Digital Brokerage Services LLC (DBS) has agreed to pay a fine of $85,000 as a part of a settlement with the Financial Industry Regulatory Authority (FINRA).

DBS customers access and trade in their DBS brokerage accounts through a mobile application. The mobile application also allows investors to access and trade in accounts holding crypto assets that are offered by an unaffiliated entity.

From July to September 2022, DBS distributed certain communications regarding the mobile application and crypto assets, including crypto asset-related services offered by the unaffiliated entity. These communications included webpages and content posted on social media platforms and some of these communications violated one or more of the content standards in FINRA Rule 2210.

Some of the violative communications contained unbalanced comparisons between the crypto assets and cash. For example, one communication stated, “unlike crypto, cash can be prone to counterfeiting.” While the communication also stated that “crypto can be wildly volatile,” it did not identify other risks related to investing in crypto assets, including the potential to lose the entire amount invested.

In addition, some of the violative communications failed to provide a balanced treatment of the risks and potential benefits of investing in the crypto assets, such as omitting that the crypto assets described in the communications were speculative and involved a high degree of risk.

For instance, the firm posted a video to social media stating that the mobile application, “makes it easy to get into crypto,” and “it’s only $1 to get started,” but did not clearly identify any risks of investing in the crypto assets.

Several of the violative communications also failed to identify the entity that offered the crypto assets or to clearly distinguish between products and services offered by DBS and those offered by the unaffiliated entity which, unlike DBS, was not a registered broker-dealer or member of FINRA or SIPC.

For example, one social media post included the statement “Crypto is now on [mobile application]. Trade crypto on the same app where you can trade stocks.” This statement could potentially have confused retail investors about which entity was offering which services and what regulations and protections applied.

After FINRA notified DBS of its violative communications, the firm stopped using certain communications related to crypto assets and undertook a review of the way in which it described crypto assets and crypto asset-related services in its communications, and discontinued or updated its communications to achieve compliance with FINRA’s content standards.

By distributing the retail communications described above, DBS violated FINRA Rules 2210(d)(1)(A), 2210(d)(1)(B), 2210(d)(3), and 2010.

On top of the $85,000 fine, the firm has agreed to a censure.