Brokerages SoFi Securities, Public and M1 Finance misled millions of investors about their securities-lending programs, according to the Financial Industry Regulatory Authority.
In such programs, brokerages make money by loaning out investors’ shares to third parties including short sellers, who bet against those stocks. Until recently, SoFi, Public and M1 said they would pay customers a slice of their revenues from lending the shares, but instead kept the money, Finra alleged in a set of enforcement actions unveiled Wednesday.
For instance, SoFi Securities—the brokerage arm of SoFi Technologies—enrolled more than 2 million customers in a securities-lending program between January 2019 and March 2023, receiving more than $8 million in revenue from its clearing firm for lending those customers’ shares, Finra said.