M1 Finance LLC has agreed to pay a fine of $400,000 as part of a settlement with the Financial Industry Regulatory Authority (FINRA).

From March 2016 to the present, M1 Finance violated Rule 203(b)(1) of Regulation SHO and Rule 200(g), as well as FINRA Rule 2010, by engaging in over 12 million short sale transactions without locating borrowable securities and erroneously marking these orders as long transactions.

By incorrectly recording these short sale transactions and an additional 3.5 million primarily buy orders as executed on an "agency" basis, the firm also maintained inaccurate books and records, and violated Section 17(a) of the Exchange Act, Section 17a-3 of the Exchange Act, and FINRA Rules 4511 and 2010.

Finally, from March 2016 to the present, M1 Finance violated FINRA Rules 3110 and 2010 by failing to establish, maintain, and enforce supervisory systems, including reasonably designed written supervisory procedures (WSPs), to achieve compliance with Regulation SHO locate and order marking requirements and applicable books and records rules.

Since March 2016, M1 Finance has conducted retail and proprietary trading business as a FINRA member firm.

In addition to the fine, the firm has also agreed to accept censure.