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SEC Fines RIA $250,000 for Undisclosed Social Media Influencer Solicitations

The Securities and Exchange Commission announced that it charged Fundrise Advisors, a registered investment advisor, with using over 200 social media influencers and online publishers (“content creators”) to attract more than 66,000 new clients to the adviser.

According to the SEC, the firm violated the Advisers Act, yielding over $655,000 in advisory fees for the firm. Between February 2016 and December 2021, Fundrise paid over $8 million to content creators to solicit Fundrise advisory clients without the disclosure and documentation required under the Advisers Act Rule, which was then in place (the “cash solicitation rule”).

According to the filing, the Washington, DC-based firm has contracted with content creators to promote their online real estate investment platform on their blogs, websites, newsletters and social media channels. As part of these contractual arrangements, the content creators agreed to include hyperlinks to Fundrise’s platform in their online promotions. The company paid the content creators, without disclosing or documenting it, based on the number of individuals who clicked on the hyperlinks and entered their email addresses.

The SEC says that as a result, Fundrise clients were not fully informed of the content creators’ financial interests in promoting Fundrise’s investment advisory services and real estate investment platform and therefore “lacked the information necessary to evaluate the content creators’ recommendation of Fundrise.” Additionally, Fundrise did not “adopt and implement written policies and procedures concerning the use of solicitors that were designed to prevent violations of the cash solicitation rule.”

Fundrise was ordered to pay a $250,000 civil money penalty within 14 days. The company has $3.3 billion in assets under management.

As The DI Wire previously reported, the SEC finalized reforms that replaced the former advertising and cash solicitation rules in December 2020.

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