FINRA imposes censure and $250,000 fine on “influencer” company for misconduct and privacy notice violations

Securities FINRA Social Media

On June 10, FINRA agreed to a Letter of Acceptance, Waiver, and Consent (AWC) from a company, addressing various regulatory infractions for improper use of social media influencers in promotional activities. From 2020 to 2022, the firm was found to have compensated influencers for social media content that was not fair and balanced and contained exaggerated claims, violating FINRA Rules 2210(d)(1) and 2010. The firm also failed to review influencer-produced videos prior to their distribution and lacked adequate supervisory procedures to monitor its influencers’ communications, contravening the Securities Exchange Act Section 17(a), Exchange Act Rule 17a-4(b)(4), and additional FINRA rules. Furthermore, the company issued misleading privacy notices to its customers, violating Regulation S-P and FINRA Rule 2010. Specifically, the company stated in its privacy notice that it disclosed nonpublic personal information “only when it is both permitted by law and required for the ordinary course of business,” when in fact it shared such nonpublic personal information with non-affiliated third parties for marketing purposes. To resolve these claims, FINRA imposed a censure and a $250,000 fine. The company concurred.