Poplar trading app hit with $850K fine after hiring army of 1,700 influencers to spread 'misleading' posts about investing in stocks

Regulators have launched a first-of-its-kind clampdown on financial influencers after hitting a trading app with a $850,000 fine over its social media content.

M1 Finance - a rival to Robinhood - hired 1,700 influencers to share sponsored posts advertising its accounts between January 2020 and April 2023. 

That period saw a boom in trading activity, particularly among younger Americans caught up in the frenzy around GameStop and Wall Street Bets frenzy. 

The Financial Industry Regulatory Authority (FINRA) said much of M1's content was 'not fair or balanced, or contained exaggerated, unwarranted, promissory or misleading statements.' 

During that time, more than 39,400 new accounts were opened. Influencers were given a flat fee every time a new customer signed up using their own unique link.

One TikTok users named Gil Oliveira posted a sponsored video for the firm in 2020 whereby he explained the benefits of M1 Finance over competitors Vanguard and Betterment. It has around 440,000 views

The case - which is the first time FINRA has targeted a firm's influencer strategy - sets a precedent for other companies amidst a boom in online money content.

The term #FinTok - which refers to financial content on TikTok - has almost 5 billion views on TikTok.What's more, a 2023 Forbes study found almost 80 percent of millennials and Gen Z have gotten financial advice from social media.

What's more, a 2023 Forbes study found almost 80 percent of millennials and Gen Z have gotten financial advice from social media.

M1 Finance agreed to settle the case without accepting or denying culpability. It did not respond to requests for comment from DailyMail.com.

Bill St Louis, head of enforcement at FINRA, said in a statement: 'As investors increasingly use social media to inform their financial decisions, FINRA’s rules on communicating with the public are especially critical. 

'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.'

M1 Finance is a trading app which offers users commission-free trades for stocks. It is similar to Robinood, but doesn't offer as many features - such as options trading - that its rival does.

M1 Finance hired an army of 1,700 influencers to post sponsored content advertising its accounts between January 2020 and April 2023

M1 Finance did not review or approve content its influencers posted - a breach of FINRA rules

On its website it claims to have more than 1 million users and store $8 billion in client assets since it was founded in 2015.  

One TikTok users named Gil Oliveira posted a sponsored video for the firm in 2020 whereby he explained the benefits of M1 Finance over competitors Vanguard and Betterment. It has around 440,000 views.

Another called Money Coach Vince - who has 476,000 followers - explained the virtues of opening a RothIRA with an M1 finance account.

Both videos are still available to watch on the social media site - though there is no indication any of the claims they personally made were misleading. DailyMail.com reached out to both creators for comment.

But FINRA said it had seen one video whereby the influencer inaccurately claimed M1 Finance's margin lending program allowed customers to 'pay [them] back at any given time... there is no set time period.'

The body also points out that M1 Finance did not review or approve content its influencers posted - a breach of FINRA rules.

Another called Money Coach Vince - who has 476,000 followers - explained the virtues of opening a RothIRA with an M1 finance account

The ruling comes amidst growing concern over the explosion in financial content on social media - which critics say can often be misleading and damaging.

A recent study by WallStreetZen found that 63 percent of stock-related videos on TikTok were misleading.

Experts recommend always verifying the credentials of any so-called 'finfluencer' whose advice you see online. 

Personal finance coach Bernadette Joy recently told CNET: 'Look into the background and qualifications of TikTok creators providing financial advice to ensure they have expertise in the field.

'I see a lot of financial influencers who are teaching things like stock market investing and saying they got rich when, in actuality, they got rich from the course they are selling you on stock market investing, not the investing itself.'