Sec. 208. Advertisements of crypto asset intermediaries and certain other persons
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Chapter 98 of title 31, United States Code, as amended by section 207 of this Act, is amended by adding at the end the following: In this section: The term Commissions means the Securities and Exchange Commission and the Commodity Futures Trading Commission, acting jointly. The term covered advertisement — means a communication that— relates to— the desirability of purchasing or entering into a transaction for a crypto asset; or the availability of crypto asset-related services; and is widely available to the general public, as specified by rule of the Commissions; and includes any script, slide, handout, or other written (including electronic) material used in connection with a public appearance with respect to a crypto asset or the availability of crypto asset-related services.
Before a crypto asset intermediary may make a covered advertisement available to the public, an officer of the crypto asset intermediary shall be required to approve that covered advertisement and certify compliance with the requirements of this section. Each crypto asset intermediary shall establish written procedures, which are appropriate and reasonable to the business, size, structure, and customers of the crypto asset intermediary, for the approval of covered advertisements, as required under subsection (b), which shall include— provisions for the education and training of applicable employees of the crypto asset intermediary regarding the procedures of the crypto asset intermediary governing covered advertisements; documentation of the education and training required under subparagraph (A); and surveillance and follow-up measures to ensure that the crypto asset intermediary implements and adheres to those procedures.
Each crypto asset intermediary shall maintain the records required under this subsection for not less than 5 years. The types of records that a crypto asset intermediary is required to maintain under subparagraph
(A)include, with respect to each covered advertisement made by the crypto asset intermediary— a copy of the covered advertisement; the dates of the first and, if applicable, last use of the covered advertisement; the name of the officer of the crypto asset intermediary who approved the covered advertisement, as required under subsection (b), including the date on which the officer gave that approval; information concerning the source of all data, statistical tables, charts, graphs, or other illustrations or outside sources used in the covered advertisement; and for a covered advertisement that includes or incorporates a performance ranking or comparison with another crypto asset intermediary, a copy of the ranking or performance used. Each covered advertisement shall adhere to the following standards: The covered advertisement shall— be based on principles of fair dealing and good faith; and provide a sound basis for evaluating the facts with respect to any particular crypto asset or type of crypto asset, industry, or service that is the subject of the covered advertisement. The covered advertisement does not omit any material fact or qualification if that omission, in light of the context of the material presented, would cause the covered advertisement to be misleading. The covered advertisement does not make any false, exaggerated, unwarranted, promissory, or misleading statement or claim. Information may be placed in a legend or footnote within the covered advertisement only if that placement would not inhibit understanding of the covered advertisement. The covered advertisement shall be consistent with risks that are present with respect to the subject matter of the covered advertisement, including volatility with respect to the value of crypto assets, the amount of potential returns, and operational risks for crypto asset intermediaries. The covered advertisement shall— consider the nature of the audience to which the covered advertisement will be directed; and provide details and explanations that are appropriate for the audience described in subparagraph (A). The covered advertisement may not predict or project performance, imply that past performance will recur, or make any exaggerated or unwarranted claim, opinion, or forecast. Nothing in subparagraph
(A)may be construed to prohibit the use of— a hypothetical illustration of mathematical principles, if that illustration does not predict or project the performance of a particular strategy; an analysis tool or a written report produced by an analysis tool; or a price target contained in a research report, if the target has a reasonable basis, the report discloses the valuation methods used to determine the price target, and the price target is accompanied by a disclosure concerning the risks that may impede achievement of the price target. Any comparison in the covered advertisement between crypto assets, crypto asset intermediaries, or crypto asset-related services shall disclose key material differences between the applicable items, including, as applicable, differences with respect to return objectives, costs and expenses, liquidity, safety, guarantees or insurance, volatility, and tax features. The covered advertisement shall prominently disclose the following: The fact that the covered advertisement is governed by this section and is subject to Federal law. The name of the applicable crypto asset intermediary. Any relationship between the applicable crypto asset intermediary and any person that appears in the covered advertisement or any compensation offered by that crypto asset intermediary to such a person. Registrations, licenses, or other authorizations in good standing that are held by the applicable crypto asset intermediary. In the covered advertisement, any reference to tax-free or tax-exempt income shall indicate which taxes apply, or which do not, unless income is free from all applicable taxes. For the purposes of subparagraph (A), the covered advertisement may not characterize income or returns as tax-free or exempt from income tax if tax liability is merely postponed or deferred, such as when taxes are payable upon redemption. The Commissions may, by rule, adopt further standards regarding tax considerations that appear in covered advertisements. The covered advertisement shall disclose the amounts of the following fees with respect to the crypto asset or crypto asset-related services that are the subject of the covered advertisement, which shall be set forth prominently and, in any print advertisement, in a prominent text box that contains only such information: Custody fees. Account fees. Applicable bank fees. If any testimonial in the covered advertisement concerns a technical aspect of