Securities regulator FINRA just recently fined M1 Finance $850,000 for misleading statements that paid influencers while promoting its products. Rafael Enrique—SOPA Images/LightRocketGetty Images
Regulators are targeting misleading investment advice on social media. Stock app M1 Finance was just fined $850,000 for hiring an army of influencers who promoted false claims about the company.
FINRA, a government-backed nonprofit organization overseen by the SEC that regulates public securities firms, announced the fine on Monday following a long-term investigation into social media campaigns paid by M1 Finance between 2020 and 2023. did.
This is the first time FINRA has brought enforcement action against a company regarding its social media influencer strategy, setting a precedent that could have major implications for other companies.
“FINRA's rules regarding communicating with the public are especially important as investors increasingly use social media to inform their financial decisions,” said FINRA Executive Vice President and Chief Executive Officer. Bill St. Louis said in a press release. “FINRA will continue to consider whether companies use practices and maintain oversight systems that are reasonably designed to address the risks associated with social media influencer programs.”
According to FINRA's investigation, M1 Finance employs approximately 1,700 influencers to post sponsored content promoting the company's brokerage accounts and provide graphics and “welcome guides” to build the content. It turned out that it was. This strategy was effective. Between January 2020 and April 2023, M1 Finance added approximately 40,000 new accounts and paid each influencer a flat fee for each new customer who signed up through their referral link.
In September 2020, TikTok user Gil Olivera posted a video in which representatives from various financial companies discuss which offers the best terms to customers, highlighting M1 Finance's low fees and app design. pointed out.
@giladventures Choosing a company to open a retirement account #investing #rothira #vanguard #m1finance #betterment #retirerich #personalfinance ♬ Original song – Gil Oliveira
In March 2022, TikTok user MoneyCoachVince posted a video listing the benefits of a Roth IRA savings account and encouraging users to sign up for M1 Finance through a link in his profile.
@moneycoachvince Start investing with M1Finance on my profile iink 📈🙌🏾 #rothira #investing #DeserveADrPepperDuet #financialfreedom #moneytok #learnontiktok #coachvince ♬ Pavor [Hip Hop] – Instrumental – Quarta Paledo Studio
FINRA noted that M1 Finance does not review or approve content posted by paid influencers, which violates the organization's rules. Some influencers also made statements that were contrary to the facts. One example of this is when one influencer said that customers using M1 Finance's margin lending program are “able to pay.” [margin loans] I'll come back any time. . . There is no fixed period. ”
M1 Finance did not respond to an email seeking comment for this article. Resolved the matter with FINRA without admitting or denying the charges.
Social media has emerged as a very popular source of financial advice. A 2023 Forbes study found that nearly 80% of Millennials and Gen Z receive financial advice from social media, and #FinTok has around 5 billion views on his TikTok alone We are proud of the number of times. However, this comes with risks. A recent study found that more than half of all financial advice on TikTok is misleading. FINRA, which has become a largely unregulated source of information, is letting influencers know it is paying attention.
