Financial & SEC Compliance for Finfluencers

Federal Compliance Lawyers for Financial Influencers in the U.S. and Worldwide

Attorney John W. Sellers
Finfluencers Team Lead
Former DOJ Trial Attorney

Financial influencers (financial social media influencers) on social media platforms have faced enhanced scrutiny from the U.S. Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA) in recent years. The SEC and FINRA have launched multiple investigations targeting financial influencer marketing and their relationships with issuers and brokerage firms, and both authorities have issued warnings to finfluencers and firms about the risks of non-compliance.

Our team is intimately familiar with these risks and the steps that are necessary to avoid them. Not only do we have extensive experience advising finfluencers and brokerage firms regarding financial and SEC compliance, but several of our attorneys previously prosecuted securities fraud and financial crimes at the U.S. Department of Justice (DOJ). The DOJ works with the SEC and FINRA to pursue criminal charges against finfluencers and others when warranted. If you have compliance questions or concerns about financial promotions, we can explain everything you need to know, and we can help you take all of the steps that are necessary for your protection going forward.

Common Compliance Pitfalls for Financial Influencers

Numerous issues can get finfluencers into trouble with the SEC and FINRA. Unfortunately, many finfluencers do not realize the scope of these authorities’ oversight, and they inadvertently make decisions that pose risks for substantial penalties. The SEC in particular regulates essentially all activities affecting U.S. markets, and it has extremely broad authority to target anyone who causes financial harm to investors.

Another critical factor to keep in mind is that the SEC holds financial influencers accountable regardless of whether they have relied on the advice of others—including the advice issuers and brokerage firms with which they work. In many cases, the SEC and FINRA have targeted finfluencers and brokerage firms jointly, and they have sought substantial penalties against all parties involved.

With this in mind, there are several Investment Advisers Act compliance pitfalls that finfluencers must be extremely careful to avoid. This includes (but is by no means limited to) common compliance pitfalls such as:

Exaggerating the amount of due diligence performed or understating the risks involved with a recommended investment.
Failing to disclose finfluencers’ financial relationships with financial institutions, issuers, investment companies, or brokerage firms.
Failing to disclose finfluencers’ holdings or planned trades during marketing communications.
Omitting material information that could impact prospective investors’ decision-making.
Recommending financial products based on compensation without examining (and adequately disclosing) the investment risks involved.

These non-compliant financial promotions—among many others—can trigger scrutiny from the SEC and the potential for significant civil monetary penalties. They can also trigger criminal investigations and indictments in some cases. However, all of these mistakes are avoidable, and finfluencers should avoid them by working with experienced financial and SEC compliance counsel.

Dr. Nick Oberheiden

Founder

Attorney-at-Law

Lynette S. Byrd

Former DOJ Trial Attorney

Partner

Brian J. Kuester

Former U.S. Attorney

Hon. Kevin McCarthy

55th Speaker, U.S. House of Representatives (ret.)

Government Consultant

Mike Pompeo

Of Counsel

Former U.S. Secretary of State

John W. Sellers

Former Senior DOJ Trial Attorney

Linda Julin McNamara

Federal Appeals Attorney

Nicholas B. Johnson

Former Prosecutor

Roger Bach

Former Special Agent (DOJ)

Chris J. Quick

Former Special Agent (FBI & IRS-CI)

Michael S. Koslow

Former Supervisory Special Agent (DOD-OIG)

Ray Yuen

Former Supervisory Special Agent (FBI)

Key Areas of Financial and SEC Compliance for Finfluencers

Like all entities involved in the U.S. securities markets, finfluencers have numerous financial and SEC compliance obligations. The following are some of the key areas of concern—though this list is far from exclusive:

Investment Representations and Recommendations

Finfluencers have an obligation to ensure that they are providing accurate information to current and prospective investors. They must also be very careful to avoid overstepping their bounds and acting as an unregistered broker or investment advisor. Adequate due diligence is essential, as is documenting your due diligence and the bases for your investment representations and recommendations.

Financial (or Other) Compensation

While nothing prohibits finfluencers from receiving financial compensation or other forms of remuneration for their services, disclosure obligations apply. Finfluencers must also be very careful to ensure that any remuneration they receive from member firms does not cause them to provide misleading or potentially dangerous investment advice while promoting financial products.

Relationship and Investment Disclosures

The SEC and FINRA have both prioritized ensuring that finfluencers, issuers, and brokerage firms adequately disclose their financial relationships in recent years. Financial influencers must also ensure that they adequately disclose both their investment holdings and investment plans.

