FINRA Fines/Suspends Rep for Facebook Posts
FINRA recently took action against a registered representative for violating FINRA Rules 2210 and 2220. FINRA Rule 2210 governs communications by registered representatives with the public and FINRA Rule 2220 sets forth requirements with respect to options-related communications. The review of this registered representative’s communications originated with a cycle examination conducted by FINRA Member Supervision.
According to FINRA, between January 2016 and November 2019, the representative authored 22 posts on a public Facebook page that did not comply with FINRA’s rules regarding communications with the public. A number of his posts contained claims about the performance and purported success of an investment club that he operated and a hedge fund at which he traded, both of which were approved outside business activities.
These posts, however, failed to provide sufficient facts to allow for a sound basis for the evaluation of those claims. Additionally, a number of the representative’s posts were options-related but did not contain disclosures about the risks of options, were posted prior to delivery of an options disclosure document, and were posted without firm principal approval or pre-submission to FINRA’s Advertising Regulation Department, as required. As a result, Langer violated FINRA Rules 2210, 2220, and 2010.
For example, one of his posts read:
“Good Day to all! Hope everyone had a wonderful Holiday season and wishing everyone a healthy and happy 2018! We did it yet again! #2 top performing options hedge fund for November 2017, 1.93% return. With a year to date return on invest of 29.12% We still remain the Top performing options Hedge fund in 2017!! i can tell you that December record breaking return (to be released in 2 weeks) put us over 34% return for 2017 making [Hedge Fund A] the #1 options strategy hedge fund on the street for 2017,, That’s back to back years we took # 1 best performing options strategy hedge fund on the Planet !! interested in putting your money to work for you? Ask us.”
To read the complete AWC, click here.
SEC Charges Eight Social Media Influencers
In a much larger case, the SEC charged eight social media influencers in a $100 million stock manipulation scheme. According to the SEC, since at least January 2020, seven of the defendants used social media platforms, such as Twitter, to promote certain stocks to “hundreds of thousands of followers,” and then quietly sold their positions after a run-up in the stocks’ prices. Altogether, the defendants had more than 1.5 million Twitter followers.
“As our complaint states, the defendants used social media to amass a large following of novice investors and then took advantage of their followers by repeatedly feeding them a steady diet of misinformation, which resulted in fraudulent profits of approximately $100 million,” said Joseph Sansone, Chief of the SEC Enforcement Division’s Market Abuse Unit.
To read that complete SEC press release, click here.