Understanding FTC Endorsement Guidelines for Trading Platforms
The Federal Trade Commission's Endorsement Guides establish fundamental truth-in-advertising principles that apply to all endorsements and testimonials, including those used by trading platforms, fintech companies, and investment services. Updated in 2023, these guidelines now explicitly address social media influencers, affiliate marketing, and digital endorsements that have become central to how trading platforms acquire customers.
For trading platforms, FTC endorsement compliance is only the baseline. You must simultaneously comply with SEC and FINRA rules governing investment advice, performance advertising, and client testimonials. This creates a complex regulatory framework where a single Instagram post can trigger obligations under multiple federal agencies.
Multi-Agency Enforcement Reality
When trading platforms use endorsements, they face enforcement risk from the FTC (deceptive advertising), SEC (unregistered investment advice, misleading performance claims), FINRA (supervision failures), and state securities regulators (unregistered agents). A compliant strategy requires satisfying all regulatory frameworks simultaneously.
FTC Act Section 5 Authority
The FTC's authority to regulate endorsements and testimonials derives from Section 5 of the FTC Act, which prohibits "unfair or deceptive acts or practices in or affecting commerce." This broad statutory mandate gives the FTC jurisdiction over advertising practices across all industries, including financial services.
Section 5(a) Prohibition
Section 5(a) declares unlawful "unfair or deceptive acts or practices in or affecting commerce." The FTC interprets endorsements and testimonials as representations made by advertisers, making the advertiser liable for misleading claims in endorsements.
Scope of FTC Jurisdiction
The FTC's jurisdiction extends to:
- All commercial endorsements and testimonials, regardless of medium (social media, traditional advertising, website content)
- Both explicit claims ("This platform made me rich") and implied claims (lifestyle content suggesting wealth from trading)
- Material connections between endorsers and advertisers, even if not explicitly stated
- Atypical results portrayed as typical consumer experiences
Enforcement Mechanisms
The FTC can enforce Section 5 through:
| Mechanism | Description | Typical Use |
|---|---|---|
| Cease and Desist Orders | Administrative orders requiring compliance | First-time violations without significant consumer harm |
| Civil Penalties | Up to $50,120 per violation (adjusted annually) | Violations of existing orders or egregious conduct |
| Consumer Redress | Restitution to harmed consumers | Cases with measurable consumer financial harm |
| Injunctions | Court orders prohibiting practices | Ongoing deceptive practices requiring immediate cessation |
FTC vs SEC Jurisdiction
The FTC has jurisdiction over deceptive advertising practices, while the SEC regulates securities offerings and investment advice. Trading platforms often fall under both agencies' authority: the FTC regulates whether endorsements are truthful and properly disclosed, while the SEC regulates whether the endorsements constitute unregistered investment advice or misleading performance claims. Compliance requires satisfying both frameworks.
Material Connection Disclosure Requirements
The cornerstone of FTC endorsement compliance is disclosure of "material connections" between endorsers and advertisers. A material connection is any relationship that might affect the weight or credibility consumers give to an endorsement.
