Regulators are taking aim at misleading investing advice on social media: Brokerage app M1 Finance just got fined $850,000 for hiring an army of influencers who advertised false claims about the company.
FINRA, a government-authorized not-for-profit overseen by the SEC that regulates public brokerage firms, announced the fine Monday after an extended investigation into social media campaigns M1 Finance paid for between 2020 and 2023.
This is the first time FINRA has levied enforcement against a company for its social-media influencer strategy, a precedent that could have big implications for other firms.
“As investors increasingly use social media to inform their financial decisions, FINRA’s rules on communicating with the public are especially critical,” FINRA executive vice president and head of enforcement Bill St. Louis wrote in a press release. “FINRA will continue to consider whether firms are using practices and maintaining supervisory systems that are reasonably designed to address the risks related to social media influencer programs.”
FINRA found that M1 Finance hired around 1,700 influencers to post sponsored content advertising the company’s brokerage accounts, providing them with graphics and a “welcome guide” to build content around. The strategy was effective: Between January 2020 and April 2023, M1 Finance added almost 40,000 new accounts, and the company paid each influencer a flat fee for every new customer that signed up through their referral link.
TikTok user Gil Olivera posted a video playing representatives of different financial firms debating over which one offers the best terms to its customers in September 2020, pointing out M1 Finance’s low fees and app design.
@giladventures Choosing a company to open a retirement account #investing#rothira#vanguard#m1finance#betterment#retirerich#personalfinance♬ original sound – Gil Oliveira
In March 2022, TikTok user MoneyCoachVince posted a video listing benefits of a Roth IRA savings account, encouraging users to sign up for M1 Finance at a link in his profile.
@moneycoachvince Get started investing using M1Finance at the iink in my profile 📈🙌🏾 #rothira#investing#DeserveADrPepperDuet#financialfreedom#moneytok#learnontiktok#coachvince♬ Pavor [Hip Hop] – Instrumental – Cuarta Pared Studio
FINRA pointed out that M1 Finance didn’t review or approve the content its paid influencers were posting, a violation of the organization’s rules. Some influencers also made factually incorrect statements, including one example where an influencer stated that customers using M1 Finance’s margin lending program could “pay [margin loans] back at any given time…there is no set time period.”
M1 Finance did not respond to an email requesting a comment for this article. It settled the matter with FINRA without admitting or denying the charges.
Social media has emerged as a hugely popular source for financial advice—a 2023 Forbes study found that almost 80% of millennials and Gen Zers have gotten financial advice from social media, and #FinTok has almost 5 billion views on TikTok alone. That comes with risks attached, though: A recent study found that well over half of all financial advice on TikTok was misleading. In what’s become a largely unregulated source of information, FINRA has let influencers know that it’s paying attention.
Editor’s note: This story was updated to more accurately describe FINRA. FINRA is a government-authorized not-for-profit, not a government-sponsored nonprofit.