To be discussed at the December 10, 2024 meeting of the

Draft as of November 22, 2024 
To be discussed at the December 10, 2024 meeting of the  
SEC Investor Advisory Committee 
 
Recommendations of the Disclosure Subcommittee of the SEC Investor 
Advisory Committee regarding the Protection of Investors  
in their Interactions with Finfluencers 
 
Introduction 
Social media has not only transformed the way we communicate and share information 
but has also impacted the world of investing.  Recent studies, including those by the CFA 
Institute (The Finfluencer Appeal:  Investing in the Age of Social Media, CFA Institute, 
January 2024)
1
 and the FINRA Investor Education Foundation (Investors of Color in 
the United States, FINRA Foundation, January 2024)
2
 have found that many young 
investors and investors of color are getting increasingly involved in the securities 
markets.  However, these newer investors are accessing investment advice in non-
traditional ways, particularly through social media.  The IAC has examined the activities 
of finfluencers providing investment advice regarding securities and questioned whether 
the current framework sufficiently protects investors. 
The FINRA Investor Education Foundation found that sixty percent of investors 
younger than 35 are getting investment information from social media and that 
investors of color are more likely than white investors to rely on social media, mobile 
trading apps, and online videos for investment advice.  This has led to a burgeoning 
number of financial influencers or “finfluencers” – individuals who by virtue of their 
popular or cultural status, have the ability to influence the financial decision-making of 
others through promotions or recommendations on social media.  Some finfluencers 
have millions of followers and are earning substantial compensation from advertising, 
sponsorships, book sales and platform fees.  
While there is helpful and educational information available through social media, some 
financial influencers are promoting strategies that are inappropriate for many investors.  
Social media platforms have very low barriers to entry, making them appealing to 
scammers, as well as those who have hidden agendas, and/or undisclosed conflicts of 
interest.  Consequently, it is difficult for retail investors to distinguish between content 
from truthful regulated firms, content from legitimate amateur investors, and content 
from deliberate fraudsters.   
Social media investing can also significantly impact the value of stocks as was evidenced 
in the meme stock frenzy in 2021 and “roaring kitty” recently resurfacing. In the Federal 
Reserve Board’s Financial Stability Report in November 2021, the Federal Reserve 
asserted that social media may not only increase risks for individual investors but also 
increase risks across the entire financial system, increasing noise in the markets in the 
 
1
 Available at https://rpc.cfainstitute.org/en/research/reports/2024/finfluencer-appeal.   
2
 Available at https://www.finrafoundation.org/sites/finrafoundation/files/investors-of-color-in-the-
us.pdf.   

2 
 
form of speculation and biases towards riskier products (Board of Governors of the 
Federal Reserve System 2021).
3
   
IAC Panel Discussion Exploring the New Frontier for Investment Advice  
On June 6, 2024, the IAC hosted a panel discussion to explore the growing impact of 
finfluencers and whether the existing regulatory framework is sufficient to protect 
investors.   
The IAC had a distinguished group of panelists   to explore and discuss these issues.  
Panelists   were Kim Clark, Senior Associate Editor at Kiplinger’s personal finance; Jeff 
Fauci, Chief Counsel for the Department of Enforcement with FINRA;  Robert Plaze, 
retired former partner at Proskauer Rose, LLP; and Rhodri Preece, Senior Head of 
Research at the CFA Institute.  
The panel discussion provided insights as to why many, particularly newer investors, are 
turning to social media for investment advice. The panel also discussed the types of 
finfluencers, the nature and content of their investment advice, and the financial 
incentives that may influence their advice.  The red flags and risks to investors of relying 
on social media for investment advice were highlighted, along with abuses and recent 
enforcement actions involving finfluencers and securities firms (broker-dealers and 
investment advisers) utilizing finfluencers to promote their services.  A specific focus 
was on whether existing securities laws and regulations are sufficient to protect 
investors in their interactions with finfluencers. 
Current Laws and Regulations Applicable to Finfluencers  
and Related Enforcement Actions  
There are several laws and regulations that govern certain activities or certain 
finfluencers under the Securities Act of 1933 (“Securities Act”), the Securities Exchange 
Act of 1934 (“Exchange Act”), and the Investment Advisers Act of 1940 (“Advisers Act”).  
Securities Act and Exchange Act 
Section 17(b) of the Securities Act makes it unlawful for any person to promote a 
security without fully disclosing the receipt and amount of consideration received or to 
be received.  Section 17(b) was designed to protect the investing public from promotions 
that purport to give an unbiased opinion, but which opinions in reality are bought and 
paid for.  The SEC has recently brought a number of cases charging celebrities and 
athletes (e,g., Kim Kardashian, Paul Pierce, Floyd Mayweather, Jr., and Lindsay 
Lohan) with alleged touting of digital securities without disclosing they received 
compensation.
4
 
 
3
 Available at https://www.federalreserve.gov/publications/2021-november-financial-stability-report-
purpose.htm.   
4
 See Kimberly Kardashian, Securities Act Release No. 11116 (Oct. 3, 2022); Paul Anthony Pierce, 
Securities Act Release No. 11157 (Feb. 17, 2023); Floyd Mayweather, Jr., Securities Act Release No. 10578 
(Nov. 29, 2018); and Lindsay Dee Lohan, Securities Act Release No. 11173 (Mar. 22, 2023). 

3 
 
Pump and dump schemes involving finfluencers on social media have fallen within the 
anti-fraud and anti-manipulation provisions of the securities laws, including Section 
17(a) of the Securities Act and Section 9(a), Section 10(b) and Rule 10b-5 of the 
Exchange Act.  In a pump and dump scheme, finfluencers “pump” up a stock price by 
spreading false or misleading information that causes a buying frenzy and then quickly 
“dumps” or sells their own shares before the hype ends.  After the finfluencers profit 
from their sales, the stock price typically drops and the remaining investors lose money.  
Finfluencers can also post false-negative information causing investors to sell their 
shares so that the stock price plummets and the finfluencer takes advantage of buying 
shares at the artificially low price.   
While the SEC has brought cases utilizing these provisions,
5
 a recent criminal case raises 
questions about the extent to which these provisions may apply to finfluencer conduct. 
A    federal judge recently dismissed criminal charges against several social media 
influencers who allegedly ran a $100 million pump and dump scheme through their 
social media accounts.
6
  The case involved influencers who allegedly manipulated the 
market through coordinated misrepresentations and omissions to their thousands of 
followers on Twitter and Discord social media platforms.   
The judge concluded that the facts alleged in the Justice Department’s c omplaint did not 
amount to a “scheme to defraud.”  The judge noted that while the defendants may well 
have intended to separate followers from their money, the evidence did not support a 
finding of actual securities fraud or conspiracy to commit fraud.  The judge accepted the 
view that false information, although spread by the defendants, at most deprived 
investors of information needed to buy, sell or hold securities and that they were not 
defrauded of their property.
7
   
Finfluencers may also be deemed statutory sellers under Section 12 of the Securities 
Act,
8
 which would subject finfluencers to liability for material fraudulent statements or 
omissions.  Recent decisions in the 9
th
 and 11
th
 U.S. Circuit Courts of Appeals suggest 
that mass   communications made on social media can make a person a statutory seller.
9
  
