Firstrade Securities, Inc has agreed to pay a fine of $85,000 as a part of a settlement with the Financial Industry Regulatory Authority (FINRA).

During the relevant period (from July to September 2022), Firstrade Securities distributed communications regarding crypto assets offered by its affiliate. The affiliate required customers who wished to purchase crypto assets to maintain brokerage accounts with Firstrade Securities.

Between July and September 2022, Firstrade Securities distributed 33 communications concerning crypto assets or crypto asset-related services-including website pages and social media posts that were broadly available-that violated one or more of the content standards in FINRA Rule 2210.

Most of these communications failed to prominently disclose that the crypto assets were not offered by Firstrade Securities, but were offered by an affiliate, which, unlike Firstrade Securities, was not a registered broker-dealer or member of FINRA or SIPC.

Many also failed to prominently disclose the name of the firm and reflect whose products were being offered by the firm. For example, the firm distributed social media posts using its own handle promoting crypto assets without disclosing that the firm itself does not offer or hold those crypto assets.

In one social media post, the firm wrote “our US customers can trade 41 popular cryptocurrencies.” Another included the statement, “Open a brokerage account today: stocks, ETFs, options, and crypto trading, among many more investment choices!” and included a link directing customers to “Open a brokerage account today!”

Neither communication disclosed that crypto assets were offered by an affiliate of the firm, not the broker-dealer itself. These communications could potentially confuse retail investors about which entity was offering the services and, as a result, about whether securities regulations and protections applied.

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

For example, the firm published a blog post describing the features of a specific crypto asset and promoting its benefits, including, for example, that it was designed to solve “a number of significant obstacles faced by the blockchain industry,” and ”to facilitate extremely fast transaction speeds and scalability.” However, that blog post did not disclose any of the associated risks.

Firstrade Securities’ crypto affiliate ceased offering crypto assets after the relevant period and, as a result, Firstrade Securities ceased distributing retail communications concerning crypto assets offered by its affiliate.

Therefore, Firstrade Securities violated FINRA Rules 2210(d)(l)(A), 2210(d)(l)(B), 2210(d)(3), and 2010.

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