First FINRA Fine for Use of Social Media Influencers
FINRA
Introduction
FINRA recently announced its first enforcement action related to the use of Social Media Influencers. This stems from FINRA’s Targeted Exam of Firm Practices related to the acquisition of customers through Social Media channels.
Regarding Social Media and Website Regulations, Vigilant’s Director, Thayne Gould, MBA, will be speaking on this topic at the end of April at the Red Oak User Conference. More information on that Conference is here.
Firms are reminded that they have supervisory requirements whenever a Third Party is utilized to provide advertisements and marketing for the Firm.
What Happened?
- Between January 2020 and April 2023, the Firm paid social media influencers to promote their Firm.
- Influencers were given a fee for every new account opened, with almost 40,000 new accounts being opened from the work of 1,700 Influencers.
- Influencers made numerous statements that were not fair and balanced under FINRA Rule 2210 and 2010.
- The Firm did not have a review process for any of the content posted by influencers, and they maintained no record as required by FINRA.
- As a result of the findings, FINRA announced an $850,000 fine.
Vigilant’s Conclusion
Firms are required to supervise and approve communications made to the public on their behalf, including those made by Third Parties. They are also reminded that Social Media posts are considered retail communications, requiring proper disclosure and evaluation prior to use.
In a fast-paced industry, it is easy for errors to occur when a written, clear, and efficient review process has not been implemented into the policies and procedures.
Vigilant offers a timely solution for Advertising and Marketing Review that can help reduce regulatory risk while allowing your Firm to focus on its business goals.