← Broker database 2024-06-10
TradeZero America Fined $250,000 for Misleading Influencer Marketing
According to FINRA, TradeZero America, Inc. was censured and fined $250,000 for multiple violations related to its influencer marketing campaign, including unfair and unbalanced communications, failure to supervise, and inaccurate privacy notices.
The firm paid several social media influencers to promote its services, including one with millions of viewers. These influencer posts constituted retail communications subject to FINRA rules. However, the posts were not fair and balanced—they failed to discuss investment risks and contained exaggerated and promissory statements. Some posts claimed TradeZero was a "free web trading platform" without disclosing applicable fees or providing links to the fee schedule. Other posts failed to disclose they were advertisements.
The supervisory failures were extensive. TradeZero did not have an appropriately qualified registered principal review and approve influencer videos prior to publication. The firm also failed to review influencer posts made in online interactive forums. Perhaps most troubling, the firm did not preserve records of influencer posts or their dates of use, making it impossible to reconstruct what representations were made to the investing public.
The firm's written supervisory procedures did not require principal approval of influencer videos before posting and lacked any system for reviewing and approving such content. This represented a complete abdication of supervisory responsibility over a major marketing channel reaching millions of potential investors.
Additionally, FINRA found the firm provided inaccurate privacy notices to customers. The notices stated TradeZero only disclosed nonpublic personal information when required for business purposes, but failed to mention the firm might share customer information with third parties for marketing purposes.
For investors, this case highlights the importance of looking beyond social media hype when choosing a brokerage firm. Influencer endorsements may not present a balanced picture of risks and costs. Always review a firm's fee schedule, regulatory history, and privacy policies before opening an account. The fact that TradeZero has since revised its supervisory systems and updated its privacy notice demonstrates that regulatory enforcement can drive positive change, but investors should remain vigilant about marketing claims that seem too good to be true.