The Financial Industry Regulatory Authority (FINRA) has imposed a fine of $1.6 million on Webull Financial, a US brokerage, due to several significant compliance failures. These issues primarily revolved around inadequate oversight of paid social media influencers and serious lapses in client disclosures that potentially impacted millions of customers.
Between January 2019 and December 2022, Webull reportedly failed to effectively monitor or retain vital records concerning promotional materials created by over 400 paid influencers. According to FINRA, some of the promotional content displayed exaggerated claims while neglecting important risk disclosures connected to margin and options trading.
Furthermore, the regulator noted that Webull’s influencer marketing initiatives violated multiple FINRA regulations concerning public communications, supervision, and recordkeeping practices. They also highlighted breaches of the Securities Exchange Act.
Additionally, Webull failed to send the required Client Relationship Summary, or Form CRS, to around 5.9 million retail customers from June 2020 to December 2022. The company did not keep records on these deliveries and did not have adequate supervisory measures in place to ensure compliance with this requirement.
While Webull did not admit to the findings, the firm agreed to comply with the terms of FINRA’s order, which includes both the financial penalty and a censure. Since its establishment in 2018, Webull has quickly gained popularity by providing commission-free trading services to retail investors and has reportedly implemented enhancements to its compliance framework in light of FINRA’s findings.
As a side note, the swift growth of online trading platforms underscores the importance of stringent regulatory oversight, particularly as they attract a large client base. Fintech companies, like Webull, have the opportunity to bolster consumer trust by prioritizing compliance and transparency in their marketing strategies.