Regulatory Overreach? The Impact of FINRA Rule 3290 on Advisor Crypto Holdings

FINRA has proposed a rule that would push crypto back into the Dark Ages of the Biden and Gensler regime with financial advisors. Here’s what it does and what you can do to help.

Under FINRA Regulatory Notice 25-05 and Proposed Rule 3290, any financial advisor who holds a FINRA license would be prohibited from personally investing in any crypto asset without first getting written approval from their broker/dealer. This requirement would also apply to the advisor’s spouse, partner, children and anyone else living in the household.

The rule is in a comment period until May 13.

Express your opposition by writing to:

Jennifer Piorko Mitchell, Office of the Corporate Secretary, FINRA, 1700 K Street, NW, Washington, DC 20006. Or submit a comment online here: https://www.finra.org/rules-guidance/notices/25-05

About half of the nation’s financial advisors personally own crypto. If this rule is enacted, upwards of a hundred thousand FAs will have to inform their B/Ds of their crypto holdings and seek written permission to keep them. If permission is not obtained, the FAs will be required to sell their crypto assets, transfer to another firm that permits their investments, or be terminated.

If this rule is enacted as-is, tens of thousands of Registered Reps will drop their FINRA licenses and switch to SEC jurisdiction as Registered Investment Advisors. By operating as an Investment Advisor Representative of an RIA, these reps will avoid FINRA’s antiquated posture, establish themselves as fiduciaries serving their clients’ best interests (which will enhance their stature in the eyes of their clients) and enable them to continue to personally own crypto. The FAs will be better off, their clients will be better off, the RIAs they join will be better off, and the losers will be FINRA and the B/Ds it oversees.

I urge you to write to FINRA and express your opposition to this rule – which FINRA calls “a Proposal to Reduce Unnecessary Burdens and Simplify Requirements Regarding Associated Persons’ Outside Activities.”

Let’s put this one to bed. Please take a moment to submit your opposition to this change.