The Financial Industry Regulatory Authority (FINRA) has recently censured a Brooklyn-based online trading platform and imposed a $250,000 fine for the company’s failure to adequately supervise social media influencers who were promoting the firm.
According to the FINRA order, the financial firm paid social media influencers to promote its services on various platforms between July 2020 and October 2022. However, some of these influencers posted communications that were not fair and balanced or made exaggerated or promissory claims about the firm’s services.
The order also reveals that the financial firm did not review or retain the influencers’ videos and posts before they were posted on social media platforms. Furthermore, the firm failed to establish and maintain a proper system, including written supervisory procedures, to oversee the retail communications shared by its influencers.
FINRA stressed that the influencers’ social media posts were considered retail communications of the firm and, as such, were subject to FINRA Rule 2210. The financial firm provided influencers with unique referral links, graphics, and talking points to use in their social media posts. These talking points highlighted specific services and features offered by the firm but failed to address the risks associated with day-trading.
The article also cites specific examples of the influencers’ posts. In one video, an influencer claimed that the firm was for “people who want to trade and make billies” and not for “grandmas and grandpas who trade, like, one stock.” Another video showed an influencer discussing his use of the firm’s platform, stating that he was up several thousand dollars without “even trying.”
This case serves as a reminder for financial firms to maintain strict oversight of their marketing and promotional activities, especially when engaging with social media influencers. Failure to comply with FINRA regulations can result in significant fines and reputational damage.
As the use of social media influencers in financial marketing continues to grow, it is crucial for firms to establish and enforce robust supervisory procedures to ensure that all communications are fair, balanced, and compliant with industry regulations. By doing so, firms can protect their clients’ interests and maintain the integrity of the financial markets.
