Firm Fined for Failing to Review Posts Made by Paid Influencers

A firm settled FINRA charges for (i) allowing paid influencers to make posts on social media that involved unfair, exaggerated or false claims and (ii) failing to review such posts prior to their posting.

According to the AWC, the firm paid approximately 1,700 influencers to promote the firm on social media. FINRA highlighted several examples of unfair, exaggerated or false claims, including one video, in which an influencer falsely advertised the firm’s margin lending program, stating that customers "can pay [margin loans] back at any given time . . . there is no set time period." Other influencer posts claimed that the firm’s margin interest rates were low without disclosing that those rates could fluctuate or that the firm's services were completely free without disclosing that certain fees may apply. FINRA also highlighted a post by an influencer who told viewers that "it is a general principle that anyone who starts a Roth IRA early on let’s say in their 20s will become a millionaire by the time they’re 60. In fact, you’ll probably have a lot more than a million bucks by that age if you contribute $6,000 per year."

FINRA found that the firm did not review the influencers' communications prior to their posting on social media, nor did the firm retain the communications. As a result, FINRA said the firm failed to establish, maintain, or enforce a reasonably designed supervisory system.

FINRA found that the firm violated FINRA Rules 2210(d)(1) ("Communications with the Public"), 3110 ("Supervision") and 2010 ("Standards of Commercial Honor and Principles of Trade").

To settle the charges, the firm agreed to (i) a censure, (ii) an $850,000 fine and (iii) remediate the issues and implement a supervisory system.