These 9
th
 and 11
th
 Circuit opinions appear to create a split among circuit courts as to 
whether social media posts may give rise to Section 12 seller liability.
10
   
 
5
 See e.g., SEC v. Andrew L. Fassare, Litigation Release No. 21585 (Aug. 27, 2021); SEC v. Michael M. 
Beck, Litigation Release No. 25325 (Feb. 7, 2022). 
6
 See United States v. Constantinescu, No. 4:22-CR-00612, 2024 (S.D.TEX. WL1221519). 
7
 One defendant accused of aiding and abetting the alleged scheme pleaded guilty to securities fraud. 
8
 Section 12 of the Securities Act imposes liability on a person who offers or sells unregistered securities or 
registered securities by means of a prospectus or oral communications containing material misstatements 
or omissions to the person purchasing such security from them.  A person can qualify as a seller if they 
pass the security title to a person or solicit the person’s purchase of the security.   
9
 See Wildes v. BITConnect Int’l PLC, 25 F. 4
th
 1341 (11
th
 Cir. 2022) and Pino v. Cardone Cap., LLC, 55 F. 
4
th
 1253 (9
th
 Cir. 2022).  In the Wildes case, the Court rejected the argument that Section 12 requires a 
targeted solicitation to a specific prospective buyer.  It noted that the Securities Act prohibits a person 
from using “any means or instrument of communication in interstate commerce to sell an unregistered 
security.”   
10
 For example, in the Second U.S. Circuit Court of Appeals, the Court held that a plaintiff must 
demonstrate that the defendant “actually solicited” the plaintiff’s specific investment in order for the 

4 
 
Advisers Act 
Under the Advisers Act, there are strong arguments that at least some subset of 
finfluencers meet the definition of investment adviser and are subject to provisions 
under the Advisers Act.  Section 202(a)(11) of the Advisers Act defines an Investment 
Adviser as “any person who, for compensation, engages in the business of advising 
others, either directly or through publications or writings, as to the value of securities or 
as to the advisability of investing in, purchasing or selling securities, or who, for 
compensation and as part of a regular business, issues or promulgates analyses or 
reports concerning securities.”  All three elements: (1) receiving compensation; (2) being 
engaged in the business; and (3) providing advice about securities, must be met for a 
person to be an investment adviser under the Advisers Act.  
The SEC has broadly construed these elements of the definition.
11
  While some 
finfluencers would meet this definition, they may also argue that they are eligible for the 
Publishers Exclusion under the Advisers Act.  Publishers (both print and electronic 
media) are excluded from the Advisers Act, if the publication:  (i) provides only 
impersonal advice (i.e., advice not tailored to the individual needs of a specific client); 
(ii) is “bona fide” (contains disinterested commentary and analysis rather than 
promotional material disseminated by someone touting particular securities);  and (iii) 
is of general and regular circulation (rather than issued   from time-to-time in response 
to episodic market activity). 
In the early days of social media, the SEC brought an action against Yun Soo Oh Park 
a/k/a Tokyo Joe (Park), and Tokyo Joe's Societe Anonyme Corp. (Societe Anonyme).
12
  
Tokyo Joe allegedly persuaded his followers to purchase, sell or hold securities using 
effusive testimonials and misleading performance results, without disclosing that he had 
a ownership interest in the securities.  It is alleged that he also promoted securities for 
which he had been paid by issuers to recommend. The SEC asserted that Tokyo Joe’s 
website was not a bona fide or genuine publication.  A federal district court denied 
Tokyo Joe’s motion to dismiss the case and held that the SEC’s complaint sufficiently 
 
defendant to qualify as a seller under Section 12.  See Capri v. Murphy, 856 F. 2d 473, 478-79 (2d. Cir. 
1988).  Cases in the 3
rd
, 5
th
 and 10
th
 Circuits are in accord with positions of the 2
nd
 Circuit. See Craftmatic 
SEC Litg. v. Kraftsow, 890 F.2d 628, 636 (1989); Loan Star Ladies Investment Club v. Schlotzsky’s Inc., 
238 F.3d 363, 370 (5
th
 Cir. 2001); and Maher v. Durango Metals, Inc., 144 F.3d 1302, 1307 (10
th
 Cir. 
1998).   
11
 The SEC has viewed the compensation element to generally be satisfied by receipt of any economic 
benefit and that the recipient of the investment advice or someone else may provide the compensation.  
Arguably, this would include compensation received from social media platforms, advertisers, or other 
sources.  With respect to the second element, the SEC has indicated that providing advice does not need to 
be the individual’s primary activity or business enterprise.  Moreover, unless advice about specific 
securities is rendered on a rare or isolated basis, some finfluencers are engaged in the business of 
providing investment advice.  With respect to the third element, SEC guidance indicates that this prong of 
the definition will be satisfied when giving advice to others regarding specific securities, including stocks, 
bonds, and mutual funds. 
12
 S.E.C. v. Yun Soo Oh Park a/k/a Tokyo Joe and Tokyo Joe's Societe Anonyme Corp. (N.D.IL., Case No. 
00C 0049, filed January 5, 2000) 

5 
 
alleged that Tokyo Joe was an investment adviser subject to the Advisers Act Anti-Fraud 
provisions.
13
 
Additionally, investment advisers are restricted as to their use of finfluencers who 
provide testimonials. Pursuant to Rule 206(4)-1 under the Advisers Act,  an adviser may 
not provide compensation, directly or indirectly, for a testimonial or endorsement, 
unless the adviser complies with various conditions.   Among other requirements, the 
Rule requires that an adviser either itself disclose, or have a reasonable belief that the 
person giving the testimonial will disclose, at the time the testimonial or endorsement is 
disseminated, that the testimonial was given by a current client or investor or that the 
endorsement was given by a person other than a current client or investor; that cash or 
non-cash compensation was provided for the testimonial or endorsement, if applicable; 
and includes a brief statement of any material conflicts of interest, on the part of the 
person giving the testimonial or endorsement resulting from the investment adviser’s 
relationship with such person.  Additionally, the Rule requires the adviser to have a 
written agreement with any person giving a compensated testimonial or endorsement 
that describes the scope of the agreed upon activities and terms of the compensation. 
FINRA Rules 
FINRA has stated that a third party’s social media posts will constitute retail 
communications subject to FINRA Rule 2210 if a member firm either: (1) paid for or 
was involved in the preparation of the content prior to posting; or (2) explicitly or 
implicitly endorsed or approved the content. Under Rule 2210, all the member’s 
communications with any individual on social media must represent fair dealing in good 
faith; give solid grounds in evaluating a particular security; and give even-handed and 
balanced information of a security’s risk and potential benefits. Additionally, this Rule 
prohibits incorrect, exaggerated, or misleading statements as well as the omission of any 
material fact that would cause a communication to be misleading. 
FINRA has brought several enforcement cases arising out of a targeted exam of firm 
practices related to broker-dealers use of finfluencers.  FINRA has imposed significant 
penalties on firms for social media posts made by finfluencers on a firm’s behalf that 
were not fair or balanced, or contained exaggerated, unwarranted, promissory or 
misleading claims.  Firms were also sanctioned for failure to review, approve and retain 
the content that the hired finfluencers produced and communicated to the public.
14
   
