SEC Sues Fundrise for Paying 200 Social Media Influencers to Solicit Clients

<p>The US
Securities watchdog has accused Fundrise Advisors, LLC, of violating the
country’s cash solicitation rules by paying over 200 social media
influencers and online newsletter publishers to solicit clients for its
investment platform. The Securities and Exchange Commission (SEC) announced
today (Tuesday) that the Washington-based investment advisor did not require
the influencers to provide customers “with certain disclosures” required by the
law. </p><p>SEC Slams
Investment Adviser</p><p>Specifically,
SEC noted that Fundrise’s brochure lacked these disclosures. In addition, the
investment firm’s compensation agreement with the influencers failed to mention
the said disclosures.
However, the securities watchdog noted that the company has agreed to settle
the case by paying $250,000 in civil penalty. </p><p>Furthermore,
SEC said the firm agreed to a
cease-and-desist order as well as a censure. However, the firm
neither admitted to nor denied the regulator’s findings. </p><p>“Fundrise
consented to the entry of <a href="https://www.sec.gov/files/litigation/admin/2023/ia-6381.pdf" target="_blank" rel="follow">the SEC’s order finding</a> that the firm willfully
violated the compliance and former cash solicitation provisions of Section
206(4) of the Investment Advisers Act of 1940 and Rules 206(4)-3 and 206(4)-7
thereunder,” SEC explained in <a href="https://www.sec.gov/enforce/ia-6381-s#:~:text=August%2022%2C%202023%20–%20The%20Securities%20and%20Exchange,the%20firm’s%20solicitation%20arrangements%20with%20online%20content%20creators." target="_blank" rel="follow">a statement</a>.</p><p>Regulators
Campaign against ‘Finfluencers’</p><p>In recent
years, regulators across major financial markets in the world have <a href="https://www.financemagnates.com/forex/finfluencers-had-a-good-run-but-the-party-may-fizzle-out/" target="_blank" rel="follow">increasingly turned
their attention towards</a> so-called fintech influencers or ‘finfluencers’.
The UK’s Financial Conduct Authority (FCA) revealed last month that it aims to
strengthen its measures against unauthorized and non-compliant financial
promotions. The British watchdog <a href="https://www.financemagnates.com/forex/fca-to-control-finfluencers-and-illegal-promotions-on-social-media/" target="_blank" rel="follow">is also planning to update its social media guidelines</a> to ensure better compliance
when firms promote financial products or services online.</p><p>Furthermore, the FCA alongside the
Advertising Standards Authority in April <a href="https://www.financemagnates.com/forex/fca-taps-love-island-contestant-to-educate-finfluencers/" target="_blank" rel="follow">launched a campaign</a> to encourage ‘finfluencers’
against promoting illegal 'get rich quick' schemes. For the campaign,
the agencies partnered
with Sharon Gaffka, a prominent social media influencer in the country.</p><p>Similarly,
the Cyprus Securities and Exchange Commission last year <a href="https://www.financemagnates.com/forex/regulation/cysec-warns-against-finfluencers-and-trading-gamification/" target="_blank" rel="follow">ran an investor protection
campaign</a> in
response to the promotion of complex and risky investment products on social
media channels, including by celebrities. During
the campaign, <a href="https://www.financemagnates.com/terms/c/cysec/">CySEC</a> also raised concerns about the
'gamification' of retail investments.</p><p>Meanwhile, as early as
2021, the Australian Securities and Investments Commission (<a href="https://www.financemagnates.com/terms/a/asic/">ASIC</a>) issued<a href="https://www.financemagnates.com/forex/regulation/aussie-regulator-cautions-firms-against-ties-with-financial-influencers/" target="_blank" rel="follow"> a warning
against ‘finfluencers’</a>, noting that most of them were providing
unlicensed financial advice in the country. The Aussie
regulator stressed that only individuals and corporations holding an Australian
Financial Services (AFS) license were allowed to offer financial advice to investors.</p><p>DMALINK partners with Danske; SoftBank's arm targets mega IPO; <a href="https://www.financemagnates.com/forex/news-nuggets-22-august-dmalink-partners-with-danske-softbanks-arm-targets-mega-ipo/" target="_blank" rel="follow">read today's news nuggets</a>.</p>

This article was written by Solomon Oladipupo at www.financemagnates.com.