What Constitutes a Material Connection
Material connections include:
- Direct payment: Cash compensation for endorsements or posts
- Free products or services: Providing free trading platform access, premium subscriptions, or tools
- Affiliate relationships: Revenue sharing, referral fees, or commissions based on customer signups
- Employment relationships: Employees or contractors posting about the platform
- Family/personal relationships: Posts by founders' family members or close friends
- Equity stakes: Ownership interests in the platform
- Business partnerships: Joint ventures or strategic relationships
Clear and Conspicuous Disclosure Standard
Disclosures of material connections must be "clear and conspicuous," meaning:
Placement Requirements
- Proximity: Disclosure must be close to the endorsement claim, not separated by scrolling or clicks
- Prominence: Cannot be buried in hashtags, "more" buttons, or extensive disclosure text
- Before click-through: Must appear before consumers click links to the advertiser
- In-feed visibility: Must be visible in social media feeds without expansion
Language Requirements
- Use plain, unambiguous language that consumers understand
- Avoid technical jargon or vague terms
- Make clear what the relationship is (not just that one exists)
- Use active voice and direct statements
COMPLIANT: Material Connection Disclosures
NON-COMPLIANT: Inadequate Disclosures
Platform-Specific Disclosure Challenges
| Platform | Challenge | FTC Guidance |
|---|---|---|
| Instagram Stories | Limited screen space, rapid progression | Disclosure must be visible without tapping; use text overlay at top |
| TikTok | Fast-paced video, on-screen text competes with content | Verbal disclosure at start + on-screen text overlay |
| Twitter/X | Character limits | #Ad at beginning acceptable; cannot require thread-clicking |
| YouTube | Description often not read | Verbal disclosure in video + description disclosure visible without expansion |
| Podcasts | Audio-only format | Host must verbally disclose at beginning and end of discussion |
Influencer Compensation Disclosure
Trading platforms increasingly use influencer marketing to reach retail investors. The FTC's 2023 updated guidance specifically addresses social media influencers and requires disclosure of all forms of compensation, not just cash payments.
All Forms of Compensation Must Be Disclosed
Compensation triggering disclosure requirements includes:
- Cash payments: Per-post fees, monthly retainers, performance bonuses
- Referral commissions: Percentage of customer deposits, per-signup bounties
- Revenue sharing: Ongoing percentage of trading fees or spreads
- Free premium access: Providing influencers with paid tier features
- Trading credits: Platform credits or reduced fees
- Gifts and perks: Conference invitations, swag, experiences
- Equity compensation: Stock options, tokens, profit sharing
- Affiliate links: Any trackable link providing compensation
The "Gifted Product" Gray Area
The FTC considers free platform access or premium features as compensation requiring disclosure, even if no cash changes hands. Many trading platforms provide influencers with premium subscriptions, API access, or reduced fees, assuming this doesn't require disclosure. This is incorrect. Any material benefit must be disclosed.
Ongoing Disclosure Obligations
Each post or endorsement must include disclosure, even if:
- The influencer previously disclosed the relationship in other posts
- The relationship is "obvious" to the influencer's audience
- The influencer genuinely likes and uses the product
- The post is part of an ongoing campaign with prior disclosures
Advertiser Responsibility and Monitoring
Trading platforms bear ultimate responsibility for influencer compliance:
- Training obligation: Educate influencers on disclosure requirements
- Contract terms: Written agreements requiring compliant disclosures
- Monitoring duty: Regularly review influencer posts for compliance
- Correction obligation: Require influencers to correct non-compliant posts
- Enforcement: Terminate relationships with non-compliant influencers
Influencer Agreement Disclosure Clause
Atypical Results Warnings
One of the most critical issues for trading platforms is the FTC's requirement to disclose when endorsements represent atypical results. Most users of trading platforms do not achieve the returns shown in testimonials and endorsements, making this disclosure mandatory.
The "Typicality" Requirement
Under FTC guidelines, if an endorsement represents results that consumers cannot generally expect to achieve, the advertiser must:
- Clearly disclose what typical results are, OR
- Clearly state that the endorser's experience is not typical
The Trading Platform Problem
For trading platforms, this creates a fundamental challenge: showcasing successful traders is atypical by definition. Most retail traders lose money or underperform the market. The FTC requires either disclosing typical results (which are often negative) or clearly stating the results are atypical. Neither option is attractive for marketing purposes, which is why many platforms avoid user testimonials entirely.
What Constitutes "Typical Results"
Typical results must represent what the ordinary consumer will achieve, not:
- Cherry-picked examples of top performers
- Median results that ignore the bottom 50%
- Results during favorable market conditions only
- Results achieved by professional or institutional traders
Required Disclosures for Atypical Results
OPTION 1: Disclose Typical Results
OPTION 2: Atypicality Disclosure
Performance Claims in Financial Services
For trading platforms, performance testimonials create overlapping FTC and SEC requirements:
| Requirement | FTC Standard | SEC Standard (Marketing Rule) |
|---|---|---|
| Typicality disclosure | Required if results atypical | Must show representative performance |
| Substantiation | Must have reasonable basis for claims | Must maintain supporting documentation |
| Time periods | Must not cherry-pick favorable periods | Must show 1, 5, 10 year returns (or since inception) |
| Net vs gross | Must reflect actual investor experience | Must show both gross and net of fees |
| Risk disclosure | Material risks affecting claims | Comprehensive risk disclosure required |
Expert Endorsements
Expert endorsements involve claims by individuals with specialized knowledge or credentials. For trading platforms, this often includes endorsements by financial professionals, former traders, economists, or technical analysts.
