The US Securities and Exchange Commission (SEC) initiated administrative and cease-and-desist proceedings against Fundrise Advisors, a registered investment adviser, on Tuesday. The financial watchdog claimed that the company violated US cash solicitation rules when it paid more than 200 social media influencers and online newsletter publishers to canvass clients for its platform.
Fundrise in SEC hot seat after using influencers to canvass investors
As Fundrise did not require the influencers and newsletters to provide specific disclosures, the investment adviser went against US law. In its filing, the SEC specifically noted the lack of these disclosures in the Fundrise brochure.
The company consented to pay a civil penalty of $250,000. In a statement, SEC commented:
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.
Recently, regulators worldwide are taking a closer look at fintech influencers, or so-called finfluencers. The UK Financial Conduct Authority (FCA) announced its plans to clamp down on unauthorised and irregular financial advertising. It is also reviewing the social media guidelines to ensure online regulatory compliance.
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In a similar move, the Cyprus Securities and Exchange Commission (CySEC) ran an investor protection initiative in 2022 to warn investors about complex and risky investment products advertised on social media. In 2021, the Australian Securities and Exchange Commission (ASIC) cautioned against finfluencers and their unlicensed financial advice.
