FINRA Levies First Enforcement Action in Finfluencers Sweep

During this period, more than 39,400 new accounts were opened and funded with the help of approximately 1,700 influencers working on the firm’s behalf.

M1 Finance influencers made social media posts promoting the firm that were not fair and balanced, in violation of FINRA Rules 2210 (Communications with the Public) and 2010 (Standards of Commercial Honor and Principles of Trade).

For example, an influencer advertising M1 Finance’s margin lending program stated that customers could “pay [margin loans] back at any given time … there is no set time period.”

But in fact, investors who use margin are not entitled to any extension of time to meet the firm’s margin requirements, and the firm can, without contacting such investors, increase the maintenance margin requirement on their accounts at any time, force a sale of securities in their accounts, and choose which securities to sell, if a margin call occurs.

M1 Finance did not review or approve the content in its influencers’ posts prior to use or retain those communications, as required by FINRA rules. M1 Finance also failed to have a reasonable system, including written procedures, for supervising the communications that the firm’s influencers made on its behalf.

In settling this matter, M1 Finance consented to the entry of FINRA’s findings without admitting or denying the charges.

The firm also agreed to certify that it has remediated the issues identified by FINRA in a letter of acceptance, waiver and consent and implemented a supervisory system, including written supervisory procedures, that is reasonably designed to achieve compliance with Rule 2210, FINRA explained.