Securities Lawyers Blog
Is a brokerage firm responsible for broker misconduct? Under FINRA rules, a firm such as M1 Finance LLC must supervise the financial advisors it registers, and it can be held liable in FINRA arbitration when a broker’s unsuitable recommendations, unauthorized trading, or misrepresentations cause investment losses. The broker misconduct attorneys at Gana Weinstein LLP bring these claims on behalf of investors and can evaluate whether a firm failed to supervise your broker.
M1 Finance is an online broker-dealer that powers the M1 investing platform, offering automated portfolio investing in stocks, fractional shares and ETFs with automatic rebalancing, along with margin lending and cash management features. Founded by Brian Barnes and headquartered on LaSalle Street in Chicago, the firm clears through Apex Clearing and serves more than one million members across the United States.
M1 Finance LLC – By the Numbers:
- CRD #: 281242
- Regulatory Events: 3
- Broker Employees: 41
M1 Finance LLC – In the News:
FINRA v. M1 Finance LLC (Case #2020068953101) – From March 2016 through the present, M1 Finance violated Regulation SHO Rule 203(b)(1) and Rule 200(g), and FINRA Rule 2010, by effecting more than 12 million short sales without locating securities available for borrowing and by inaccurately marking those orders as long. By inaccurately recording these short sales, and another 3.5 million principal buy orders, as executed in an “agent” capacity, the firm also maintained inaccurate books and records and violated Exchange Act Section 17(a), Exchange Act Rule 17a-3, and FINRA Rules 4511 and 2010. Finally, from March 2016 to the present, M1 Finance violated FINRA Rules 3110 and 2010 by failing to establish, maintain and enforce a supervisory system, including written supervisory procedures (WSPs), reasonably designed to achieve compliance with the provisions of Regulation SHO’s locate and order marking requirements and applicable books and records rules and regulations.
FINRA v. M1 Finance LLC (Case #2021072581101) – Between January 2020 and April 2023, M1 Finance paid individuals with followings on social media sites (commonly known as “influencers”) to promote the firm in social media communications. M1 Finance’s influencers posted on the firm’s behalf communications about the firm that were not fair and balanced or made claims that were exaggerated, unwarranted, promissory, or misleading. Therefore, M1 Finance violated FINRA Rules 2210(d)(1) and 2010. During that same period, M1 Finance did not review M1 Finance’s influencers’ communications prior to their posting on social media platforms, nor did the firm retain the communications. M1 Finance also failed to establish, maintain, and enforce a system, including written supervisory procedures (WSPs), reasonably designed to supervise communications disseminated on the firm’s behalf by the firm’s influencers. Therefore, the firm violated the Securities Exchange Act of 1934 Section 17(a), Exchange Act Rule 17a-4(b)(4), and FINRA Rules 2210(b), 4511, 3110, and 2010.
FINRA v. M1 Finance LLC (Case #2021072127401) – From January 2019 to June 2023, M1 Finance failed to establish, maintain, and enforce a reasonably designed supervisory system, including written supervisory procedures (WSPs), for its fully paid securities lending business. Therefore, the firm violated FINRA Rules 3110 and 2010. From January 2019 to February 2023, the firm distributed documents to more than 1.5 million retail investors containing misrepresentations about the compensation that those investors would receive for participating in fully paid securities lending. By making these misleading statements to customers, M1 Finance violated FINRA Rule 2010. The misstatements also violated the content standards of FINRA’s advertising rule; therefore, the firm also violated FINRA Rules 2210(d) and 2010.
Gana Weinstein LLP has successfully handled hundreds of customer investment disputes with their brokerage firms. Our attorneys can help you detect and uncover suspicious activity in your M1 Finance LLC accounts. Our consultations are free and we welcome all inquiries.