Robo-advisor and online brokerage firm M1 Finance allegedly paid social media influencers more than $2.75 million to promote the company to their followers. Wall Street regulators said more than 39,400 new accounts were registered on M1 Finance over the three-year effort, but some of the influencer posts contained exaggerated and misleading claims. It is said that
Finra announced on Monday that it had fined M1 Finance $850,000 for violating regulations governing public communications. The penalties are the first time Finra, a self-imposed industry regulator, has penalized companies for their oversight of social media influencers.
Bill St. Louis, head of enforcement at Finra, said enforcement of public communications regulations has become more important as investors increasingly rely on social media to inform financial decisions. Stated. Regulators are closely monitoring securities firms' efforts to attract new customers through social media.
“Finra will continue to review whether companies use practices and maintain oversight systems that are reasonably designed to address the risks associated with social media influencer programs,” he said in a statement Monday. mentioned in.
As part of the settlement, M1 Finance did not admit or deny Finra's findings, but agreed to agree with Finra's findings and change its supervisory regime and procedures in accordance with the regulatory order. Representatives for the company did not respond to requests for comment.
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According to Finra, M1 Finance paid social media influencers to post content promoting M1 from January 2020 to April 2023. Finra said the company provides influencers with a unique hyperlink to the company's website, graphics, and a “welcome guide” that explains specific services and features available through M1 Finance that influencers can highlight. It is said that he provided it.
M1 Finance paid influencers a flat fee for each new account opened and funded by a customer who clicked on a unique link. Finra said there was no limit to the compensation influencers could earn. Approximately 1,700 influencers participated in the paid promotional campaign, resulting in over 39,400 new accounts.
But some of those posts violated Finra's rules, the group said. For example, a social media influencer promoted M1 Finance's margin lending program and said customers “can pay.” [margin loans] You can always come back… There's no set time frame,” Finra said. In fact, the margin loan had a repayment deadline. According to Finra, other influencers claimed that M1 Finance's services are completely free, without disclosing that specific fees may apply.
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The regulatory body said M1 Finance did not review or approve the influencers' posts, nor did it retain copies of the posts, despite Finra rules requiring it to do so.
Email Andrew Welsh at andrew.welsch@barrons.com.
