The Financial Industry Regulatory Authority ordered four member firms to cough up $2.6 million in fines and restitution after it said they  misrepresented securities lending deals to their customers. The total includes $1 million the firms must pay back to customers because the clients were not made aware of the lending, which triggered tax bills, Finra said.

The four firms sanctioned by Finra today are online securities platforms and robo-advisors M1 Finance, Open to the Public Investing, SoFi Securities and SogoTrade. Finra said the firms violated supervisory and advertising rules in connection with what is known as fully paid securities lending.

All four firms settled the charges without admitting or denying Finra’s findings, according to the settlements.

Fully paid securities lending is a practice through which a clearing firm borrows a customer’s fully paid or excess margin securities and lends them to a third party in exchange for a daily borrowing fee.

“It is imperative that Finra member firms offering fully paid securities lending programs exercise particular care in supervising them,” said Bill St. Louis, Finra’s head of enforcement, in a statement. “Finra will continue to fulfill its mission of investor protection by enforcing the applicable rules and working to ensure that harmed customers receive restitution.”

When shares are borrowed, customers typically receive payments in lieu of dividends, and these payments are typically subject to a higher tax rate. But the investors in this case were never alerted that their securities were being lent, nor were they compensated, Finra said in the settlement.

Finra rules require that if a customer chooses to enroll in a fully paid lending program, the clearing firm determines which securities to borrow, when, and on what terms. The daily borrowing fee that the clearing firm collects is generally shared among the clearing firm, the introducing broker-dealer, and the customer who owns the borrowed security.

Although each firm agreed in contracts with their clearing firm to determine which of its customers were appropriate for participation in fully paid securities lending, each of the firms “enrolled all new customers in fully paid securities lending at account opening. The firms also provided customers with disclosure documents that contained misrepresentations that customers would receive compensation for the lending of their securities, including in the form of a ‘loan fee.’ In fact, the customers did not receive any compensation,” Finra said.

The firms also failed to establish any criteria for customer participation or take any steps to make appropriateness determinations before enrolling their customers in the securities lending, the regulator said.

“The over $1 million in restitution compensates customers whose securities were lent out over a dividend date and who therefore potentially suffered adverse tax consequences as a result of their participation in the fully paid securities lending programs,” Finra said.

None of the firms immediately responded to a request for comment at press time.