FINRA penalizes another broker dealer for social media miscues

The Financial Industry Regulatory Authority (FINRA) on Tuesday fined an online brokerage Open to the Public Investing $350,000 for its shortcoming in monitoring statements by social media influencers. These influencers are also known as "finfluencers" when they focus on financial activity. 

FINRA, which regulates the brokerage industry, has been focused on firms and their use of social media for several years. And in 2024, the regulator hit another online brokerage firm, M1 Finance, with an $850,000 fine for violations related to its social media influencer program.

That 2024 action was FIRA’s first formal enforcement action against a firm over its supervision of finfluencers.

Public Investing’s influencers’ communications were not fair and balanced and included misleading or unwarranted statements, according to FINRA.

In this week’s settlement with Open to the Public Investing, FINRA found that, “from January 2020 to at least September 2022, Public Investing paid individuals with followings on social media sites, commonly known as 'influencers,' to promote the firm in social media communications,” according to the settlement.

“Some of those communications included statements that were not fair and balanced or made claims that were misleading or unwarranted,” according to the settlement.

The firm, which is based in New York, agreed to FINRA’s findings in the matter without admission or denial. Open to the Public Investing’s CEO, Stephen Sikes, did not return a call Wednesday afternoon to comment.

During its Advertising Regulatory Conference last September, FINRA staff pointed to widespread failures they uncovered during a sweep on firms’ uses of social media influencers.

Among 15 firms and 1,300 communications the agency examined, 70% were out of compliance, said Stephanie Gregory, associate director of the complex review team in the regulator’s advertising regulation department.

As part of the sweep that started in 2021, FINRA looked at the two ways firms work with influencers – hiring them for specific content, or paying them for referrals. FINRA considers the latter of which a bigger concern and is the area where the agency has focused its efforts.

Meanwhile, from January 2020 to March 2023, the firm “also did not review and maintain records of all retail communications disseminated on the firm’s behalf by its influencers, and failed to establish, maintain, and enforce a reasonably designed supervision system with respect to such communications,” according to FINRA.