The FINRA Crackdown on Social Media Influencers Should Be a Wake-Up Call to Investors


  • Brokerage app M1 Finance has been busted for paying off influencers.
  • According to reports, some paid TikTok content creators pushed misinformation in their M1-sponsored content.
  • This should remind investors why taking investing advice from social media can be dangerous.
FINRA social media - The FINRA Crackdown on Social Media Influencers Should Be a Wake-Up Call to Investors

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One of this week’s biggest stories involved a regulatory crackdown on a prominent brokerage app. In a statement released on March 18, The Financial Industry Regulatory Authority (FINRA) reported that financial services platform M1 Finance had hired some 1,700 social media influencers between 2020 and 2023. These influencers, in turn, spread misinformation and misleading content in order to compel users to sign up for the M1 platform. The FINRA social media investigation has resulted in M1 being fined $850,000.

M1 will likely recover from this costly penalty. But for users who made financial decisions based on the misleading advice, the road back may not be so easy. Still, this story highlights an even bigger and more troubling trend that has emerged over the past year.

The FINRA Social Media Crackdown

The FINRA social media investigation centered around one platform in particular; many of the influencers hired by M1 over the three-year period are prominent creators on TikTok. More specifically, they are part of the “FinTok” community, which has become a popular source of information for aspiring investors. Unfortunately, though, TikTok has a history of spreading misinformation to young users, according to a report from NewsGuard.

This troubling trend isn’t surprising. A few months ago, I began investigating the problems with FinTok after seeing the following headline: “They Tried TikTok Money Advice. Then They Needed a Lawyer.” Originally published by CNET, this story discussed the dangers that can stem from listening to TikTok users who aren’t qualified to be dispensing financial advice.

To learn more, I spoke to Erika Kullberg, an attorney and personal finance expert who boasts one of the biggest followings of any investing influencer. One tip she shared centered around investigating any TikTok user offering financial advice.

The M1 users who watched the videos made by the platform’s paid TikTok influencers should have kept that in mind. One content creator who goes by the handle “MoneyCoachVince” posted a video promoting M1’s Roth IRA accounts. But his website claims to be “not a financial advisor nor affiliated with any.”

Fortune provided further context on the M1 scandal:

“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.”

Why This Matters

Stories like this are likely to undermine trust in public markets. But what they should really do is highlight the problems with taking financial advice from random social media users. Unless someone is an accredited financial advisor, is it wise to be taking their investment advice? After all, they could have a strong incentive to promote things that aren’t necessarily in the best interest of investors.

Since the Reddit (NYSE:RDDT) forum r/WallStreetBets led to the GameStop (NYSE:GME) squeeze of 2021, people have flocked to social media to hear and share investing ideas. But people tend to overlook one key detail of that historic phenomenon. Keith Gill — the user responsible for kickstarting the squeeze — holds the designation of Chartered Financial Analyst (CFA), an important qualification. Many FinTok influencers don’t seem to have that as part of their title.

That just further demonstrates why it makes sense to listen to an accredited finance professional and not random social media users. In January 2023, I began investigating market manipulation allegations into MMTLP, the now-delisted preferred shares of meme stock Meta Materials (NASDAQ:MMAT). Multiple investors bought in because someone they knew suggested it — but they could do nothing when the shares were delisted. As InvestorPlace’s Eddie Pan reports, the groupthink mentality that has driven meme stock communities has been hugely effective at helping investors lose money.

FINRA’s social media crackdown on M1 should be a wake-up call for investors. Social media is full of investing scams and misinformation. It’s more important than ever to follow Kullberg’s advice and extensively investigate the claims made on platforms like TikTok. As the M1 scandal shows, even trusted brokerage platforms are taking advantage of this trend but failing to investigate dangerous misinformation.

On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Samuel O’Brient is a Reporter for InvestorPlace, where his work focuses primarily on financial markets, global economic trends, and public policy. O’Brient writes a weekly column on recent political news that investors should be following.

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