 
 
13
 See SEC v. Gun Soo Oh Park and Tokyo Joe’s Societe Anonyme Corp., 99 F. Supp. 2d. 889 (2000) and 
Gun Soo Oh Park a/k/a Tokyo Joe and Tokyo Joe’s Societe Anonyme Corp., Litigation Release No. 16399 
(Jan. 5, 2000) and Litigation Release No. 16925 (Mar. 8, 2001). 
14
 See M1 Finance LLC, FINRA Letter of Acceptance, Waiver and Consent No. 2021072127401 (Dec. 5, 
2023); Cobra Trading Inc., FINRA Letter of Acceptance, Waiver and Consent No. 2021072501001 (April 
3, 2024); TradeZero America, Inc., FINRA Letter of Acceptance, Waiver and Consent No. 
20210725811301 (Jun. 10, 2024). 

6 
 
Federal Trade Commission Rules 
The Federal Trade Commission enforces Section 5 of the Federal Trade Commission Act 
which generally prohibits deceptive advertising.  The FTC has published guides 
addressing the use of endorsements and testimonials in advertising.
15
  The FTC has also 
published a document answering frequently asked questions about the Endorsement 
Guides.
16
  Influencer content must be truthful, not misleading and substantiated.  Any 
claims should be verifiable and based on the influencer’s honest, actual experience.  
Testimonials should reflect the typical customer experience and not extreme or 
exceptional results.  Influencers must also clearly disclose material connections with the 
firm.  Practices inconsistent with these guides may result in an FTC investigation and 
possible corrective action, such as civil and monetary penalties.  The FTC has enforced 
its rules in the financial services sector related to investment schemes.  The FTC fined 
Warrior Trading $3 million for allegedly making misleading claims to potential 
customers interested in day trading.
17
  
State Laws 
Many States define an investment adviser similar to the definition in the Investment 
Advisers Act.  Most States require advisers to register or obtain a license, if not 
registered with the SEC or there is not an applicable exemption. To the extent that 
finfluencers meet a state’s investment adviser definition, they would need to consider 
whether they need to register.  Additionally, most State laws have anti-fraud provisions 
that apply to investment advisers and impose a duty on investment advisers to act as 
fiduciaries.   
It should be noted that other State laws may be applicable to finfluencer activity. 
Various celebrities and athletes were named in a class-action lawsuit involving the 
failure of FTX.  It is asserted that these celebrities and athletes promoted FTX as “brand 
ambassadors” and violated Florida State laws prohibiting unfair business practices.
 18
   
IAC’S Recommendations 
The SEC and other regulators recognize the benefits that social media has had in 
attracting new entrants, particularly young investors, to the financial markets but are  
concerned about the risks of social media as a vehicle for investment advice, especially 
fraudulent or poor quality advice.  The SEC, FINRA and the North American Securities 
Administrators Association have all issued alerts to investors about the risks of relying 
on social media for investment advice.
 19
 
 
15
 See 16 C.F.R. §255 (2023), Guides Concerning Use of Endorsements and Testimonials in Advertising. 
16
 See FTC's Endorsement Guides: What People Are Asking (June 2023), available at 
https://www.ftc.gov/business-guidance/resources/ftcs-endorsement-guides-what-people-are-asking.   
17
 See FTC Matter, File No. 2023198 Civil Action No. 3:22-CV-30048 (District of Massachusetts). 
18
 Florida Deceptive and Unfair Trade Practices Act, Sec. 501.201 Florida Statutes. 
19
 See Joint Investor Bulletin – Technology and Digital Finance:  World Investor Week 2024 (October 7, 
2024); Following the Crowd: Investing in Social Media, FINRA (March 13, 2023); Financial Advice Via 
Social Media - The Rise Of The Finfluencer, North American Securities Administrators Association 
(August 9, 2022); and Social Media and Investment Fraud – SEC Investor Alert (August 29, 2022). 

7 
 
Existing federal securities laws cover some of the worst and problematic finfluencer 
activity when it involves a regulated entity.   However, current statutes, regulations and 
rules leave certain conduct unregulated or unenforced.  
Accordingly, some finfluencers are providing investment advice regarding securities to 
large audiences despite a potential lack of knowledge and qualifications without 
reasonable and appropriate disclosures.
 20
     The CFA in its study of finfluencer content, 
found that only 20 percent of content that contained investment recommendations 
contained some form of disclosure, such as professional status or whether the 
finfluencers received compensation for recommending certain products.  These 
finfluencers have a significant incentive to build up large followings on social media 
platforms who will pay for higher user engagement with their content by promoting get 
rich quick schemes and providing exaggerated or false or misleading investment 
advice.
21
 
We note that several jurisdictions around the world have taken action to address these 
concerns regarding finfluencers.
 22
   The IAC has concluded that the SEC and FINRA 
should also consider taking additional actions to enhance the regulatory framework and 
protect investors in their interactions with finfluencers who are providing investment 
advice regarding securities.  Accordingly, the IAC makes the following 
recommendations: 
1. The SEC should engage in rulemaking and advocacy to close existing regulatory 
gaps in finfluencer oversight. 
a. The SEC should adopt a rule requiring certain disclosures related to 
finfluencer activity in providing investment advice regarding securities. 
The SEC should use its authority under Section 206(4) of the Advisers Act to 
propose a rule that would require disclosure of: (1) finfluencer conflicts; (2) 
compensation received; (3) regulatory status or qualifications to give advice or 
lack thereof; and (4) the impersonal nature of the advice.  
The IAC believes that retail investors would benefit from these basic 
disclosures in evaluating influencers’ advice.  Investors could therefore 
scrutinize finfluencer content more critically, if they are informed of the 
finfluencers qualifications to give investment advice regarding securities, 
conflicts and whether the content is paid for.  These disclosures can help deter 
inappropriate reliance on investment advice and mitigate harm.   Such a rule 
would close the regulatory gap in the regulation of finfluencers and go beyond 
the anti-touting provisions which are focused on compensation from issuers, 
dealers and underwriters.  The proposed rule would cover investment advisers 
that use social media to provide investment advice, whether registered or not, 
 
20
 See IOSCO Retail Market Conduct Task Force Final Report (March 2023). 
21
 See Kim Clark, Finfluencers Are A Rising Trend.  But Should You Trust Their Advice? Kiplinger 
Personal Finance (January 31, 2024). 
22
See Info 269: Discussing Financial Products and Services Online, ASIC (Mar. 2022); See About the New 
Financial Advice Regime, FIN. MKT. AUTH. (Mar. 15, 2021). 

