The Financial Industry Regulatory Authority (FINRA), the U.S. broker-dealer watchdog, has announced a $850,000 fine on M1 Finance LLC, a financial superapp operator, for posting on social media on behalf of the company that was unfair, unbalanced, or contained exaggerated, unwarranted, promised or misleading claims。

The case stems from FINRA's targeted examination of the company's practices related to acquiring customers through social media channels, and is the first formal enforcement disciplinary action by FINRA against those involved in the company's regulation of social media influencers.。

Bill St, Executive Vice President and Head of Enforcement at FINRA.Louis said: "As investors increasingly use social media to inform their own financial decisions, FINRA's rules on communicating with the public are particularly important.。FINRA will continue to consider whether the company has adopted well-designed practices and maintained regulatory systems to address the risks associated with social media influencer programs。"

Between January 2020 and April 2023, M1 Finance pays social media influencers to post content promoting the company and instructs influencers to include a unique hyperlink to the company's website that potential new customers can use to open and fund M1 Finance brokerage accounts.。M1 Finance also provides its influencers with a graphic and "welcome guide" that describes the specific services and features offered by M1 Finance, which influencers can highlight to make their social media posts more effective。

For each new account opened and funded by a customer using the unique link provided by M1 Finance, the company pays a fixed fee to the influencers participating in its plan。The company does not limit the compensation available to influencers.。Over 39,400 new accounts were opened and funded during this period with the help of some 1,700 influencers working on behalf of the company.。

M1 Finance's influencers' corporate propaganda articles published on social media were unfair and balanced, in violation of FINRA rules 2210 (Communication with the Public) and 2010 (Business Honor Standards and Trading Principles).。For example, one influencer who advertised the M1 Finance Margin Loan program stated that customers could "repay [the Margin Loan] at any time.".No fixed term "。But in fact, investors who use margin are not entitled to any extension of time to meet the company's margin requirements, and the company can increase the maintenance margin requirements of its accounts at any time without contacting these investors, force the sale of securities in its accounts, and choose which securities to sell when making margin calls。

M1 Finance did not review or approve the content of its influencers "posts before using or retaining these communications, as required by FINRA rules.。M1 Finance also does not have a reasonable system (including written procedures) to monitor the communication of the company's influencers on behalf of the company。These actions violate FINRA rules 2210, 2010, 3110 (supervision) and 4511 (general requirements - books and records), as well as the Securities Exchange Act of 1934 and the Exchange Act Rules.。

In resolving the matter, M1 Finance agreed to accept FINRA's findings but did not admit or deny the allegations.。The company also agreed to demonstrate that it has remedied the problems identified in FINRA's acceptance, waiver and consent letter, and has implemented a regulatory system including written regulatory procedures, which is reasonably designed to achieve compliance with Rule 2210。

It marks the second time M1 Finance has been charged by FINRA in less than six months.。In December 2023, M1 Finance was among a handful of financial firms fined $2.6 million for securities lending violations.。

FINRA publishes disciplinary complaints, decisions and other information in its "Disciplinary Action Online" database and publishes in its "Monthly Disciplinary Action" page a summary of disciplinary actions against companies and individuals who violate FINRA rules, federal securities laws, rules and regulations, and Municipal Securities Rulemaking Commission rules.。