What Qualifies as an Expert Endorsement
An endorsement is an "expert endorsement" when:
- The endorser is represented as having expertise relevant to the product
- Credentials, titles, or experience are highlighted (CFA, former hedge fund manager, economics PhD)
- The endorsement relies on or implies specialized knowledge
- Consumers are likely to give the endorsement greater weight due to expertise
Expert Qualification Requirements
When using expert endorsements, trading platforms must:
- Verify credentials: Ensure the expert actually possesses claimed qualifications
- Relevant expertise: Credentials must be relevant to the endorsed product/service
- Current standing: Expert must maintain licenses and good standing
- Actual belief: Expert must genuinely hold the opinions expressed
- Substantiation: Expert opinions must be supported by adequate evidence
The "Former Trader" Problem
Many trading platforms feature "former Wall Street traders" or "ex-hedge fund managers" as endorsers. The FTC requires verifying these claims and ensuring the expertise is current and relevant. A trader who worked at Goldman Sachs 15 years ago in a different market may not qualify as a current expert on retail crypto trading platforms.
Disclosure Requirements for Expert Endorsements
| Element | Disclosure Required |
|---|---|
| Compensation | Must disclose if expert is paid, even if expert genuinely believes claims |
| Affiliation | Any employment, investment, or business relationship with platform |
| Basis of opinion | If opinion based on limited testing or specific conditions, must disclose |
| Scope of expertise | If credentials are in different field, must clarify relevance |
| Changes in opinion | Cannot continue using endorsement if expert changes position |
SEC Overlay: Investment Advice Registration
Expert endorsements by trading platforms create SEC registration concerns:
When Expert Endorsement Triggers IA Registration
- Expert recommends specific securities or trading strategies
- Expert provides ongoing market analysis or recommendations
- Expert receives compensation tied to trading activity
- Expert's role goes beyond endorsement to advisory relationship
Safe Harbor: Genuine Endorsement
- Expert endorses the platform generally, not specific trades
- Compensation is flat fee, not tied to customer trading
- Expert does not interact with customers or provide advice
- Endorsement is clearly advertising, not advisory content
Consumer Testimonials
Consumer testimonials are endorsements by ordinary users sharing their experiences. For trading platforms, these are the most common form of endorsement but also present significant compliance challenges.
Baseline FTC Requirements
All consumer testimonials must:
- Be genuine: Testimonials must reflect honest opinions and actual experiences
- Not be fabricated: Cannot create fake user testimonials or use stock photos
- Represent current views: If customer changes opinion, cannot continue using testimonial
- Disclose incentives: If customer received compensation or incentives, must disclose
- Typical results warning: If results shown are atypical, must disclose typical results or atypicality
Common Trading Platform Testimonial Violations
| Violation | Example | Why Problematic |
|---|---|---|
| Cherry-picked results | "User made $50K in first month" | Atypical results without disclosure that most users lose money |
| Undisclosed incentives | Testimonial from user given free premium account | Material connection not disclosed |
| Fabricated testimonials | Stock photos with fake names and results | Completely deceptive |
| Outdated testimonials | Using 2020 bull market results in 2024 | No longer representative of current experience |
| Platform employee testimonials | Employees posting as regular users | Material connection not disclosed |
Solicited vs. Unsolicited Testimonials
The FTC draws an important distinction:
Unsolicited Testimonials
- Customer posts about platform without prompting or compensation
- Platform is not liable for customer's statements
- BUT if platform reposts/shares the testimonial, platform adopts it and becomes liable
- Platform must ensure adopted testimonials don't make misleading claims
Solicited Testimonials
- Platform asks customers to provide testimonials
- Platform offers incentives (rewards, discounts, contest entries)
- Platform must disclose any compensation or incentives
- Platform bears full responsibility for accuracy and typicality
Consumer Testimonial Disclosure Template
Social Media Disclosure Requirements (#ad, #sponsored)
Social media endorsements require specific disclosure formats to meet FTC "clear and conspicuous" standards. The FTC has issued detailed guidance on social media disclosures, recognizing the unique constraints of each platform.
