On July 16, TradeStation Securities, Inc., a member firm of the Financial Industry Regulatory Authority (FINRA), submitted a Letter of Acceptance, Waiver, and Consent (AWC) to FINRA’s Department of Enforcement. This AWC proposes a settlement for alleged rule violations concerning retail communications related to crypto assets. The acceptance of this AWC by FINRA ensures that no future actions will be brought against TradeStation Securities based on the same factual findings.
Background
TradeStation Securities has been a FINRA member since 1996, providing an online trading platform for self-directed retail and institutional customers. Headquartered in Plantation, Florida, the firm operates with approximately 145 registered representatives across 19 branch offices.
Between July and September 2022, TradeStation Securities distributed retail communications about crypto assets and related services that failed to meet FINRA’s standards. Specifically, these communications allegedly did not clearly disclose that crypto assets were not offered through a registered broker-dealer, nor did they provide a fair and balanced presentation of the benefits and risks associated with the products. Consequently, TradeStation Securities violated FINRA Rules 2210(d) and 2010, resulting in a censure and an $85,000 fine.
Specific Violations
TradeStation Securities distributed communications that allegedly:
- Failed to disclose that crypto assets were offered by an affiliate, not by TradeStation Securities itself.
- Did not clearly distinguish between services offered by the firm and those by its affiliate.
- Lacked a balanced description of the risks associated with investing in crypto assets.
These communications included webpages, emails, and social media content, potentially misleading retail investors about the entity offering the services and the applicable regulations and protections. FINRA emphasizes the need for balance in such communications, meaning that firms must present both the potential benefits and the risks associated with crypto assets. For example, communications should not only highlight advantages like fast transaction speeds but should also disclose the associated risks, such as the speculative nature and high risks involved in investing in these assets.
Takeaways
The order against TradeStation is substantially similar to a May AWC that also levied an $85,000 fine against Firstrade Securities, Inc., for its alleged failure to clearly disclose that crypto assets were not offered through a registered broker-dealer and not providing a fair and balanced presentation of the benefits and risks of the products discussed. These actions show FINRA’s continued interest in how member firms communicate with and advertise crypto assets and services to customers.