8 
 
including finfluencers who do not qualify for the publisher’s exclusion under 
the Investment Advisers Act.   
Here is suggested text for a proposed rule:   
It is a fraudulent or deceptive course of conduct under the Advisers Act for 
an Investment Adviser (or a supervised person of an investment adviser) 
to provide advice about securities through social media (“finfluencers”) 
without disclosing:  (1) any material conflicts the adviser has regarding the 
advice it provides; (2) compensation received for advice it provides; 
(3) regulatory status, educational background and business experience of 
the finfluencer or lack thereof; and (4) advice is impersonal and not a 
substitute for individualized advice. 
b. The SEC should advocate for Section 12 liability for misleading, deceptive, or 
fraudulent finfluencer conduct.   
Given the split in Circuit Court decisions on statutory seller liability under 
Section 12(a) of the Securities Act, as discussed above, the SEC should 
consider supporting the position that social media posts give rise to Section 12 
seller liability through guidance, filing amicus briefs and other advocacy.  
Alternatively, the SEC should consider urging Congress to provide recourse 
for investors to pursue recovery in courts when they have been misled and 
defrauded by finfluencers. 
2. The SEC should gather and publish data related to finfluencer misconduct.  
The SEC should coordinate with the FTC, FINRA and state regulators to compile 
and publish data on finfluencer complaints and finfluencer violations. This would 
help investors identify finfluencers who have engaged in questionable activity or 
violated the law and social media platforms to avoid. This would be similar to 
FINRA’s Broker-Check Database that provides investors with information on 
credentials and violations by brokers. 
3. The SEC should issue guidance related to finfluencer activities. 
a. The SEC should provide guidance to, and engagement with, finfluencers 
regarding applicable federal securities laws and regulations.    
The IAC believes it would be helpful and avoid violations of the law if 
finfluencers understood the applicability of the Federal securities laws to their 
activities. We suggest that the SEC publish comprehensive guidance for 
finfluencers regarding applicability of the federal securities laws. This would 
be similar to guidance provided by the Federal Trade Commission concerning 
influencer endorsements of particular products for which influencers are 
compensated.  Additionally, as suggested by the CFA Institute, the SEC should 
engage directly with finfluencers through forums, seminars, or other means to 
educate them on activities that are regulated. 

9 
 
b. The SEC should issue best practices for investment advisers.  
The SEC should publish suggested Best Practices for advisers to use when 
engaging finfluencers under the Advisers Act Marketing Rule. FINRA 
provided useful Best Practices for broker-dealers after an exam sweep focused 
on broker-dealer acquisition of clients through social media channels.
23
    
c. Encourage broker-d  ealers and investment advisers to train finfluencers that 
they utilize and enhance oversight of finfluencers. 
Training of finfluencers, including defining permitted and prohibited conduct, 
should assist finfluencers in avoiding violations of the law.  Additionally, 
reviewing finfluencer content before and after their use will also facilitate 
compliance with applicable requirements.  These suggestions should help 
firms evaluate their social media finfluencers and referral programs, including 
whether their practices and supervisory systems are reasonably designed to 
address relevant risks. 
4. The SEC should provide and encourage investor education. 
a. SEC and FINRA should continue to provide investor education regarding red 
flags and risks of relying on finfluencer advice. 
As noted above, the SEC, FINRA and state regulators have issued alerts to 
investors about the risks of relying on social media for investment advice.  
Guidance to investors should include how they should evaluate influencer 
content and questions to ask. 
b. The SEC should encourage traditional investment advisers to enhance 
outreach and education to newer investors.  
In its study, the CFA Institute concluded that finfluencers appeal to younger 
investors because they produce educational and engaging content that is free 
and instantly accessible.  Some finfluencers assist these investors in 
understanding complex financial information in clear and digestible social 
media content.  The SEC should encourage traditional financial firms to 
consider how to educate these new investors by providing easily assessable 
investor education and decreasing barriers to entry.  Forward-looking firms 
should recognize that many of these investors, while having minimal wealth 
now, will accumulate additional wealth in the future.  
5. The SEC should cooperate with other regulators and stakeholders to improve 
investor protection. 
 
23
 See FINRA Provides Update on Sweep:  Social Medial Influences, Customer Acquisition and Related 
Information Protection (February 2023). 

10 
 
a. The SEC should seek to work with the Federal Trade Commission to 
incorporate in their guidance examples that apply to investment advice 
provided by finfluencer activities under The Federal Trade Commission Act.   
Given that there is some overlap in applicability of the Federal securities laws 
and the Federal Trade Commission Act to certain finfluencer activity, it would 
be useful for the FTC to incorporate in their guidance examples that apply to 
finfluencer activity under the Federal Trade Commission Act and cross-
reference the applicable Federal securities laws. We believe this would 
facilitate finfluencer compliance with applicable laws. 
b. The SEC should consider engaging constructively with social media platforms 
to understand their guidelines to monitor problematic finfluencer activity.   
The SEC should consider engaging the social media platforms to understand 
their controls for monitoring problematic finfluencers activities.  Some 
platforms are better than others in forcing clear disclosures and monitoring 
finfluencer content.   
We note that the FTC, as a result of increasing fraud on social media, issued 
orders to eight social media and video streaming platforms seeking 
information on how these companies scrutinize and restrict paid commercial 
advertising that is deceptive or exposes consumers to financial scams and 
other fraud.
24
  The SEC may want to consider doing something similar to 
evaluate platform oversight of finfluencers. 
c. The SEC should consider international cooperation. 
Given the breath of the internet, the SEC should coordinate with IOSCO and 
various jurisdictions regarding a baseline set of requirements that would 
apply to all finfluencers, such as the rulemaking we suggest in 
Recommendation 1. 
6. The SEC should study whether existing anti-fraud anti-manipulation provisions 
are sufficient to protect investors. 
Existing anti-fraud and anti-manipulation provisions prohibit certain clearly 
illegal conduct in securities markets, such as pump and dump schemes.  
However, regulators have difficulty in applying these laws in a situation in which 
the finfluencer simply discloses security holdings in a company and easily profits 
off of their followers predictable trading behavior.  In such situations, there is 
arguably no fraud and if it exists, or if there is an attempt to manipulate, it is hard 
to prove.  We suggest that the SEC and FINRA study whether the laws should be 
modified to address this potentially harmful market conduct.  This is consistent 
with a recommendation of the House Financial Services Committee in its June 
 
24
 See Social Media 6b Model Order, FTC Matter No. P224500 (Mar. 16, 2023), available at 
https://www.ftc.gov/system/files/ftc_gov/pdf/P224500-Social-Media-6b-Model-Order.pdf.   

11 
 
2022 Report – Game Stopped:  How The Meme Stock Market Event Exposed 
Troubling Business Practices, Inadequate Risk Management and the Need for 
Regulatory and Legislative Reform.
25
 
 
25
 Available at https://democrats-
financialservices.house.gov/uploadedfiles/6.22_hfsc_gs.report_hmsmeetbp.irm.nlrf.pdf.  

