M1 Finance Fined by FINRA for Short Selling & Record-Keeping Violations

M1 Finance LLC, a Chicago-based broker-dealer firm, has been fined $400,000 by the Financial Industry Regulatory Authority (FINRA) for violating rules related to short selling and maintaining inaccurate books and records.

According to a Letter of Acceptance, Waiver and Consent (AWC) published by FINRA, from March 2016 through the present, M1 Finance violated Regulation SHO Rule 203(b)(1) by effecting more than 12 million short sale orders without first locating borrowable shares, as required.

The firm also violated Regulation SHO Rule 200(g) by inaccurately marking those 12 million orders as long sales, rather than properly marking them as short sales. M1 further mismarked over 3.5 million buy orders, maintaining inaccurate trade records in violation of Securities Exchange Act rules.

FINRA stated that M1 Finance failed to establish and maintain a reasonable supervisory system, including written procedures, to ensure compliance with the short selling locate and order marking requirements, as well as related recordkeeping rules.

As part of the settlement, M1 Finance was censured and agreed to certify within 180 days that it has implemented proper supervisory procedures and remediated the violations. The firm consented to the entry of FINRA's findings without admitting or denying the charges.

The $400,000 fine reflects FINRA's continued scrutiny of member firms' short selling and recordkeeping practices aimed at ensuring market integrity and investor protection.

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