FINRA Issues $850,000 Fine To M1 Finance For Misleading Posts

The Financial Industry Regulatory Authority has issued a fine of $850,000 to M1 Finance LLC for posts made on social media. These posts which were made by influencers backed by the firm are reported to be unfair and contain unwarranted and misleading claims.

The Head of Enforcement and Executive Vice President of FINRA, Bill St. Louis, revealed that investors are continuously using social media to share their financial decisions. This has made the rules of the Financial Industry Regulatory Authority on speaking with the public become highly essential.

The Authority plans to ensure that firms maintain supervisory systems and use practices made to address social media risks.

M1 Finance Pays Influencers For Social Media Promotion Posts

Beginning from January 2020 to April 2023, M1 Finance provided payments to influencers for posting content on social media that could potentially promote the firm.

The company also told the influencers to add a unique hyperlink to its website. With this link, potential clients could open a brokerage account and fund their wallets.

According to the latest report, M1 Finance also provided a Welcome Guide and relevant graphics for influences.

These items describe the specific features and services available that can enhance the effectiveness of the influencer’s post. The company paid a flat fee to every influencer who partook in its program.

For every new customer who opens an account through the posted links given by M1 Finance, these influencers will be rewarded.

The company did not place any limitations on the amount influencers could grab. During this period, users opened over 39,400 new accounts and placed funds in them. This was all possible with the assistance of about 1,700 influencers working with the firm.

The Firm Has Failed To Maintain Certain FINRA Rules

M1 Finance failed to review or authorize its influencer’s post contents before they were used. It also did not retain those communications, as mandated by FINRA rules. The company couldn’t create a reasonable system. This system consists of written procedures, to supervise the influencer’s communications made on its behalf.

The firm violated certain FINRA rules, such as the supervision Rules of 2210, 2010, 3110, and the General Requirements-Books and Records of 4511. Others include the Exchange Act Rules and the Securities Exchange Act of 1934.

In resolving the issue, M1 Finance has agreed to FINRA’s findings without denying or admitting the charges. The company has written a letter of acceptance to confirm that it has addressed any issues identified by FINRA. It also claims to have provided a supervisory system that complies with Rule 2210.