Online Investment Site Settles With FTC, $2.4M Fine – Finance and Banking – United States – Mondaq News Alerts

United States:

Online Investment Site Settles With FTC, $2.4M Fine

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On March 8, the FTC settled with the operators of
an online stock trading platform over allegations that the
operators fraudulently marketed investment-related services that
they claimed would enable consumers to make consistent profits and
beat the market. FTC alleged that the consumers were misled and
those who subscribed to the operators’ stock and option trading
services were trapped into hard-to-cancel subscription plans with
costly charges.

According to the complaint, the operators
violated the FTC Act over false earning claims misrepresentations
regarding the platforms services. Many of the platform’s
marketing materials involve their instructors highlighting selected
winning trades that earned huge percentages, often over 100% per
trade and as high as 1600%. However, the FTC claims that such
trades were atypical, and neither the instructors nor their
consumers make market-beating returns on a week-after-week basis.
Many consumers complained of losing money when trying to follow the
trade recommendations. The complaint also alleges violations of the
Restore Online Shoppers’ Confidence Act (ROSCA) for charging
consumers for services through a negative option feature while
failing to provide simple mechanisms for consumers to stop
recurring charges from being placed on their credit card, debit
card, bank account, or other financial account.

Under the terms of a proposed settlement order, the operators,
among other requirements, (i) must pay $2.425 million to the FTC;
(ii) are prohibited from making any claims about potential earnings
without having written evidence that those claims are typical for
consumers; (iii) are prohibited from making claims misrepresenting
that purchasers can be successful in trading regardless of their
experience, the amount of capital they have to invest, or the
amount of time they spend trading; and (iv) are required to provide
consumers with an easy method to cancel their subscriptions and
require them to get express, informed consent from consumers before
signing them up for a recurring subscription plan.

Putting it Into Practice: This action was taken
as part of an initiative called “Operation Income
,” which encompasses more than 50 enforcement
actions against alleged scams targeting consumers with false
promises of income and financial independence. Companies offering
financial products and services online should be wary as the FTC
remains committed to its use of ROSCA to assess hefty monetary
penalties (we previously discussed the FTC’s application of
ROSCA in previous Consumer Finance and FinTech blog posts here and here).

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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