JD Supra reports that the SEC in June imposed a fine of $25,000 on Canada-based robo-adviser Emperor Investments for a number of violations. Among the firm’s infractions was their failure to comply with Advisers Act Rule 206(4)-3, the Cash Solicitation Rule, when using social media influencers acting as referral sources.
The SEC said the firm conducted a client referral program by paying compensation to certain bloggers for successfully soliciting new clients to open Emperor accounts. Under this arrangement, bloggers would place hyperlinks to the firm’s website in or near a favorable blog post about Emperor.
The SEC said Emperor paid the bloggers based on the amount of assets deposited in new accounts from client referrals. They were paid $3,400 for referring new clients and an additional $12,500 for blogger reviews, according to the commission.
Under the Cash Solicitation Rule, Emperor was required to have a written solicitation agreement with the bloggers, to require that the bloggers provide certain disclosures to solicited clients, and to receive written acknowledgment of receipt of the disclosure documents by the solicited clients before entering into an advisory contract with them. But the firm was found to have been in violation of these three provisions.
The SEC noted that the fine amount that was levied of $25,000 was based on the company’s cooperation with its investigation and enforcement action.
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