Draft as of November 22, 2024 
To be discussed at the December 10, 2024 meeting of the  

SEC Investor Advisory Committee 
 

Recommendations of the Disclosure Subcommittee of the SEC Investor 
Advisory Committee regarding the Protection of Investors  

in their Interactions with Finfluencers 
 

Introduction 

Social media has not only transformed the way we communicate and share information 
but has also impacted the world of investing.  Recent studies, including those by the CFA 
Institute (The Finfluencer Appeal:  Investing in the Age of Social Media, CFA Institute, 
January 2024)1 and the FINRA Investor Education Foundation (Investors of Color in 
the United States, FINRA Foundation, January 2024)2 have found that many young 
investors and investors of color are getting increasingly involved in the securities 
markets.  However, these newer investors are accessing investment advice in non-
traditional ways, particularly through social media.  The IAC has examined the activities 
of finfluencers providing investment advice regarding securities and questioned whether 
the current framework sufficiently protects investors. 

The FINRA Investor Education Foundation found that sixty percent of investors 
younger than 35 are getting investment information from social media and that 
investors of color are more likely than white investors to rely on social media, mobile 
trading apps, and online videos for investment advice.  This has led to a burgeoning 
number of financial influencers or “finfluencers” – individuals who by virtue of their 
popular or cultural status, have the ability to influence the financial decision-making of 
others through promotions or recommendations on social media.  Some finfluencers 
have millions of followers and are earning substantial compensation from advertising, 
sponsorships, book sales and platform fees.  

While there is helpful and educational information available through social media, some 
financial influencers are promoting strategies that are inappropriate for many investors.  
Social media platforms have very low barriers to entry, making them appealing to 
scammers, as well as those who have hidden agendas, and/or undisclosed conflicts of 
interest.  Consequently, it is difficult for retail investors to distinguish between content 
from truthful regulated firms, content from legitimate amateur investors, and content 
from deliberate fraudsters.   

Social media investing can also significantly impact the value of stocks as was evidenced 
in the meme stock frenzy in 2021 and “roaring kitty” recently resurfacing. In the Federal 
Reserve Board’s Financial Stability Report in November 2021, the Federal Reserve 
asserted that social media may not only increase risks for individual investors but also 
increase risks across the entire financial system, increasing noise in the markets in the 

 
1 Available at https://rpc.cfainstitute.org/en/research/reports/2024/finfluencer-appeal.  
2 Available at https://www.finrafoundation.org/sites/finrafoundation/files/investors-of-color-in-the-
us.pdf.  

https://rpc.cfainstitute.org/en/research/reports/2024/finfluencer-appeal
https://www.finrafoundation.org/sites/finrafoundation/files/investors-of-color-in-the-us.pdf
https://www.finrafoundation.org/sites/finrafoundation/files/investors-of-color-in-the-us.pdf


2 
 

form of speculation and biases towards riskier products (Board of Governors of the 
Federal Reserve System 2021).3   

IAC Panel Discussion Exploring the New Frontier for Investment Advice  

On June 6, 2024, the IAC hosted a panel discussion to explore the growing impact of 
finfluencers and whether the existing regulatory framework is sufficient to protect 
investors.   

The IAC had a distinguished group of panelists to explore and discuss these issues.  
Panelists were Kim Clark, Senior Associate Editor at Kiplinger’s personal finance; Jeff 
Fauci, Chief Counsel for the Department of Enforcement with FINRA; Robert Plaze, 
retired former partner at Proskauer Rose, LLP; and Rhodri Preece, Senior Head of 
Research at the CFA Institute.  

The panel discussion provided insights as to why many, particularly newer investors, are 
turning to social media for investment advice. The panel also discussed the types of 
finfluencers, the nature and content of their investment advice, and the financial 
incentives that may influence their advice.  The red flags and risks to investors of relying 
on social media for investment advice were highlighted, along with abuses and recent 
enforcement actions involving finfluencers and securities firms (broker-dealers and 
investment advisers) utilizing finfluencers to promote their services.  A specific focus 
was on whether existing securities laws and regulations are sufficient to protect 
investors in their interactions with finfluencers. 

Current Laws and Regulations Applicable to Finfluencers  
and Related Enforcement Actions  

There are several laws and regulations that govern certain activities or certain 
finfluencers under the Securities Act of 1933 (“Securities Act”), the Securities Exchange 
Act of 1934 (“Exchange Act”), and the Investment Advisers Act of 1940 (“Advisers Act”).  

Securities Act and Exchange Act 

Section 17(b) of the Securities Act makes it unlawful for any person to promote a 
security without fully disclosing the receipt and amount of consideration received or to 
be received.  Section 17(b) was designed to protect the investing public from promotions 
that purport to give an unbiased opinion, but which opinions in reality are bought and 
paid for.  The SEC has recently brought a number of cases charging celebrities and 
athletes (e,g., Kim Kardashian, Paul Pierce, Floyd Mayweather, Jr., and Lindsay 
Lohan) with alleged touting of digital securities without disclosing they received 
compensation.4 

 
3 Available at https://www.federalreserve.gov/publications/2021-november-financial-stability-report-
purpose.htm.  
4 See Kimberly Kardashian, Securities Act Release No. 11116 (Oct. 3, 2022); Paul Anthony Pierce, 
Securities Act Release No. 11157 (Feb. 17, 2023); Floyd Mayweather, Jr., Securities Act Release No. 10578 
(Nov. 29, 2018); and Lindsay Dee Lohan, Securities Act Release No. 11173 (Mar. 22, 2023). 

https://www.federalreserve.gov/publications/2021-november-financial-stability-report-purpose.htm
https://www.federalreserve.gov/publications/2021-november-financial-stability-report-purpose.htm


3 
 

Pump and dump schemes involving finfluencers on social media have fallen within the 
anti-fraud and anti-manipulation provisions of the securities laws, including Section 
17(a) of the Securities Act and Section 9(a), Section 10(b) and Rule 10b-5 of the 
Exchange Act.  In a pump and dump scheme, finfluencers “pump” up a stock price by 
spreading false or misleading information that causes a buying frenzy and then quickly 
“dumps” or sells their own shares before the hype ends.  After the finfluencers profit 
from their sales, the stock price typically drops and the remaining investors lose money.  
Finfluencers can also post false-negative information causing investors to sell their 
shares so that the stock price plummets and the finfluencer takes advantage of buying 
shares at the artificially low price.   

While the SEC has brought cases utilizing these provisions,5 a recent criminal case raises 
questions about the extent to which these provisions may apply to finfluencer conduct. 
A federal judge recently dismissed criminal charges against several social media 
influencers who allegedly ran a $100 million pump and dump scheme through their 
social media accounts.6  The case involved influencers who allegedly manipulated the 
market through coordinated misrepresentations and omissions to their thousands of 
followers on Twitter and Discord social media platforms.   