Material Misrepresentations and Omissions

Material misrepresentations and omissions—even if unintentional—can expose finfluencers to substantial penalties. When making public statements about securities and other investment opportunities, finfluencers must take adequate steps to ensure that they are not misleading the investing public.

Using or Sharing (or Claiming to Share) Inside Information

Using inside information can lead to civil or criminal liability for insider trading. So can sharing information received from company insiders. Claiming to have inside information can be just as dangerous, as this can lead to allegations of misleading investors.

Pump-and-Dump and Other Investment Fraud Schemes

Some financial influencers have unknowingly found themselves at the center of pump-and-dump and other investment fraud schemes. As part of their due diligence, finfluencers must ensure that they are not being pulled into an investment fraud scam. The FTX saga brought this risk into the limelight; and, while the SEC pursues celebrities and other public figures, it pursues many other individuals as well.

Compliance Documentation

If you ever find yourself facing scrutiny from the SEC, FINRA, or any other authority, documentation will be the key to avoiding unnecessary consequences. Finfluencers need to document their good-faith efforts to establish compliance and maintain compliance on an ongoing basis.

Importantly, while financial and SEC compliance are two key areas of concern for financial influencers, these are by no means the only compliance concerns finfluencers face. From the U.S. Federal Trade Commission (FTC) to state securities regulators, several other authorities have oversight of finfluencers’ use of social media, their claims about securities offerings, and other areas of concern as well.

What We Can Do to Help

Given the importance of financial and SEC compliance for finfluencers, your choice of legal representation matters. So, why should you choose Oberheiden P.C.? Here are just some of the ways our attorneys (including our former DOJ prosecutors) can help:

Help You Understand Your Financial and SEC Compliance Obligations – Our attorneys can explain the rules that apply to finfluencers generally and provide advice based on your specific investment-related activities.
Provide You with Compliance Documentation – After assessing your specific risks and needs, we can provide you with compliance documentation that you can use to make informed decisions.
Review Your Social Media Posts and Other Online Content – If desired, our attorneys can review your existing and/or future social media posts and other online content to identify any potential financial or SEC compliance concerns.
Answer Your Questions as They Arise – Our attorneys can also be available to you to answer compliance-related questions as they arise.
Deal with the SEC and Other Authorities on Your Behalf as Necessary – If you get contacted by the SEC or other authorities, our attorneys can work with the authorities on your behalf. We can use the documentation we’ve provided to demonstrate your good-faith compliance efforts and work to secure a resolution that avoids unnecessary consequences.

FAQs: Federal Compliance for Finfluencers

Are Financial Influencers Regulated?

Yes, financial influencers are subject to numerous regulations at the state and federal levels. To avoid scrutiny from state and federal authorities, finfluencers must take a proactive approach to meeting their regulatory obligations. Regulatory violations can expose finfluencers to substantial penalties.

Are Finfluencers Subject to SEC Compliance?

Yes, the SEC is one of several agencies that oversee finfluencers’ activities in the marketplace. As a result, finfluencers need to proactively address SEC compliance. There are several steps involved; and, to ensure that you are doing everything necessary to protect yourself, a custom-tailored approach is critical.

What Are the Penalties for SEC Non-Compliance?

The penalties financial influences can face for SEC non-compliance vary widely. In most cases, the SEC imposes civil monetary penalties for non-compliance. But, the SEC can also enjoin finfluencers from engaging in securities-related marketing and other activities, and it can work with the DOJ to pursue criminal penalties (including fines and incarceration) when warranted.

When Can Finfluencers Face Federal Criminal Charges?

Finfluencers can face federal criminal charges when accused of intentionally attempting to mislead investors or manipulate the securities market. Insider trading and other offenses can lead to criminal charges as well. As the number of finfluencers promoting investment opportunities on social media continues to grow, the SEC and other authorities are enhancing their efforts to hold bad actors criminally accountable.

What Should I Do if I Have Concerns About Financial or SEC Compliance?

If you have concerns about financial or SEC compliance as a financial influencer, you should consult with an attorney promptly. You will want to make sure you are in compliance before you get contacted by the SEC. If you have already been contacted by the SEC, you need to be very careful, and you should consult with an attorney promptly in this scenario as well.

Speak with a Financial and SEC Compliance Lawyer at Oberheiden P.C. in Confidence

If you are a financial influencer and you have compliance-related questions or concerns, our attorneys can help you move forward with confidence. We represent clients throughout the United States and worldwide. To speak with a senior financial and SEC compliance lawyer at Oberheiden P.C. in confidence as soon as possible, call 888-680-1745 or tell us how we can reach you online today.