Acceptable Disclosure Formats
The FTC considers the following clear and conspicuous for social media:
Unambiguous Hashtags (at beginning of post)
#ad#sponsored#[Brand]Partner#PaidPartnership
Text Disclosures (preferred)
- "Paid partnership with [Platform]"
- "This is a sponsored post"
- "[Platform] is paying me to share this"
- "I receive commissions from [Platform]"
Inadequate Disclosure Formats
The FTC has found the following insufficient:
#spon,#sp,#collab- too vague- Disclosure at end of long caption after "more" button
- Disclosure in hashtag list after 10+ other hashtags
- "Thanks [Platform]" without stating compensation
- Platform native tools that require hovering or clicking
- Disclosure only in video description, not in video itself
Instagram Feed Posts
Format: "#Ad" or "Paid partnership with [Brand]"
Additional: Use Instagram's paid partnership label
Instagram Stories
Format: Text overlay "Paid Partnership" or sticker
Duration: Visible entire story duration
TikTok Videos
Format: "Paid partnership" toggle + text overlay
Duration: On-screen for 3+ seconds
X (Twitter)
Format: "#Ad" as first word or tag
Note: Character limits don't excuse omitting disclosure
YouTube Videos
Format: First 2 lines of description (visible without "show more")
Timing: Verbal disclosure in first 30 seconds
LinkedIn Posts
Format: "Disclosure: Paid partnership" or #Ad
Professional context: Be especially clear given audience
Platform Native Disclosure Tools
Many platforms now offer built-in partnership disclosure tools:
| Platform | Native Tool | FTC Sufficient Alone? |
|---|---|---|
| "Paid partnership with [Brand]" label | Yes, if prominently displayed | |
| YouTube | "Includes paid promotion" checkbox | No - still need verbal and description disclosure |
| TikTok | "Paid partnership" toggle | Yes, when combined with on-screen text |
| "Paid partnership" tag | Yes, if prominently displayed | |
| X (Twitter) | No native tool | N/A - must use hashtags or text |
Best Practice: Multiple Disclosure Points
Given the FTC's emphasis on "clear and conspicuous," best practice is to use multiple disclosure methods: platform native tools + hashtags + text disclosure. This redundancy protects against changes in platform features and ensures consumers see the disclosure regardless of how they access content.
Platform-Specific Compliance Requirements
Each social media platform presents unique compliance challenges based on content format, audience demographics, and technical constraints. Trading platforms must develop platform-specific compliance protocols.
Instagram Compliance Protocol
Instagram's visual-first format creates disclosure challenges, particularly in Stories and Reels:
- Feed posts: Disclosure in first 1-2 lines of caption before "more" button
- Stories: Text overlay at top of screen, visible without tapping, entire duration
- Reels: On-screen text overlay in first 3 seconds + caption disclosure
- Carousel posts: Disclosure on first slide; cannot require swiping to see
- Comments: Cannot use comment section for required disclosures
TikTok Compliance Protocol
TikTok's short-form video format and young demographic require special attention:
- Verbal disclosure: Creator must verbally state sponsorship in first 10-15 seconds
- On-screen text: Text overlay stating "Paid partnership with [Platform]" for 3+ seconds
- Platform toggle: Enable "Paid partnership" disclosure toggle
- Caption: Include #Ad or "Sponsored" in caption
- Age demographics: Extra scrutiny given younger audience susceptible to influence
TikTok High-Risk Environment
TikTok presents the highest compliance risk for trading platforms due to: (1) extremely young user base (many minors), (2) algorithm that amplifies engaging content regardless of accuracy, (3) fast-paced format that discourages reading disclosures, (4) trend-driven culture that spreads misleading claims rapidly. I advise many trading platforms to avoid TikTok influencer partnerships entirely or limit content to purely educational material with no product promotion.
