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April 05, 2024 at 01:24 PM
What You Need to Know
- Cobra Trading paid individuals with followers on social media sites to promote the company.
- Posts on the firm's behalf were not fair and balanced, the regulator says.
- The broker-dealer, based near Dallas, was ordered to pay a $200,000 penalty.
The Financial Industry Regulatory Authority has levied another disciplinary action involving a firm’s supervision of social media influencers.
According to FINRA’s order against Cobra Trading, between November 2019 and October 2023, Cobra paid individuals with followings on social media sites to promote the firm in social media communications.
Such influencers’ posts “were not fair and balanced or made claims that were promissory,” FINRA said.
These actions violated FINRA Rules 2210(d)(1) and 2010. Cobra Trading was ordered by FINRA to pay a $200,000 penalty.
FINRA levied its first action March 18 when it fined M1 Finance LLC $850,000 for social media posts made by influencers on the firm’s behalf that were not fair or balanced, or contained exaggerated, unwarranted, promissory or misleading claims.
During that same period, Cobra Trading did not review these influencers’ videos before their posting on social media platforms, nor did the firm retain those videos, the order states.
Cobra Trading also failed to establish, maintain and enforce a system, including written supervisory procedures, reasonably designed to supervise communications disseminated on the firm’s behalf by influencers.
Cobra Trading, Inc. provides self-directed trading to retail investors through its online portal. Headquartered near Dallas in Carrollton, Texas, the firm has 12 registered representatives at one branch office.
Regulatory Notices
In Regulatory Notices 10-06 and 17-18, FINRA stated that third parties’ social media posts would constitute retail communications subject to FINRA Rule 2210 if a member firm either paid for or was involved in the preparation of the content before posting.
Regulatory Notice 17-18 also stated that firms “should clearly identify as advertisements any communications that take the form of comments or posts by influencers as well as any other information required for compliance with FINRA Rule 2210,” FINRA points out.
Order Details
During the relevant period, Cobra Trading paid 17 influencers for promotional communications on social media platforms, including online interactive forums and video sharing platforms.
The firm “paid these influencers a flat fee if a new account was opened and funded by a customer using a unique link provided by Cobra Trading and did not limit the compensation influencers could earn,” FINRA explained.
