TradeZero America, Inc.
The findings stated that the firm paid several influencers to promote it on social media platforms, including one influencer whose platforms had millions of viewers. The influencers’ social media posts were retail communications of the firm.
The influencers created social media posts promoting the firm that were not fair and balanced, as they did not discuss the risks of investing. The posts also contained exaggerated and promissory statements. The influencers also posted communications that claimed that the firm was a “free web trading platform,” without disclosing that certain fees may apply or providing a prominent link to the firm’s fee schedule, or failed to disclose that the posts were advertisements.
The findings also stated that the firm failed to review the influencers’ posts about the firm and failed to preserve records of the posts. The firm did not have an appropriately qualified registered principal approve influencers’ videos prior to their publication and did not review influencers’ posts made in online interactive electronic forums.
The firm also did not maintain records of influencers’ posts or the dates they were used. The findings also included that the firm failed to establish, maintain, and enforce a reasonably designed supervisory system, including WSPs, for the influencers’ retail communications. The firm’s WSPs did not require any principal to review and approve videos created by influencers prior to posting and did not have any system to review and approve the videos prior to posting. The firm’s WSPs also did not require review and supervision of its influencers’ posts made in online interactive electronic forums in the same manner as the firm reviewed and supervised correspondence.
The firm also did not reasonably supervise its retail communications posted by influencers for compliance with FINRA Rule 2210(d) (1). Furthermore, the firm did not establish or maintain a supervisory system or procedures to preserve records of influencers’ videos or their dates of use.
The firm has since revised its supervisory system, including its WSPs, to, among other things, require a registered principal of the firm to review and approve all influencers’ social media communications promoting the firm prior to use and to preserve records of such communications and their dates of use.
FINRA found that the firm provided inaccurate privacy notices to firm customers. At the time of account opening, the firm provided each customer a privacy notice that stated, in part, that it discloses nonpublic personal information only when it is both permitted by law and required for the ordinary course of business. However, the privacy notice failed to state that the firm might share customers’ nonpublic personal information with third parties for marketing purposes. Therefore, the firm failed to disclose to customers the categories of nonpublic personal customer information it would disclose, and the non-affiliated third parties to whom it would disclose that information. The firm updated its privacy notice to correct the inaccuracy.
