The Financial Regulation Authority (FINRA) has fined M1 Finance US$850,000 for social media posts made by influencers it paid to promote its products.
Over the course of three years, M1 Finance carried out a huge social media campaign involving the use of 1,700 influencers. The individuals were asked to post content that linked to the company’s webpage, allowing potential new customers to sign up for an M1 Finance brokerage account. The influencers received payment for every account opened via the links they posted.
Finra claims M1 Finance influencers made social media posts promoting the firm that were not fair and balanced, in violation of FINRA regulations. 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.”
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 agreed to the settlement without admitting or denying the charges.
