Trading Platform Troubles Mount As TradeZero America Charged A Huge Fine by FINRA

Highlights:

• TradeZero America are to pay a $250,000 fine to FINRA for several regulatory violations from July 2020 to October 2022.
• They have agreed to the sanctions, including the $250,000 fine and a censure, without admitting or denying the findings.

TradeZero America, Inc., a trading platform for retail investors, must pay a $250,000 fine to the Financial Industry Regulatory Authority (FINRA). This Brooklyn-based firm, which has been a FINRA member since 2016, was accused of several regulatory violations from July 2020 to October 2022. The settlement focuses on the firm’s use of social media influencers and the provision of inaccurate privacy notices to customers.

The Allegations

Between July 2020 and October 2022, TradeZero America paid social media influencers to promote the firm, violating FINRA Rules 2210(d)(l) and 2010. These influencers posted communications that were not balanced or made exaggerated claims. At the same time, they did not review or retain influencers’ videos before posting them on social media. They also didn’t review or keep track of influencers’ posts in online forums.

They also failed to establish a system to supervise its influencers’ communications properly, violating various rules, including FINRA Rules 2210(b), 4511, 3110, and 2010. Moreover, between January 2020 and January 2022, TradeZero America provided inaccurate privacy notices to customers regarding the use of their personal information, breaching Regulation S-P of the Securities Exchange Act of 1934 Rule 4 and FINRA Rule 2010.

TradeZero’s Response

Earlier, in mid-March, M1 Finance faced a $850,000 penalty from FINRA for misleading social media posts, similar to TradeZero America’s recent fine. TradeZero America agreed to the sanctions imposed by FINRA, including a $250,000 fine and a censure, without admitting or denying the findings.

The firm has updated its supervisory procedures to comply with FINRA rules, now requiring the review and approval of social media communications by a registered principal and accurate privacy disclosures.