The Financial Industry Regulatory Authority (FINRA) has fined TradeZero America, Inc., a retail investor trading platform, $250,000. FINRA member since 2016, the Brooklyn-based company was accused of numerous regulatory infractions from July 2020 to October 2022. The settlement deals with the company’s use of social media influencers and its misrepresentation of privacy policies to consumers.
TradeZero America paid social media influencers to advertise its services, but it didn’t make sure the messages were impartial, fair, and compliant with laws, according to FINRA’s investigation. Influencer posts frequently broke FINRA regulations by making false and misleading claims. Additionally, the company neglected to keep track of published videos and posts and to review them.
“TradeZero America neither retained nor reviewed the videos that its influencers posted on social media before they were posted. Additionally, the company neither retained nor reviewed posts made by influencers in online interactive electronic forums, according to FINRA.
Furthermore, TradeZero America sent out false privacy notices to its clients between January 2020 and January 2022, misrepresenting the purposes for which their nonpublic personal information would be utilized. According to FINRA, the company improperly disclosed when sharing private client information for marketing purposes with unaffiliated third parties.
FINRA has penalized a trading firm for influencers’ actions previously. M1 Finance was hit with a similar ($850,00) fine in mid-March for posting false information on social media. Rewrite Shared
TradeZero America accepted the sanctions, which included a $250,000 fine and a censure, but did not acknowledge or deny the findings. Since then, the company has made necessary revisions to its supervisory processes to guarantee adherence to FINRA regulations. These revisions include requiring a registered principal to review and approve social media communications and to provide accurate privacy disclosures.
The role of financial influencers, or “influencers,” in the financial industry is growing. According to a study conducted this year, average investors place more trust in influencers than in friends or family when it comes to financial advice. Retail traders’ savings and funds are at risk from the actions of influencers in the financial market, according to Gerhard Van Deventer, Divisional Executive of Enforcement at the Financial Sector Conduct Authority (FSCA).
BofA Securities was also recently fined $90,080 by FINRA for regulatory infractions, which included submitting incomplete or late notifications to the regulator. BofA Securities was also charged by FINRA for neglecting to keep up a sufficient supervisory system. According to reports, the company’s filings missed the necessary regulatory deadlines.
