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FINRA Atwitter on Social Media Influencers | Carlton Fields


Social media influencers are individuals, sometimes celebrities, who help businesses gain customers through social media communications. Influencers can communicate, for example, on TikTok, Facebook, Instagram, YouTube, Twitter, Stocktwits, Reddit, Twitch and many other platforms, about a company or product to influence customers’ purchasing decisions potentials.

In the heavily regulated securities industry, using influencers to acquire clients can raise regulatory issues, including receiving referral fees and confidentiality.

On September 16, 2021, FINRA sent a targeted review letter to member firms asking if firms use influencers to acquire customers and, if so, how firms compensate influencers and what firms do customer data.

The FINRA letter requested documents, including:

  • Engagement letters, contracts and agreements in which the company has contracted with influencers to provide social media communications for compensation.
  • Copies of all social media influencers posted about the company, and whether the social media communications have been filed with FINRA’s Advertising Regulatory Department.
  • Written supervision procedures, compliance policies and training materials regarding the use of social media influencers.
  • A list of all unaffiliated third parties with whom the Company has shared non-public personal information about a Customer’s use of the Company’s website or mobile application.

With respect to referral commissions, FINRA asked if the firm or an affiliate offered a referral program through which individuals received bonuses, awards, incentives, or other compensation for referring new customers when opening accounts with the company. FINRA requested information on compensation, benefits or bonuses offered through referral programs, including how these amounts are determined, likely to assess whether influencers receive transaction-based security compensation.

With respect to consumer privacy, FINRA requested information on companies’ compliance with SEC SP rules regarding the collection of data generated by a website or mobile application about a user and then saved (known as cookies). ). Specifically, FINRA researched information about cookies obtained from customers or individuals who provided non-public personal information but were not onboarded as customers, privacy policies, and opt-out notices from company, as well as the associated compliance procedures.

Time will tell if the results of FINRA’s targeted review will lead to enforcement action and/or guidance regarding securities industry influencers.

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