Galvin Fines Online Investment Adviser $500,000 Over Misleading Social Media Ads

Secretary of the Commonwealth William F. Galvin has levied a fine of $500,000 against Dub Advisors, an online investment adviser that allows clients to “copy” the trades of public figures. The fine was included in a settlement agreement, in which the company admitted to running paid advertisements flagged as inherently misleading.

According to a consent order filed with Galvin’s Securities Division, Dub Advisors advertises a feature called “copy trading,” allowing clients to attempt to replicate the portfolios of politicians, hedge fund managers, or other influential investors. Dub Advisors uses public disclosures, publicly available sources, and third-party financial data to create the “Premium Portfolios” of these well-known figures.

As noted in the consent order, in some instances, it is not possible for a Dub Advisors client to make the same purchase as the individual they are attempting to copy. Further, trades are executed on behalf of a Dub Advisor client only after the portfolio of the well-known individual has been updated.

To advertise this service, Dub Advisors created social media posts highlighting the portfolio performance of a well-known politician. An Instagram post cited daily performance for a specific day, though the post was created and submitted for approval before markets had closed. Dub Advisors did not include any of the necessary disclosures, adding a brief disclosure in the comments of the post only after it had been viewed by others, and omitting any information about how the data in the post was calculated.

Though it lacked sufficient disclosures, Dub Advisors paid to promote the post on social media for a period of two months, beginning two weeks after the graphic had originally been posted on Instagram. Dub Advisors’ chief of compliance eventually ordered the advertisement to cease, as internal Dub Advisors communications noted daily performance information “becomes stale the next day and thus misleading for potential customers,” and that the paid advertisement lacking proper disclosures “inherently is misleading.” Nonetheless, Dub Advisors continued to run the advertisement for another eleven days after the chief compliance officer’s order.

In addition to the $500,000 administrative fine for failure to supervise its agents, Dub Advisors has agreed to make payments of restitution to certain Massachusetts residents and to revise its policies to ensure sufficient, prominent, and specific disclosures, tailored to the advertising medium.