The Financial Industry Regulatory Authority said Monday that it has levied its first disciplinary action involving a firm's supervision of social media influencers.
The broker-dealer self-regulator fined M1 Finance LLC $850,000 for social media posts made by influencers on the firm's behalf that were not fair or balanced, or contained exaggerated, unwarranted, promissory or misleading claims.
The case, according to FINRA, arises from its targeted exam of firm practices related to the acquisition of customers through social media channels.
"As investors increasingly use social media to inform their financial decisions, FINRA's rules on communicating with the public are especially critical," said Bill St. Louis, executive vice president and head of enforcement, in a statement. "FINRA will continue to consider whether firms are using practices and maintaining supervisory systems that are reasonably designed to address the risks related to social media influencer programs."
Between January 2020 and April 2023, M1 Finance paid social media influencers to post content promoting the firm, and instructed the influencers to include a unique hyperlink to the firm's website that potential new customers could use to open and fund an M1 Finance brokerage account, according to FINRA.
M1 Finance "also provided its influencers with graphics and a 'Welcome Guide' that described specific services and features available through M1 Finance that influencers could highlight to make their social media posts more effective," FINRA said.
The firm paid influencers who participated in its program a flat fee for every new account that was opened and funded by the customer using a unique link provided by M1 Finance. The firm did not limit compensation influencers could earn.