YouTube Compliance Protocol
YouTube's long-form format allows comprehensive disclosures but requires multiple disclosure points:
- Verbal disclosure: Creator states sponsorship in first 30 seconds and reminds at end
- Description disclosure: First 2-3 lines (visible without "show more") state paid partnership
- Pinned comment: Pin disclosure comment to top of comment section
- YouTube checkbox: Check "video contains paid promotion" in upload settings
- Comment moderation: Monitor comments to avoid adopting viewer recommendations
Twitter/X Compliance Protocol
Twitter's character limit creates tension between disclosure requirements and message content:
- #Ad at beginning: First word or first hashtag
- Character limits: Not an excuse for omitting disclosure; shorten message if needed
- Threads: Disclosure required in first tweet; cannot require clicking to thread
- Quote tweets: Avoid quote-tweeting product claims even if original has disclosure
- Retweets: Retweet = endorsement; ensure retweeted content has proper disclosures
Monitoring and Enforcement Obligations
Trading platforms bear responsibility for monitoring influencer and affiliate compliance. The FTC holds advertisers liable for endorser misconduct, making robust monitoring essential.
Advertiser Monitoring Duties
Trading platforms must:
- Initial review: Review and approve content before posting when feasible
- Ongoing monitoring: Regularly review influencer posts for compliance
- Spot checks: Random sampling of affiliate and partner content
- Complaint response: Investigate consumer complaints about misleading endorsements
- Corrective action: Require influencers to correct or remove non-compliant content
- Relationship termination: End partnerships with repeatedly non-compliant endorsers
Monitoring Program Elements
Influencer Monitoring Checklist
- ☐ Written policies: Document monitoring procedures and responsibilities
- ☐ Pre-posting review: Implement approval workflow for high-risk content
- ☐ Social listening: Use tools to track brand mentions and endorsements
- ☐ Disclosure audit: Monthly review of influencer posts for proper disclosures
- ☐ Claims substantiation: Verify endorsers don't make unsubstantiated product claims
- ☐ Complaint log: Track and investigate complaints about endorsements
- ☐ Corrective actions: Document requests to fix non-compliant content
- ☐ Termination triggers: Define when relationships must end due to non-compliance
- ☐ Training program: Quarterly training for endorsers on disclosure requirements
- ☐ Legal review: Escalation to legal counsel for potential violations
FTC Enforcement Actions Against Advertisers
Recent FTC actions demonstrate advertiser liability for endorser misconduct:
FTC v. Sunday Riley Modern Skincare (2020)
The FTC charged Sunday Riley with directing employees to post fake positive reviews on Sephora without disclosing their employment. The company agreed to cease and desist and implement monitoring systems.
Lesson: Advertisers are liable when they direct or know about undisclosed employee endorsements, even on third-party platforms.
FTC v. Teami LLC (2020)
Teami paid influencers to promote products without ensuring they disclosed compensation. The FTC found Teami liable for influencers' failure to disclose despite Teami's claims it instructed them to comply.
Lesson: Merely instructing influencers to disclose is insufficient; advertisers must monitor and enforce compliance.
CSGO Lotto Endorsement Case (2017)
YouTube influencers promoted gambling site CSGO Lotto without disclosing they owned the company. The FTC settled with the influencers for failure to disclose material connection.
Lesson: Ownership interests are material connections requiring disclosure, especially in financial services.
SEC vs FTC Jurisdictional Overlap
Trading platforms face the unique challenge of complying with both FTC endorsement guidelines and SEC securities regulations. These frameworks overlap but are not identical, creating complex compliance obligations.
