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Regulation and Compliance > Federal Regulation > FINRA

FINRA Slaps BD With $250K Finfluencer Fine

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What You Need to Know

  • TradeZero America paid individuals with social media followings to promote the firm.
  • The firm did not review its influencers' videos prior to their posting, nor did the firm retain those videos.
  • Influencers made exaggerated claims on the firm's behalf, FINRA said.

The Financial Industry Regulatory Authority has censured TradeZero America Inc. and ordered it to pay a $250,000 fine for failing to oversee social media influencers.

According to FINRA’s order, between July 2020 and October 2022, TradeZero America paid individuals with followings on social media sites to promote the firm.

“Such influencers posted social media communications on the firm’s behalf that were not fair and balanced or that made exaggerated or promissory claims,” the order states.

TradeZero, based in Brooklyn, New York, provides self-directed trading to retail investors through its online portal. The firm has 28 registered representatives at one branch office.

During the same period, TradeZero America “did not review its influencers’ videos prior to their posting on social media platforms, nor did the firm retain those videos,” the order states.

One influencer’s social media platforms had millions of viewers, the order states, and during the relevant period, customers opened approximately 575 accounts using a unique referral link that TradeZero provided to its influencers.

The firm also did not review or retain influencers’ posts made in online interactive electronic forums, and failed to establish, maintain and enforce a system, including written supervisory procedures, reasonably designed to supervise retail communications disseminated on the firm’s behalf by its influencers, according to FINRA.

“TradeZero America’s influencers’ social media posts were retail communications of the firm and therefore subject to FINRA Rule 2210,” FINRA said.

TradeZero America “provided each influencer with their own unique link which directed people to a page on the firm’s website where they could open and fund a TradeZero America brokerage account,” according to the order. “The fiirm also provided influencers with graphics to use in their social media posts and ‘talking points’ that influencers could use to make their social media posts more effective.”

These talking points highlighted specific services and features offered by the firm.

For example, “the talking points noted that TradeZero America offered various features related to day-trading, but they omitted any discussion of the risks of day-trading,” FINRA said.

TradeZero America also promoted its partnership with one of its influencers on the firm’s website and on social media platforms.

In a video posted in July 2020, one TradeZero America influencer told viewers that he was a ‘TradeZero guy’ because the firm was for ‘people who want to trade and make billies’ and not for ‘grandmas and grandpas who trade, like, one stock.’”

In another video, “the same influencer discussed his use of TradeZero America, stating he was up several thousand dollars without ‘even trying.’”

Other influencer posts claimed that TradeZero America “was a ‘free web trading platform,’ without disclosing that certain fees may apply or providing a prominent link to TradeZero America’s fee schedule, or failed to disclose that the posts were advertisements,” FINRA said.

Credit: Shutterstock


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