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Regulation and Compliance > Federal Regulation > FINRA

FINRA Provides Update on 'Finfluencers' Crackdown

By Melanie Waddell

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The Financial Industry Regulatory Authority said broker-dealers are updating their practices to address risks related to social media influencers, or “finfluencers,” and referral programs after the regulator began conducting an exam sweep last year.

The sweep, announced by FINRA last September, also probes firms on how they “manage their obligations related to information collected from those customers and other individuals that may provide data to firms.”

FINRA CEO Robert Cook said on July 22 that a sweep related to “finfluencers” was coming.

Greg Ruppert, executive vice president of Member Supervision at FINRA, said the information released Tuesday provides “some initial themes” from the ongoing targeted exam.

“We hope firms will use this update as an opportunity to look at their practices in this space and consider any potential regulatory obligations,” Ruppert said.

The first part of the review focuses on firms’ use of social media influencer and referral programs to promote their products and services and recruit new customers. The second part addresses firms’ privacy notices and options to opt out regarding the collection and sharing of their usage information.

The broker-dealer self-regulator said that it’s looking for communications via any website or application that enables users to create and share content or participate in social networking, including TikTok, Facebook, Instagram, YouTube, Twitter, Stocktwits, Reddit and Twitch.

FINRA also wants firms to weigh in on their written and supervisory compliance with the Securities and Exchange Commission’s Regulation S-P, Privacy of Consumer Financial Information and Safeguarding Personal Information.

On Tuesday, FINRA said that the update summarizes selected practices FINRA has observed firms implement “to this point in the sweep.”

For instance, when it comes to maintaining written supervisory procedures (WSPs) focusing on social media influencer and referral programs, firms have:

  • Differentiated between social media influencer and referral programs, including considering additional controls for social media influencers with a relatively large social media presence, as well as any additional requirements for programs managed by member firms, affiliates or marketing agencies;
  • Updated their WSPs on a regular basis and in response to program developments, regulatory changes or industry trends; and
  • Addressed program participants’ compensation.

FINRA said that it may provide additional information about its review at a later date.

(Image: Shutterstock) 

Melanie Waddell

@Think_MelanieW

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