In May, Webull Financial agreed to pay a $1.6 million fine to settle charges brought by the Financial lndustry Regulatory Authority that Webull failed to properly manage its influencers.
By way of background, FINRA Rule 2210 requires, among other things, that covered communications be based on principles of fair dealing and good faith, be fair and balanced, and provide a sound basis for evaluating a security. Specifically, the Rule prohibits "promises of specific results" as well as "exaggerated or unwarranted claims." The Rule also prohibits failing to disclose appropriate risks and warnings.
FINRA alleged that Webull hired more than 400 influencers to promote the firm in social media, and that some of those influencers created posts that included statements that were not fair and balanced or were promissory or exaggerated. For example, one influencer posted, "once this actual stock skyrockets to quadruple the price you are going to see this company actually making lots of money and not losing money." Another influencer posted, "If you make a day trade today . . . you're on your way to being a profitable day trader and you're on your way to being a millionaire."
Some influencer posts, FINRA alleged, also didn't include disclosures of appropriate risks and other material terms. FINRA also alleged that some of Webull's influencers failed to clearly identify their posts as paid advertisements.
In addition, FINRA alleged that Webull violated Rule 2210 by failing to approve these social media posts before they were posted.
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