The judge concluded that the facts alleged in the Justice Department’s complaint did not 
amount to a “scheme to defraud.”  The judge noted that while the defendants may well 
have intended to separate followers from their money, the evidence did not support a 
finding of actual securities fraud or conspiracy to commit fraud.  The judge accepted the 
view that false information, although spread by the defendants, at most deprived 
investors of information needed to buy, sell or hold securities and that they were not 
defrauded of their property.7   

Finfluencers may also be deemed statutory sellers under Section 12 of the Securities 
Act,8 which would subject finfluencers to liability for material fraudulent statements or 
omissions.  Recent decisions in the 9th and 11th U.S. Circuit Courts of Appeals suggest 
that mass communications made on social media can make a person a statutory seller.9  
These 9th and 11th Circuit opinions appear to create a split among circuit courts as to 
whether social media posts may give rise to Section 12 seller liability.10   

 
5 See e.g., SEC v. Andrew L. Fassare, Litigation Release No. 21585 (Aug. 27, 2021); SEC v. Michael M. 
Beck, Litigation Release No. 25325 (Feb. 7, 2022). 
6 See United States v. Constantinescu, No. 4:22-CR-00612, 2024 (S.D.TEX. WL1221519). 
7 One defendant accused of aiding and abetting the alleged scheme pleaded guilty to securities fraud. 
8 Section 12 of the Securities Act imposes liability on a person who offers or sells unregistered securities or 
registered securities by means of a prospectus or oral communications containing material misstatements 
or omissions to the person purchasing such security from them.  A person can qualify as a seller if they 
pass the security title to a person or solicit the person’s purchase of the security.   
9 See Wildes v. BITConnect Int’l PLC, 25 F. 4th 1341 (11th Cir. 2022) and Pino v. Cardone Cap., LLC, 55 F. 
4th 1253 (9th Cir. 2022).  In the Wildes case, the Court rejected the argument that Section 12 requires a 
targeted solicitation to a specific prospective buyer.  It noted that the Securities Act prohibits a person 
from using “any means or instrument of communication in interstate commerce to sell an unregistered 
security.”   
10 For example, in the Second U.S. Circuit Court of Appeals, the Court held that a plaintiff must 
demonstrate that the defendant “actually solicited” the plaintiff’s specific investment in order for the 



4 
 

Advisers Act 

Under the Advisers Act, there are strong arguments that at least some subset of 
finfluencers meet the definition of investment adviser and are subject to provisions 
under the Advisers Act.  Section 202(a)(11) of the Advisers Act defines an Investment 
Adviser as “any person who, for compensation, engages in the business of advising 
others, either directly or through publications or writings, as to the value of securities or 
as to the advisability of investing in, purchasing or selling securities, or who, for 
compensation and as part of a regular business, issues or promulgates analyses or 
reports concerning securities.”  All three elements: (1) receiving compensation; (2) being 
engaged in the business; and (3) providing advice about securities, must be met for a 
person to be an investment adviser under the Advisers Act.  

The SEC has broadly construed these elements of the definition.11  While some 
finfluencers would meet this definition, they may also argue that they are eligible for the 
Publishers Exclusion under the Advisers Act.  Publishers (both print and electronic 
media) are excluded from the Advisers Act, if the publication:  (i) provides only 
impersonal advice (i.e., advice not tailored to the individual needs of a specific client); 
(ii) is “bona fide” (contains disinterested commentary and analysis rather than 
promotional material disseminated by someone touting particular securities);  and (iii) 
is of general and regular circulation (rather than issued from time-to-time in response 
to episodic market activity). 

In the early days of social media, the SEC brought an action against Yun Soo Oh Park 
a/k/a Tokyo Joe (Park), and Tokyo Joe's Societe Anonyme Corp. (Societe Anonyme).12  
Tokyo Joe allegedly persuaded his followers to purchase, sell or hold securities using 
effusive testimonials and misleading performance results, without disclosing that he had 
a ownership interest in the securities.  It is alleged that he also promoted securities for 
which he had been paid by issuers to recommend. The SEC asserted that Tokyo Joe’s 
website was not a bona fide or genuine publication.  A federal district court denied 
Tokyo Joe’s motion to dismiss the case and held that the SEC’s complaint sufficiently 

 
defendant to qualify as a seller under Section 12.  See Capri v. Murphy, 856 F. 2d 473, 478-79 (2d. Cir. 
1988).  Cases in the 3rd, 5th and 10th Circuits are in accord with positions of the 2nd Circuit. See Craftmatic 
SEC Litg. v. Kraftsow, 890 F.2d 628, 636 (1989); Loan Star Ladies Investment Club v. Schlotzsky’s Inc., 
238 F.3d 363, 370 (5th Cir. 2001); and Maher v. Durango Metals, Inc., 144 F.3d 1302, 1307 (10th Cir. 
1998).   
11 The SEC has viewed the compensation element to generally be satisfied by receipt of any economic 
benefit and that the recipient of the investment advice or someone else may provide the compensation.  
Arguably, this would include compensation received from social media platforms, advertisers, or other 
sources.  With respect to the second element, the SEC has indicated that providing advice does not need to 
be the individual’s primary activity or business enterprise.  Moreover, unless advice about specific 
securities is rendered on a rare or isolated basis, some finfluencers are engaged in the business of 
providing investment advice.  With respect to the third element, SEC guidance indicates that this prong of 
the definition will be satisfied when giving advice to others regarding specific securities, including stocks, 
bonds, and mutual funds. 
12 S.E.C. v. Yun Soo Oh Park a/k/a Tokyo Joe and Tokyo Joe's Societe Anonyme Corp. (N.D.IL., Case No. 
00C 0049, filed January 5, 2000) 



5 
 

alleged that Tokyo Joe was an investment adviser subject to the Advisers Act Anti-Fraud 
provisions.13 

Additionally, investment advisers are restricted as to their use of finfluencers who 
provide testimonials. Pursuant to Rule 206(4)-1 under the Advisers Act, an adviser may 
not provide compensation, directly or indirectly, for a testimonial or endorsement, 
unless the adviser complies with various conditions.  Among other requirements, the 
Rule requires that an adviser either itself disclose, or have a reasonable belief that the 
person giving the testimonial will disclose, at the time the testimonial or endorsement is 
disseminated, that the testimonial was given by a current client or investor or that the 
endorsement was given by a person other than a current client or investor; that cash or 
non-cash compensation was provided for the testimonial or endorsement, if applicable; 
and includes a brief statement of any material conflicts of interest, on the part of the 
person giving the testimonial or endorsement resulting from the investment adviser’s 
relationship with such person.  Additionally, the Rule requires the adviser to have a 
written agreement with any person giving a compensated testimonial or endorsement 
that describes the scope of the agreed upon activities and terms of the compensation. 

FINRA Rules 

FINRA has stated that a third party’s social media posts will constitute retail 
communications subject to FINRA Rule 2210 if a member firm either: (1) paid for or 
was involved in the preparation of the content prior to posting; or (2) explicitly or 
implicitly endorsed or approved the content. Under Rule 2210, all the member’s 
communications with any individual on social media must represent fair dealing in good 
faith; give solid grounds in evaluating a particular security; and give even-handed and 
balanced information of a security’s risk and potential benefits. Additionally, this Rule 
prohibits incorrect, exaggerated, or misleading statements as well as the omission of any 
material fact that would cause a communication to be misleading. 

