According to FINRA, M1 Finance LLC was fined $850,000 in connection with the first FINRA enforcement action related to social media influencer marketing by a broker-dealer. Between January 2020 and April 2023, M1 Finance paid social media influencers to promote the firm and its services to the public. Over that period, approximately 1,700 influencers participated in the program, resulting in over 39,400 new customer accounts being opened through influencer-driven referrals.

FINRA found that the influencer posts used to promote M1 Finance were not fair or balanced, as required by FINRA Rule 2210, which governs communications with the public. The influencer content contained exaggerated, misleading, and promissory claims, including claims about the firm's margin lending products. These types of communications are prohibited because they can give investors unrealistic expectations about the risks and returns associated with financial products and services. FINRA Rule 2210 requires that all communications with the public, including those made through social media, be fair, balanced, and not misleading, and that they provide a sound basis for evaluating the products or services being offered.

Critically, FINRA found that M1 Finance failed to review or approve the influencer content before it was published and disseminated to the public. Under FINRA Rule 2210, member firms are required to have a registered principal review and approve retail communications before they are used. By allowing influencers to post promotional content without prior review, M1 Finance failed to ensure that the communications complied with applicable regulatory standards. Additionally, the firm failed to retain copies of the influencer communications, violating FINRA Rule 4511 and Exchange Act recordkeeping requirements.

FINRA also found that M1 Finance failed to establish and maintain a reasonable supervisory system to oversee the influencer communications, in violation of FINRA Rule 3110. A firm that engages influencers to promote its services must have procedures in place to ensure that the content is reviewed, approved, and retained in accordance with applicable rules. M1 Finance's failure to do so resulted in violations of FINRA Rules 2210, 2010, 3110, and 4511, as well as applicable SEC rules.

This landmark case is significant because it establishes that FINRA will hold member firms accountable for the content produced by paid social media influencers, just as it would for any other form of advertising or retail communication. Investors should be cautious about financial products promoted through social media and should always conduct independent research before opening accounts or investing based on influencer recommendations.