SEC charges Fundrise Advisors for paying finfluencers $8M to solicit clients

The Securities and Exchange Commission has announced charges against a Washington, D.C.-based advisory firm because of its dealings with hundreds of online content creators. 

According to an SEC order, Fundrise Advisors violated the cash solicitation rule for agreements in place from February 2016 through December 2021.

During that time, Fundrise made cash payments to more than 200 social media influencers and publishers of online newsletters to solicit clients for the firm, the order alleges. As part of these contractual arrangements, the content creators agreed to include hyperlinks to Fundrise's platform in their online promotions.

Fundrise paid the content creators based on the number of individuals who clicked on the hyperlinks and entered their email addresses. Some of these individuals ultimately entered into advisory relationships with Fundrise.

In total, Fundrise paid more than $8 million to the content creators who referred more than 66,000 new clients to the firm, the order states. To date, those clients have accounted for more than $300 million of Fundrise's AUM, yielding more than $655,000 in advisory fees for the organization.

The order finds that Fundrise did not require the solicitors to provide clients with certain disclosures required by the rules governing cash solicitation payments in effect at the time. Specifically, the regulators are referring to Fundrise's brochure and a separate written disclosure document describing the solicitor's relationship with Fundrise and the terms of the compensation agreement.

Without admitting or denying the findings, Fundrise agreed to a cease-and-desist order, a censure and a $250,000 civil penalty to settle the charges.

In a statement provided to Financial Planning, Fundrise Chief Financial Officer Alison Staloch said the firm is "pleased to have resolved this matter."

"Fundrise fully cooperated with the SEC staff in reaching this settlement, which addresses past conduct concerning the firm's management of content creators," said Staloch, who is the former chief accountant of the SEC Division of Investment Management. "I have a deep appreciation for the importance of compliance in our industry. This settlement reinforces the significance of adhering to regulatory requirements and upholding the trust our clients place in us.

"Fundrise remains committed to the highest standards of compliance and integrity."

According to the SEC, Fundrise operates an online real estate investment platform. The firm has been registered with the commission as an investment advisor since Sept. 25, 2014. As of March 31, 2023, Fundrise reports approximately $3.3 billion in assets under management.