FINRA has brought several enforcement cases arising out of a targeted exam of firm 
practices related to broker-dealers use of finfluencers.  FINRA has imposed significant 
penalties on firms for social media posts made by finfluencers on a firm’s behalf that 
were not fair or balanced, or contained exaggerated, unwarranted, promissory or 
misleading claims.  Firms were also sanctioned for failure to review, approve and retain 
the content that the hired finfluencers produced and communicated to the public.14   

 

 
13 See SEC v. Gun Soo Oh Park and Tokyo Joe’s Societe Anonyme Corp., 99 F. Supp. 2d. 889 (2000) and 
Gun Soo Oh Park a/k/a Tokyo Joe and Tokyo Joe’s Societe Anonyme Corp., Litigation Release No. 16399 
(Jan. 5, 2000) and Litigation Release No. 16925 (Mar. 8, 2001). 
14 See M1 Finance LLC, FINRA Letter of Acceptance, Waiver and Consent No. 2021072127401 (Dec. 5, 
2023); Cobra Trading Inc., FINRA Letter of Acceptance, Waiver and Consent No. 2021072501001 (April 
3, 2024); TradeZero America, Inc., FINRA Letter of Acceptance, Waiver and Consent No. 
20210725811301 (Jun. 10, 2024). 



6 
 

Federal Trade Commission Rules 

The Federal Trade Commission enforces Section 5 of the Federal Trade Commission Act 
which generally prohibits deceptive advertising.  The FTC has published guides 
addressing the use of endorsements and testimonials in advertising.15  The FTC has also 
published a document answering frequently asked questions about the Endorsement 
Guides.16  Influencer content must be truthful, not misleading and substantiated.  Any 
claims should be verifiable and based on the influencer’s honest, actual experience.  
Testimonials should reflect the typical customer experience and not extreme or 
exceptional results.  Influencers must also clearly disclose material connections with the 
firm.  Practices inconsistent with these guides may result in an FTC investigation and 
possible corrective action, such as civil and monetary penalties.  The FTC has enforced 
its rules in the financial services sector related to investment schemes.  The FTC fined 
Warrior Trading $3 million for allegedly making misleading claims to potential 
customers interested in day trading.17  

State Laws 

Many States define an investment adviser similar to the definition in the Investment 
Advisers Act.  Most States require advisers to register or obtain a license, if not 
registered with the SEC or there is not an applicable exemption. To the extent that 
finfluencers meet a state’s investment adviser definition, they would need to consider 
whether they need to register.  Additionally, most State laws have anti-fraud provisions 
that apply to investment advisers and impose a duty on investment advisers to act as 
fiduciaries.   

It should be noted that other State laws may be applicable to finfluencer activity. 
Various celebrities and athletes were named in a class-action lawsuit involving the 
failure of FTX.  It is asserted that these celebrities and athletes promoted FTX as “brand 
ambassadors” and violated Florida State laws prohibiting unfair business practices. 18   

IAC’S Recommendations 

The SEC and other regulators recognize the benefits that social media has had in 
attracting new entrants, particularly young investors, to the financial markets but are  
concerned about the risks of social media as a vehicle for investment advice, especially 
fraudulent or poor quality advice.  The SEC, FINRA and the North American Securities 
Administrators Association have all issued alerts to investors about the risks of relying 
on social media for investment advice. 19 

 
15 See 16 C.F.R. §255 (2023), Guides Concerning Use of Endorsements and Testimonials in Advertising. 
16 See FTC's Endorsement Guides: What People Are Asking (June 2023), available at 
https://www.ftc.gov/business-guidance/resources/ftcs-endorsement-guides-what-people-are-asking.  
17 See FTC Matter, File No. 2023198 Civil Action No. 3:22-CV-30048 (District of Massachusetts). 
18 Florida Deceptive and Unfair Trade Practices Act, Sec. 501.201 Florida Statutes. 
19 See Joint Investor Bulletin – Technology and Digital Finance:  World Investor Week 2024 (October 7, 
2024); Following the Crowd: Investing in Social Media, FINRA (March 13, 2023); Financial Advice Via 
Social Media - The Rise Of The Finfluencer, North American Securities Administrators Association 
(August 9, 2022); and Social Media and Investment Fraud – SEC Investor Alert (August 29, 2022). 

https://www.ftc.gov/business-guidance/resources/ftcs-endorsement-guides-what-people-are-asking


7 
 

Existing federal securities laws cover some of the worst and problematic finfluencer 
activity when it involves a regulated entity.  However, current statutes, regulations and 
rules leave certain conduct unregulated or unenforced.  

Accordingly, some finfluencers are providing investment advice regarding securities to 
large audiences despite a potential lack of knowledge and qualifications without 
reasonable and appropriate disclosures. 20   The CFA in its study of finfluencer content, 
found that only 20 percent of content that contained investment recommendations 
contained some form of disclosure, such as professional status or whether the 
finfluencers received compensation for recommending certain products.  These 
finfluencers have a significant incentive to build up large followings on social media 
platforms who will pay for higher user engagement with their content by promoting get 
rich quick schemes and providing exaggerated or false or misleading investment 
advice.21 

We note that several jurisdictions around the world have taken action to address these 
concerns regarding finfluencers. 22   The IAC has concluded that the SEC and FINRA 
should also consider taking additional actions to enhance the regulatory framework and 
protect investors in their interactions with finfluencers who are providing investment 
advice regarding securities.  Accordingly, the IAC makes the following 
recommendations: 

1. The SEC should engage in rulemaking and advocacy to close existing regulatory 
gaps in finfluencer oversight. 

a. The SEC should adopt a rule requiring certain disclosures related to 
finfluencer activity in providing investment advice regarding securities. 

The SEC should use its authority under Section 206(4) of the Advisers Act to 
propose a rule that would require disclosure of: (1) finfluencer conflicts; (2) 
compensation received; (3) regulatory status or qualifications to give advice or 
lack thereof; and (4) the impersonal nature of the advice.  

The IAC believes that retail investors would benefit from these basic 
disclosures in evaluating influencers’ advice.  Investors could therefore 
scrutinize finfluencer content more critically, if they are informed of the 
finfluencers qualifications to give investment advice regarding securities, 
conflicts and whether the content is paid for.  These disclosures can help deter 
inappropriate reliance on investment advice and mitigate harm.  Such a rule 
would close the regulatory gap in the regulation of finfluencers and go beyond 
the anti-touting provisions which are focused on compensation from issuers, 
dealers and underwriters.  The proposed rule would cover investment advisers 
that use social media to provide investment advice, whether registered or not, 

 
20 See IOSCO Retail Market Conduct Task Force Final Report (March 2023). 
21 See Kim Clark, Finfluencers Are A Rising Trend.  But Should You Trust Their Advice? Kiplinger 
Personal Finance (January 31, 2024). 
22See Info 269: Discussing Financial Products and Services Online, ASIC (Mar. 2022); See About the New 
Financial Advice Regime, FIN. MKT. AUTH. (Mar. 15, 2021). 



8 
 

including finfluencers who do not qualify for the publisher’s exclusion under 
the Investment Advisers Act.   