purchasing or otherwise entering into a transaction for crypto assets— the person making the testimonial shall have the knowledge and experience to form a valid opinion regarding the issue; and the testimonial, if the testimonial concerns the advisability of purchasing crypto assets or the performance of a crypto asset, shall prominently disclose— the fact that the testimonial may not be representative of the experience of other customers; the fact that the testimonial is no guarantee of future performance or success; and if more than $1,000 in value is paid for the testimonial— the fact that the testimonial is a paid testimonial; and the amount and type of compensation paid, which shall include, if compensation was paid in crypto assets, an identification of each specific crypto asset. If the covered advertisement includes a recommendation to purchase, or otherwise transact in, a crypto asset, the covered advertisement shall— have a reasonable basis for the recommendation; and if applicable, disclose— that, at the time the covered advertisement was published or distributed, the applicable crypto asset intermediary was conducting trading activities in the crypto asset; that the applicable crypto asset intermediary— is directly and materially involved in the preparation of the content of the covered advertisement; and has a financial interest the crypto assets being recommended; and the nature of any financial interest disclosed under clause (ii), including whether that financial interest consists of any option, right, warrant, future, or long or short position, unless the extent of that financial interest is nominal. Except as otherwise provided by subparagraph (B), the covered advertisement may not refer, directly or indirectly, to past specific recommendations made by the applicable crypto asset intermediary that were or would have been profitable to any person. The covered advertisement may set out or offer to furnish a list of all recommendations as to the same type of crypto assets made by the applicable crypto asset intermediary during the 1-year period preceding the date on which the covered advertisement is released, if the communication or list— states the name of each crypto asset recommended, the date and nature of each such recommendation (such as whether to buy, sell, or hold the crypto asset), the market price (as of the date of the recommendation), the price at which a person was meant to act upon the recommendation, and the market price of each such crypto asset, as of the most recent practicable date; and contains the following warning, which shall appear prominently within the communication or list: It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the crypto assets in this list. . A crypto asset intermediary shall provide, or offer to provide upon request, available information or sources supporting any recommendation described in subsection (d)(13). When a crypto asset intermediary recommends a crypto asset in a covered advertisement, as described in subsection (d)(13), the crypto asset intermediary shall provide the price of the crypto asset, as of the date on which the recommendation is made. When an officer or employee of a crypto asset intermediary is sponsoring or participating in a seminar, forum, or broadcast, or when such an individual is otherwise engaged in a public appearance or speaking activity, paragraphs (1), (2), and
(3)of subsection (d), shall apply to that appearance to the same extent as those provisions apply to a covered advertisement. If an officer or employee of a crypto asset intermediary recommends a crypto asset in a public appearance, that individual shall— have a reasonable basis for the recommendation; and disclose, as applicable— whether the individual has a financial interest in the crypto asset recommended; the nature of the financial interest disclosed under clause (i), including whether that financial interest consists of any option, right, warrant, future, or long- or short- position, unless the extent of that financial interest is nominal; and any other actual, material conflict of interest of which the individual knows or has reason to know at the time of the public appearance. Each crypto asset intermediary shall establish written procedures that are appropriate and reasonable to the business, size, structure, and customers of the crypto asset intermediary in order to supervise the public appearances of the officers and employees of the crypto asset intermediary, which shall include— provisions for the education and training of employees of the crypto asset intermediary regarding those procedures; documentation of the education and training required under paragraph (1); and surveillance and follow-up measures to ensure that the crypto asset intermediary implements and adheres to those procedures. The Securities and Exchange Commission, the Commodity Futures Trading Commission, or a customer protection and market integrity authority operating under delegated authority by the appropriate commission, as applicable to a crypto asset intermediary, shall regularly ascertain the compliance with this section by the crypto asset intermediary (and applicable individuals) at the time of each regular examination of the intermediary by the applicable entity. The appropriate commission or customer protection and market integrity authority, as applicable, may conduct an investigation into a suspected violation of this section and take enforcement action outside of a regular examination of a crypto asset intermediary, which shall be comprised of the following: With respect to such a violation by that crypto asset intermediary, the following: For an initial violation of this section, the imposition of a civil monetary penalty in an amount that is not more than $100,000. For any subsequent violation of this section, the imposition of a civil monetary penalty in an amount that is not more than $1,000,000. The enjoinment of future violations of this section by the crypto asset intermediary and the requirement that the crypto asset intermediary submit to the enforcing entity appropriate remediation plans. For repeated, knowing violations of this section by an individual, the imposition of a temporary or permanent bar from the crypto asset industry with respect to that individual. A document filed with the Securities and Exchange Commission, as otherwise required by law or regulation, is not subject to the requirements of this section. The Commissions, after not less than a 120-day comment period, shall adopt rules to implement this section. . The table of section for chapter 98 of title 31, United States Code, as amended by section 206, is amended by adding at the end the following: 9808. Advertising of crypto asset intermediaries and certain other persons. .