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This move underscores FINRA’s recognition of the growing significance of crypto-related considerations and the need to address them within its regulatory oversight framework.
💡 We've published the 2024 FINRA Annual Regulatory Oversight Report to share key insights and observations with member firms to use in strengthening their compliance programs.
— FINRA (@FINRA) January 9, 2024
Read the report ▶️ https://t.co/f671KckXFX pic.twitter.com/lMTCywTDc0
FINRA Urges Heightened Attention to Crypto Compliance Risks
Under the regulatory oversight of the U.S. SEC, FINRA mandates membership for all firms dealing in securities broker-dealers. As a self-regulatory organization (SRO), FNRA has advised its member firms to undergo assessments by FNRA for their crypto securities business lines to ensure adherence to all rules stipulated by the SEC.
The regulator has specifically directed firms to increase their focus on the growing compliance risks associated with cryptocurrencies and stressed the importance of enhancing due diligence regarding activities involving digital assets.
“Member firms seeking to engage in crypto asset-related activity should identify and address the relevant regulatory and compliance challenges and risks.”
In addition to directing member firms to assess their crypto securities business lines, FNRA has also requested the completion of a questionnaire related to their and their affiliates’ activities in the crypto asset space. The regulatory body’s examination of member firms included addressing various cybersecurity trends such as imposter websites, insider threats, and ransomware.
The 90-page report highlighted that bad actors are exploiting investor interest in crypto assets and blockchain technology through market manipulation schemes like pump and dump. Furthermore, FINRA identified individuals engaged in a spectrum of crypto-related activities, including proprietary trading, operating crypto investment funds, and participating in crypto mining operations.
These developments align with the SEC’s recent efforts to enhance supervision over the crypto industry, indicating a potential shift towards more stringent legislation in the future to mitigate both new and existing threats.
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