Here is suggested text for a proposed rule:   

It is a fraudulent or deceptive course of conduct under the Advisers Act for 
an Investment Adviser (or a supervised person of an investment adviser) 
to provide advice about securities through social media (“finfluencers”) 
without disclosing:  (1) any material conflicts the adviser has regarding the 
advice it provides; (2) compensation received for advice it provides; 
(3) regulatory status, educational background and business experience of 
the finfluencer or lack thereof; and (4) advice is impersonal and not a 
substitute for individualized advice. 

b. The SEC should advocate for Section 12 liability for misleading, deceptive, or 
fraudulent finfluencer conduct.   

Given the split in Circuit Court decisions on statutory seller liability under 
Section 12(a) of the Securities Act, as discussed above, the SEC should 
consider supporting the position that social media posts give rise to Section 12 
seller liability through guidance, filing amicus briefs and other advocacy.  
Alternatively, the SEC should consider urging Congress to provide recourse 
for investors to pursue recovery in courts when they have been misled and 
defrauded by finfluencers. 

2. The SEC should gather and publish data related to finfluencer misconduct.  

The SEC should coordinate with the FTC, FINRA and state regulators to compile 
and publish data on finfluencer complaints and finfluencer violations. This would 
help investors identify finfluencers who have engaged in questionable activity or 
violated the law and social media platforms to avoid. This would be similar to 
FINRA’s Broker-Check Database that provides investors with information on 
credentials and violations by brokers. 

3. The SEC should issue guidance related to finfluencer activities. 

a. The SEC should provide guidance to, and engagement with, finfluencers 
regarding applicable federal securities laws and regulations.   

The IAC believes it would be helpful and avoid violations of the law if 
finfluencers understood the applicability of the Federal securities laws to their 
activities. We suggest that the SEC publish comprehensive guidance for 
finfluencers regarding applicability of the federal securities laws. This would 
be similar to guidance provided by the Federal Trade Commission concerning 
influencer endorsements of particular products for which influencers are 
compensated.  Additionally, as suggested by the CFA Institute, the SEC should 
engage directly with finfluencers through forums, seminars, or other means to 
educate them on activities that are regulated. 



9 
 

b. The SEC should issue best practices for investment advisers.  

The SEC should publish suggested Best Practices for advisers to use when 
engaging finfluencers under the Advisers Act Marketing Rule. FINRA 
provided useful Best Practices for broker-dealers after an exam sweep focused 
on broker-dealer acquisition of clients through social media channels.23    

c. Encourage broker-dealers and investment advisers to train finfluencers that 
they utilize and enhance oversight of finfluencers. 

Training of finfluencers, including defining permitted and prohibited conduct, 
should assist finfluencers in avoiding violations of the law.  Additionally, 
reviewing finfluencer content before and after their use will also facilitate 
compliance with applicable requirements.  These suggestions should help 
firms evaluate their social media finfluencers and referral programs, including 
whether their practices and supervisory systems are reasonably designed to 
address relevant risks. 

4. The SEC should provide and encourage investor education. 

a. SEC and FINRA should continue to provide investor education regarding red 
flags and risks of relying on finfluencer advice. 

As noted above, the SEC, FINRA and state regulators have issued alerts to 
investors about the risks of relying on social media for investment advice.  
Guidance to investors should include how they should evaluate influencer 
content and questions to ask. 

b. The SEC should encourage traditional investment advisers to enhance 
outreach and education to newer investors.  

In its study, the CFA Institute concluded that finfluencers appeal to younger 
investors because they produce educational and engaging content that is free 
and instantly accessible.  Some finfluencers assist these investors in 
understanding complex financial information in clear and digestible social 
media content.  The SEC should encourage traditional financial firms to 
consider how to educate these new investors by providing easily assessable 
investor education and decreasing barriers to entry.  Forward-looking firms 
should recognize that many of these investors, while having minimal wealth 
now, will accumulate additional wealth in the future.  

5. The SEC should cooperate with other regulators and stakeholders to improve 
investor protection. 

 
23 See FINRA Provides Update on Sweep:  Social Medial Influences, Customer Acquisition and Related 
Information Protection (February 2023). 



10 
 

a. The SEC should seek to work with the Federal Trade Commission to 
incorporate in their guidance examples that apply to investment advice 
provided by finfluencer activities under The Federal Trade Commission Act.   

Given that there is some overlap in applicability of the Federal securities laws 
and the Federal Trade Commission Act to certain finfluencer activity, it would 
be useful for the FTC to incorporate in their guidance examples that apply to 
finfluencer activity under the Federal Trade Commission Act and cross-
reference the applicable Federal securities laws. We believe this would 
facilitate finfluencer compliance with applicable laws. 

b. The SEC should consider engaging constructively with social media platforms 
to understand their guidelines to monitor problematic finfluencer activity.   

The SEC should consider engaging the social media platforms to understand 
their controls for monitoring problematic finfluencers activities.  Some 
platforms are better than others in forcing clear disclosures and monitoring 
finfluencer content.   

We note that the FTC, as a result of increasing fraud on social media, issued 
orders to eight social media and video streaming platforms seeking 
information on how these companies scrutinize and restrict paid commercial 
advertising that is deceptive or exposes consumers to financial scams and 
other fraud.24  The SEC may want to consider doing something similar to 
evaluate platform oversight of finfluencers. 

c. The SEC should consider international cooperation. 

Given the breath of the internet, the SEC should coordinate with IOSCO and 
various jurisdictions regarding a baseline set of requirements that would 
apply to all finfluencers, such as the rulemaking we suggest in 
Recommendation 1. 

6. The SEC should study whether existing anti-fraud anti-manipulation provisions 
are sufficient to protect investors. 

Existing anti-fraud and anti-manipulation provisions prohibit certain clearly 
illegal conduct in securities markets, such as pump and dump schemes.  
However, regulators have difficulty in applying these laws in a situation in which 
the finfluencer simply discloses security holdings in a company and easily profits 
off of their followers predictable trading behavior.  In such situations, there is 
arguably no fraud and if it exists, or if there is an attempt to manipulate, it is hard 
to prove.  We suggest that the SEC and FINRA study whether the laws should be 
modified to address this potentially harmful market conduct.  This is consistent 
with a recommendation of the House Financial Services Committee in its June 

 
24 See Social Media 6b Model Order, FTC Matter No. P224500 (Mar. 16, 2023), available at 
https://www.ftc.gov/system/files/ftc_gov/pdf/P224500-Social-Media-6b-Model-Order.pdf.  

https://www.ftc.gov/system/files/ftc_gov/pdf/P224500-Social-Media-6b-Model-Order.pdf


11 
 

2022 Report – Game Stopped:  How The Meme Stock Market Event Exposed 
Troubling Business Practices, Inadequate Risk Management and the Need for 
Regulatory and Legislative Reform.25 

 
25 Available at https://democrats-
financialservices.house.gov/uploadedfiles/6.22_hfsc_gs.report_hmsmeetbp.irm.nlrf.pdf.  

https://democrats-financialservices.house.gov/uploadedfiles/6.22_hfsc_gs.report_hmsmeetbp.irm.nlrf.pdf
https://democrats-financialservices.house.gov/uploadedfiles/6.22_hfsc_gs.report_hmsmeetbp.irm.nlrf.pdf