Avenue Securities LLC
The findings stated that the firm’s affiliate arranged with the influencers to promote it and its affiliated companies to potential retail investors in Brazil through social media platforms, including in static video posts and in online interactive electronic forums. The firm’s foreign affiliate paid the influencers a fixed monthly fee for content that promoted the firm brand, including the firm’s products and services, on social media. Some posts suggested that investments in certain securities would guarantee dividend income without disclosing the risks inherent in investing. The influencers also promoted investment in U.S. markets with the promise of investment success.
Further, other posts used promissory and misleading hashtags that suggested investors would get wealthy or earn money from their investments and several posts promoted specific registered exchange-traded funds without including required information and disclosures. Some posts encouraged potential investors to purchase crypto assets but did not clearly explain the risks of the investment, including that investors could lose their entire investment amount.
In addition, some of the influencers described the firm as “free”, “completely free of charge”, or “zero fee” without disclosing that certain fees may apply or providing a prominent link to the firm’s fee schedule. Many of the influencers’ posts failed to clearly identify the communications as paid advertisements.
The findings also stated that the firm failed to have a registered principal review and approve influencers’ static video content prior to posting, and the firm did not maintain records of influencers’ communications related to the firm, or the dates they were used. The firm also failed to review posts made by influencers in online interactive electronic forums.
The findings also included that the firm failed to establish, maintain, and enforce a system, including WSPs, reasonably designed to supervise social media communications disseminated by influencers engaged to promote the firm and related recordkeeping requirements. While the firm’s written policies and procedures required principal review and approval of retail communications, the firm’s procedures did not provide guidance about when influencer communications were retail communications of the firm.
Subsequently, the firm revised its supervisory system to require a registered principal of the firm to review and approve influencers’ social media content promoting the firm prior to use and implemented a system to preserve records of its review and approval of influencer communications promoting the firm.
