FINRA Fines M1 Finance $850,000 Over Alleged Social Media Influencer Program Violations

M1 Finance, a financial technology company based in Chicago, has found itself in hot water with the Financial Industry Regulatory Authority (FINRA) after being slapped with a hefty $850,000 fine. The penalty stems from alleged violations related to the improper use of a social media influencer program, marking a significant development as the first instance of FINRA addressing breaches of social media promotion rules.

According to FINRA, M1 Finance engaged in the practice of compensating influencers to disseminate promotions that were deemed to be "not fair and balanced," thereby running afoul of FINRA Rules 2210 and 2010. As part of the settlement reached between M1 and FINRA, the company has agreed to a censure and has committed to implementing specific remedial measures aimed at ensuring compliance with FINRA Rule 2210.

The allegations against M1 Finance span a significant period, stretching from January 2020 to April 2023. During this time, FINRA claims that M1 Finance paid influencers to make a series of claims in their social media posts that were characterized as exaggerated, unwarranted, promissory, or misleading. Particularly concerning was M1's failure to exercise oversight by reviewing or approving the content posted by influencers. Additionally, the company was found to lack a reasonable supervisory system, including written procedures, to effectively monitor the communications made by influencers on its behalf.

An example provided by FINRA highlights the severity of the allegations. One influencer allegedly falsely advertised M1's margin lending program, claiming that investors could "pay [margin loans] back at any given time … there is no set time period." However, this assertion contradicted the firm's actual requirements for investors using margin, illustrating the potential risks associated with unchecked promotional activities.

In response to the settlement, M1 Finance has committed to taking specific compliance measures within a stipulated timeframe. Within 180 days, the company must certify that it has addressed the issues outlined in the order and has implemented a robust supervisory system, complete with written procedures designed to ensure compliance with Rule 2210.

Despite the gravity of the allegations and the substantial fine imposed by FINRA, M1 Finance has refrained from offering immediate comment on the matter. Furthermore, the company has chosen to settle with FINRA without admitting or denying the regulator's findings, a common practice in such cases.

By fLEXI tEAM