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Investment Losses in Crypto Assets Due to Unsuitable Recommendations by Your Broker/Advisor? Contact KlaymanToskes

January 24, 2024

FINRA Finds 70% of Crypto Asset Communications Examined May Violate Rules

National investment loss lawyers KlaymanToskes reports the Financial Industry Regulatory Authority (“FINRA”) has identified in a recent examination of member firms that actively communicate with retail customers concerning crypto assets, that in 70% of cases reviewed, potential violations of Rule 2210 (Communications with the Public) occurred.

Investors that suffered losses in Crypto Assets recommended by their broker/financial advisor may hold them liable for engaging in private securities transactions or “selling away” and/or their brokerage firm’s failure to supervise their financial professional.

If you suffered losses in Crypto investments due to a recommendation by a broker/financial advisor, you are encouraged to contact attorney Lawrence L. Klayman, Esq. at (888) 997-9956 or lawrence@klaymantoskes.com for a free consultation to discuss legal options. We do not collect attorney’s fees unless we are able to obtain a financial recovery for you.

Regulatory Challenges in the Growing Crypto Asset Market:

KlaymanToskes previously reported that FINRA conducted a targeted exam in November 2022, reviewing communications related to crypto assets from certain member firms. The results revealed that in 70% of the cases, potential violations of FINRA Rule 2210 (Communications with the Public) were identified. FINRA Rule 2210 mandates that broker-dealer communications with the public must be accurate and balanced, providing a factual basis for assessing any discussed product or service. The rule prohibits false or misleading claims and the omission of material facts that could lead to misinterpretation.

More than 500 crypto asset-related retail communications were reviewed, including those distributed by FINRA member firms regarding crypto assets offered through affiliates or third parties. Key findings of FINRA’s sweep include the following:

  • Failure to differentiate clearly between crypto assets offered by affiliates or third parties and those offered directly by FINRA-regulated brokerage firms.
  • False statements or implications that crypto assets functioned similarly to cash or cash equivalents.
  • Unclear and misleading explanations of how crypto assets operate.
  • Misleading claims about crypto assets and inadequate comparisons of crypto assets to other assets without a sound basis for comparison.
  • Failure to provide a clear basis for evaluating crypto assets by omitting explanations of their issuance, holding, transfer, or sale.
  • Misrepresentation of the Federal Securities Laws’ protections for crypto assets.
  • Misleading statements regarding the extent of protection for certain crypto assets by the Securities Investor Protection Corporation.

The crypto asset market has experienced rapid growth in the past decade, with expanded product offerings and increased retail investor participation. With the growing interest in these assets, the potential harm from problematic brokerage firm communications has also increased, emphasizing the need for clear descriptions of risks for investors. 

Brokerage firms are obligated to possess a comprehensive understanding of cryptocurrency investments they recommend, providing clients with clear explanations of associated risks. Moreover, they must accept responsibility for offering suitable recommendations and conducting transparent risk assessments.

Investors that suffered losses in Crypto investments due to unsuitable recommendations at a full-service brokerage firm are encouraged to contact attorney Lawrence L. Klayman, Esq. at (888) 997-9956 or lawrence@klaymantoskes.com for a free consultation to discuss legal options. We do not collect attorney’s fees unless we are able to obtain a financial recovery for you.

About KlaymanToskes

KlaymanToskes is a leading national securities law firm which practices exclusively in the field of securities arbitration on behalf of retail and institutional investors throughout the world in large and complex securities matters. The firm has recovered over $250 million in FINRA arbitrations and over $350 million in other securities litigation matters. KlaymanToskes has office locations in California, Florida, New York, and Puerto Rico.

Contact

KlaymanToskes, P.A.
Lawrence L. Klayman, Esq.
888-997-9956
lawrence@klaymantoskes.com
www.klaymantoskes.com