Jurisdictional Boundaries
| Issue | FTC Jurisdiction | SEC Jurisdiction |
|---|---|---|
| Deceptive advertising | Primary authority for all products/services | Authority over securities-related advertising |
| Endorsement disclosures | Material connection disclosure requirements | Testimonial disclosure under Marketing Rule |
| Performance claims | Substantiation and typicality requirements | Detailed performance advertising rules |
| Influencer compensation | Clear and conspicuous disclosure | Written agreements, bad actor checks, oversight |
| Expert endorsements | Qualification verification, disclosure | May trigger investment adviser registration |
Where FTC and SEC Requirements Diverge
FTC: Broad Consumer Protection
- Applies to all endorsements regardless of product type
- Focuses on "clear and conspicuous" disclosure
- Accepts various disclosure formats (#ad, sponsored, etc.)
- No pre-approval requirements
- Advertiser liable for endorser claims
SEC: Securities-Specific Rules
- Applies only to securities-related endorsements
- Requires specific disclosure content (client status, compensation details)
- Written agreements required for compensation over $1,000
- Bad actor background check requirement
- Ongoing oversight and review obligations
Compliance Strategy: Satisfy Both Frameworks
To comply with both FTC and SEC requirements, trading platforms must:
1. Disclosure Content
Combine FTC and SEC disclosure elements:
FTC + SEC Compliant Disclosure
2. Written Agreements
Influencer agreements must address both FTC and SEC requirements:
- FTC: Disclosure format and placement requirements
- SEC: Specific disclosures (client status, compensation over $1,000, oversight rights)
- Both: Prohibitions on false or misleading claims
- Both: Substantiation requirements for product claims
3. Pre-Engagement Due Diligence
| Check | FTC Requirement | SEC Requirement |
|---|---|---|
| Background verification | Recommended best practice | Required - bad actor check |
| Credential verification | Required for expert endorsements | Required if presenting as expert |
| Prior violations | Recommended best practice | Disqualifying events under Marketing Rule |
| Social media review | Check for patterns of non-disclosure | Check for unregistered advisory activity |
4. Ongoing Monitoring
- FTC focus: Ensure disclosures remain clear and conspicuous across posts
- SEC focus: Ensure no investment advice provided beyond endorsement
- Both: Verify claims remain substantiated and not misleading
- Both: Monitor for changes in relationship requiring updated disclosures
Enforcement Coordination Between Agencies
The FTC and SEC increasingly coordinate enforcement:
- Information sharing through inter-agency working groups
- Joint investigations of fintech and trading platform marketing
- Referrals between agencies when conduct violates both frameworks
- Coordination with state securities regulators on influencer actions
Simultaneous Multi-Agency Actions
Trading platforms can face simultaneous enforcement from multiple agencies for the same conduct. For example, undisclosed influencer payments for investment recommendations could trigger: (1) FTC action for failure to disclose material connections, (2) SEC action for testimonial rule violations or unregistered investment advice, (3) FINRA action if platform is a broker-dealer, (4) state securities regulator actions for unregistered agents. This creates potential for multiplicative penalties.
Comprehensive Disclosure Templates
The following templates satisfy both FTC and SEC requirements for trading platform endorsements across various scenarios.
Template 1: Paid Influencer (Non-Client)
Instagram/TikTok Format
Template 2: Paid Influencer (Current Client)
YouTube/Blog Format
Template 3: Affiliate Marketing
Any Platform Format
Template 4: Expert Endorsement
Professional/LinkedIn Format
Template 5: Consumer Testimonial with Performance Claims
Website/Marketing Material Format
Template 6: Employee/Insider Post
Social Media Format
Major Enforcement Cases
Understanding enforcement actions helps identify compliance priorities and risk areas. The following cases illustrate how FTC and SEC enforce endorsement rules against trading platforms and financial services.
SEC v. Kim Kardashian (2022)
Kim Kardashian promoted EthereumMax tokens on Instagram, receiving $250,000 in compensation. She did not disclose the payment or the amount. The SEC charged violations of securities anti-touting provisions.
Key Lessons: (1) Celebrity endorsements of securities require disclosure of compensation and amount, (2) Social media posts about securities trigger SEC rules beyond FTC requirements, (3) "Influencer" status does not exempt from securities laws, (4) SEC will pursue high-profile cases to set precedent.
