According to FINRA, Richard Lawrence Langer was fined $5,000 and suspended from association with any FINRA member in all capacities for 10 business days for authoring social media posts that did not comply with FINRA's rules regarding communications with the public.
Langer maintained a public social media page for an investment club he operated. Langer authored posts on the page regarding the performance, investment returns, industry standing, and purported successes of the investment club and a separate hedge fund at which he traded. These posts, in part, did not provide a sound basis for evaluating the claims Langer made about the investment club and hedge fund. The posts only made positive claims about the prospects and performance of these entities but did not explain any of the risks associated with investing with them.
Langer made some posts that were options-related, but his posts failed to reflect the risks attendant to options transactions and failed to include a warning that options are not suitable for all investors. Langer's posts went beyond general descriptions of the options being discussed by describing specific transactions or including performance prior to delivery of an options disclosure document. Additionally, Langer did not obtain approval in advance for any of his options-related posts from a registered options principal of his member firm. Nor did Langer submit the posts to FINRA's Advertising Regulation Department at least ten days prior to use.
The suspension was in effect from January 3, 2023, through January 17, 2023.
FINRA's rules regarding communications with the public are designed to ensure that promotional materials and communications are fair, balanced, and not misleading. These rules apply to all forms of communication, including social media posts. When registered representatives use social media to discuss investment opportunities, performance, or specific trading strategies, those communications must comply with the same standards that apply to traditional advertising.
Langer's posts were deficient in several critical ways. First, they presented only positive information about the investment club and hedge fund without disclosing risks. This one-sided presentation is inherently misleading because all investments involve risks, and investors need balanced information to make informed decisions. Second, the posts did not provide a sound basis for evaluating the claims made about performance and success. Performance claims must be based on documented, accurate data and must include appropriate context and disclosures.
The options-related violations are particularly serious because options are complex instruments that carry substantial risks. FINRA requires specific disclosures for options communications, including warnings that options are not suitable for all investors. These warnings are important because options can result in significant losses, including losses exceeding the initial investment in some cases. Additionally, any communication about options must be approved in advance by a registered options principal, ensuring that someone with expertise in options reviews the content for compliance before it is disseminated. Langer's failure to obtain this approval meant his posts were not subjected to the required supervisory review.
For investors, this case offers important reminders about social media communications from financial professionals. Be skeptical of social media posts that present only positive information about investments without discussing risks. Legitimate investment communications provide balanced information. Be particularly cautious about options-related posts or communications, as options are complex and risky. Any financial professional promoting options should provide comprehensive risk disclosures and ensure you understand the potential for losses.
