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.

SEC Slams Investment Adviser

Specifically, the 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.

Furthermore, the 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.

“Fundrise consented to the entry of the SEC’s order finding 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,” the SEC explained in a statement.

Regulators Campaign against ‘Finfluencers’

In recent years, regulators across major financial markets in the world have increasingly turned their attention towards 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 is also planning to update its social media guidelines to ensure better compliance when firms promote financial products or services online.

Furthermore, the FCA alongside the Advertising Standards Authority in April launched a campaign 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.

Similarly, the Cyprus Securities and Exchange Commission last year ran an investor protection campaign in response to the promotion of complex and risky investment products on social media channels, including by celebrities. During the campaign, CySEC raised concerns about the 'gamification' of retail investments.

Meanwhile, as early as 2021, the Australian Securities and Investments Commission (ASIC ) issued a warning against ‘finfluencers’, 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.

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