M1 Finance

Kurta Law is investigating recommendations by brokers from M1 Finance (CRD#: 281242). Investors should know that M1 Finance has faced multiple six-figure fines by FINRA. The firm offers self-directed brokerage services and is based in Chicago, Illinois.

Fees and Conflicts of Interest

Investors should review the fees and conflicts of interest that M1 Finance discloses in its Customer Relationship Summary (Form CRS) and disclosures page. The firm also expands on its fee disclosures on its fee page.

• M1 Finance charges a $3 monthly platform fee.
• The firm charges a $3 monthly IRA fee for investors who do not pay the monthly fee, maintain less than $10,000 in assets, or who have an active M1 Personal Loan.
• M1 Finance charges fees for paper copies of documents, wire transfers, outgoing direct account transfers, and other activities that do not involve trading or the maintenance of your account.
• The firm earns money on the cash balance in your brokerage accounts and from margin loans in your accounts.
• M1 Finance receives payment from execution firms for order flow, and is compensated based on the quantity of shares it sends to certain firms.
• The firm makes money from M1 High-Yield Cash Accounts and your participation in the Cash Sweep Program. The firm earns money from the difference between the rate at which the participating bank pays you for your cash and the fees it pays to the firm. M1 Finance is incentivized to send your cash to participating banks and the fees it earns will lower the yield in your M1 High-Yield Cash Account.
• Additionally, M1 Finance receives intellectual property gains through its relationship with the intermediary bank that facilitates cash transfers as part of the Cash Sweep Program.
• The firm earns money on securities lent out through its Fully Paid for Securities Lending Program.

Broker-Dealer Services

Investors who use M1 Finance as their brokerage firm will have access to investments such as stocks, exchange-traded funds (ETFs), and mutual funds. Investors should be aware that ETFs and mutual funds can come with high fees and significant risks.

Regulatory Actions

Kurta Law wants investors to be aware of the following regulatory actions that M1 Finance discloses on its detailed BrokerCheck page.

Short Sale Allegations

On May 6, 2024, FINRA filed a Letter of Acceptance, Waiver & Consent (AWC) alleging that M1 Finance effected more than 12 million short sales from 2016-2024 without locating securities available for borrowing and mismarked the orders as long.

M1 Finance allegedly failed to establish and maintain a system of supervision designed to achieve compliance with the locate and order marking requirements of Regulation SHO. This regulation requires brokerage firms to identify borrowable securities before executing short sales to prevent a failure to deliver.

FINRA censured the firm, fined it $400,000, and ordered it to revise its supervisory procedures to achieve compliance with relevant SEC and FINRA rules. You can access the full AWC here.

Alleged Failure to Review Communications

On March 15, 2024, FINRA alleged that M1 Finance paid social media influencers to promote the firm, but failed to review these influencers’ promotional communications prior to their posting or retain them.

An AWC alleged that these social media influencers posted materials on the firm’s behalf that contained claims that were exaggerated, promissory, or misleading, or that were not fair and balanced.

FINRA censured M1 Securities and fined it $850,000. The firm was also ordered to remediate the issues alleged in the AWC. You can read the full AWC here.

Alleged Misrepresentations

In an AWC filed on December 5, 2023, FINRA alleged that M1 Finance failed to establish a reasonably designed system of supervision for its fully paid securities lending program.

The firm allegedly distributed documents containing misrepresentations about the compensation investors would receive for participating in the program from 2019-2023. These documents were allegedly distributed to more than 1.5 million retail investors.

M1 Finance was censured by FINRA, fined $500,000, and ordered to pay restitution of $736,917.86 plus interest. You can access the full AWC here.

How Can Investors Recover Lost Funds from a Brokerage Firm?

If you have concerns about your broker’s conduct, you may be able to recover your losses through FINRA arbitration. Brokerage firms typically require FINRA arbitration over civil court, and a securities attorney can help you navigate the process.

Kurta Law Can Help

Investors who lost money working with M1 Finance should reach out to an investment fraud lawyer for help. Our attorneys offer free case evaluations and do not charge a fee unless we win your case. Call (877) 600-0098 or email info@kurtalawfirm.com.