According to FINRA, TradeStation Securities, Inc., a Plantation, Florida-based broker-dealer, was censured and fined $85,000 for distributing retail communications about crypto assets that violated FINRA content standards.
FINRA Rule 2210 establishes content standards for broker-dealer communications to ensure investors receive accurate, balanced information. FINRA found that TradeStation distributed several communications that failed to meet these standards.
The primary issue involved inadequate disclosure about which entity offered crypto assets. TradeStation's affiliate—not the registered broker-dealer itself—offered crypto asset services. However, most of the violative communications failed to prominently disclose this distinction.
This matters because TradeStation Securities is a registered broker-dealer and FINRA/SIPC member, while its crypto-offering affiliate is not. Investors dealing with a registered broker-dealer have certain protections, including SIPC coverage for securities. Crypto assets offered through an unregistered affiliate do not receive these same protections.
Certain website content describing crypto services did not clearly identify which entity offered them. The firm also posted a social media video that could have confused investors about which entity was offering services and what regulations applied.
Additionally, some communications discussed crypto assets without providing a balanced description of the associated risks. Crypto assets are highly volatile and speculative investments, and communications about them must present a fair picture that includes potential downsides.
TradeStation's affiliate has since ceased offering crypto assets, and the firm stopped distributing the violative communications.
For investors, this case underscores the importance of understanding exactly which entity you are dealing with and what protections apply. Not all investment products offered through a broker-dealer's website are necessarily covered by SIPC or subject to FINRA oversight. When considering crypto investments, carefully review disclosures about the offering entity and understand that different rules may apply.
