Key Insights
- FINRA fined TradeStation Securities $85,000 for distributing misleading crypto-related communications between July and September 2022.
- Promotional materials failed to clarify that crypto assets were offered by an unregulated affiliate, not TradeStation itself.
- FINRA cited multiple rule violations, including unclear disclosures and lack of balanced risk messaging in public-facing content.
WASHINGTON, DC (MarketsXplora) — TradeStation Securities, Inc. has agreed to pay an $85,000 fine and accept a censure following a settlement with the Financial Industry Regulatory Authority (FINRA), after the firm was found to have distributed misleading communications related to cryptocurrency services between July and September 2022.
During the three-month period, the online brokerage promoted crypto assets and related services offered by an affiliate company. The affiliate required customers interested in cryptocurrencies to open brokerage accounts with TradeStation Securities. However, the messaging around this relationship was found to be unclear and potentially misleading to retail investors.
Was TradeStation’s Crypto Messaging Too Vague for FINRA Standards?
According to FINRA, TradeStation issued retail communications — including webpages, emails, and social media posts — that frequently failed to disclose a critical distinction: the crypto assets were not offered by TradeStation Securities itself, but by a separate affiliate.
Unlike TradeStation Securities, the affiliate was not a registered broker-dealer and held no membership with FINRA or the Securities Investor Protection Corporation (SIPC).
Several of the firm’s communications reportedly blurred the line between the regulated brokerage and its unregulated affiliate. On its website, for instance, TradeStation stated:
“TradeStation provides award-winning trading and analysis platforms and self-clearing online brokerage services for stocks, ETFs, Equity and index options, commodity and financial futures, futures options, and cryptocurrencies.”
FINRA said this language failed to clearly identify which products were offered by the brokerage and which were offered by the affiliate.
Similarly, a video posted on social media claimed that “TradeStation is a high-quality and hassle-free platform that allows you to buy, sell, and trade many types of stocks, ETFs, and several cryptocurrencies.” This message, FINRA noted, could have misled retail customers into believing that the brokerage itself offered crypto trading services, potentially obscuring the regulatory protections — or lack thereof — involved.
Beyond the failure to clarify the role of the affiliate, FINRA also flagged that some communications lacked a fair and balanced presentation of the risks involved in investing in crypto assets. Under FINRA Rule 2210, firms are required to provide clear, fair, and balanced messaging in their communications — a standard FINRA found TradeStation did not meet.
Specifically, the regulator cited violations of FINRA Rules 2210(d)(1)(A), 2210(d)(1)(B), 2210(d)(3), and Rule 2010, which governs standards of commercial honor and just and equitable principles of trade.
While TradeStation neither admitted nor denied the findings, the firm consented to the fine and the censure as part of the settlement. The affiliate in question has since ceased offering crypto assets, and TradeStation Securities has stopped distributing communications related to those services.