SEC Operation Token Mirrors (2022)
The SEC charged eight social media influencers for promoting crypto securities without disclosing they were paid over $100 million collectively. Some influencers also faced charges as unregistered broker-dealers.
Key Lessons: (1) High-volume promotion may trigger broker-dealer registration, not just disclosure requirements, (2) SEC will bring coordinated actions against multiple influencers simultaneously, (3) Crypto/digital asset endorsements receive heightened scrutiny, (4) Disclaimers like "not financial advice" don't cure undisclosed compensation.
FTC v. Teami LLC (2020)
Teami paid hundreds of influencers but failed to ensure they disclosed the relationship. The FTC found Teami liable even though it claimed to have instructed influencers to disclose.
Key Lessons: (1) Advertisers must monitor influencers, not just instruct them, (2) Boilerplate contract language requiring disclosure is insufficient, (3) Widespread influencer programs require systematic monitoring, (4) FTC will hold advertisers liable for influencer failures.
FINRA v. Robinhood (2020)
FINRA fined Robinhood for making false and misleading statements in communications with customers, including through gamification features that constituted recommendations without proper supervision.
Key Lessons: (1) App features and UX design can constitute "communications" requiring supervision, (2) "Gamification" of trading triggers regulatory scrutiny, (3) Platform design choices have compliance implications, (4) Supervision systems must cover all customer communications, including in-app messages.
Multi-State Finfluencer Sweep (2023)
State securities regulators coordinated enforcement targeting social media "finfluencers" providing investment advice without registration. Many operated "trading courses" or "signal services."
Key Lessons: (1) State regulators are actively monitoring social media, (2) "Educational" framing doesn't exempt from IA registration if providing specific advice, (3) Multi-state coordination creates widespread enforcement risk, (4) Signal sellers and course providers face same requirements as traditional advisers.
FTC v. Sunday Riley Modern Skincare (2020)
Sunday Riley directed employees to post fake positive reviews on Sephora without disclosing employment. The FTC obtained a consent order requiring monitoring and prohibiting fake reviews.
Key Lessons: (1) Employee posts about employer's products require disclosure of relationship, (2) Directing fake reviews is per se deceptive, (3) Reviews on third-party platforms (not just owned properties) are covered, (4) FTC will require ongoing monitoring as remedy.
Best Practices Summary
10 Essential FTC Endorsement Compliance Practices
- 1. Default to disclosure: When in doubt, disclose material connections prominently
- 2. Multiple disclosure points: Use platform native tools + hashtags + text for redundancy
- 3. Disclosure at beginning: Never bury disclosures after "more" buttons or in hashtag lists
- 4. Plain language: Use clear terms like "#Ad" not vague abbreviations like "#spon"
- 5. Atypicality warnings: Always disclose when results shown are not typical
- 6. Written agreements: Contract with all paid endorsers covering disclosure obligations
- 7. Ongoing monitoring: Implement systematic review of endorser content, not just pre-approval
- 8. Training programs: Educate endorsers on FTC and SEC requirements quarterly
- 9. Document everything: Maintain records of agreements, training, monitoring, and corrective actions
- 10. Legal review: Have counsel review endorsement programs before launch and quarterly thereafter
Endorsement Program Launch Checklist
- ☐ Legal review: Counsel reviews program structure and agreements
- ☐ Written policies: Document endorsement policies and disclosure requirements
- ☐ Endorser agreements: Signed contracts with all compensated endorsers
- ☐ Bad actor checks: Background verification for all paid promoters (SEC requirement)
- ☐ Disclosure training: Initial training session for all endorsers on FTC/SEC requirements
- ☐ Platform guidelines: Written guidance for disclosure format on each social platform
- ☐ Monitoring system: Tools and procedures to track endorser posts
- ☐ Pre-approval workflow: Review process for high-risk content before posting
- ☐ Escalation procedures: Process for handling potential violations
- ☐ Record retention: System to archive all endorser content and agreements