One unusual aspect of this enforcement action was that it was largely precipitated by the firm's misevaluation (likely unintentional) of the securities pledged by the customer as collateral for a margin loan. It serves as a caution that firms must have good procedures for valuing securities that they do not trade as principal.

How to regulate a digital asset that has both a functional "use" and that may increase in monetary value is a difficult question. Commissioner Peirce is grappling with the difficult regulatory situation in which a purchaser of the digital asset may be buying it for its functional use (in which case the asset is not being purchased as a "security") or may be buying it with the hope of making a profit (in which case that same asset might be a "security").

Individuals and companies who…

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A broker-dealer ordinarily becomes subject to a suitability obligation when it makes a "recommendation" to a customer. However, in the case of options, a broker-dealer is subject to the obligation as a result of effecting the transaction, without regard to whether a recommendation has been made. Accordingly, firms are subject to an obligation to review the decisions of customers who trade options, even if the transaction or product was not recommended.

FINRA may take a more aggressive…