FINRA’s 2024 Oversight Report Emphasizes Crypto Asset Compliance

The Financial Industry Regulatory Authority (FINRA), a major self-regulatory body in the United States, recently released its 2024 Annual Regulatory Oversight Report. This report is particularly interesting as it is the first to include a dedicated section on cryptocurrency assets. This reflects the growing importance of cryptocurrencies in the financial environment. This section aims to guide member firms that are engaged or plan to engage in cryptocurrency-related activities to ensure compliance standards and SEC regulations.

Cryptocurrency asset development

FINRA’s Member Application Program (MAP) focuses on evaluating member firms’ business plans in the crypto-asset securities space consistent with the SEC’s guidelines. This includes assessing financial responsibility and complying with customer protection rules. The report provides guidance for companies considering engaging in crypto asset-related activities and emphasizes the importance of due diligence and compliance with applicable regulations.

Advertising volume and cybersecurity

The report covers topics such as inflated trading volumes and unreasonable supervision. It also highlights the increasing variety, frequency, and sophistication of cybersecurity incidents. Businesses receive guidance on how to identify, prevent and mitigate such incidents.

Money Laundering and Fraud Prevention

Member companies must develop and implement written anti-money laundering regulations (AML) programs. The report outlines the steps required to comply with these programs, along with the need for robust fraud and sanctions screening processes.

Retail Communications and Compliance

Retail communications involving crypto assets are known to have significantly higher non-compliance rates compared to other products. The report suggests that companies establish written policies, procedures and controls related to crypto asset activities conducted by the company and its associates.

Potential Impact of Pending Supreme Court Ruling

The report notes a pending Supreme Court decision that could impact FINRA’s regulatory mechanisms and regulatory practices related to in-house judges.

Industry Impact

The inclusion of a cryptocurrency asset section in FINRA’s annual report is a testament to the organization’s responsiveness to the dynamic nature of financial markets. By setting compliance standards and providing detailed guidance, FINRA is preparing its members to navigate the complex and rapidly evolving cryptocurrency sector. This proactive approach is critical to maintaining market integrity and protecting investors’ interests in the face of new financial technologies and trends.

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