Financial regulator hits Robinhood for $70 million for widespread and significant harm to customers By Michael Kaplan Former Robinhood workers speak out
The stock-trading app Robinhood was ordered to pay nearly $70 million Tuesday by financial regulators for misleading its customers, causing them to lose millions of dollars.
A major player in the recent stock market frenzy, Robinhood says its mission is to stand up for the little guy and democratize finance. But in a 123-page complaint, the Financial Industry Regulatory Authority said Robinhood inflicted widespread and significant harm to millions of customers by providing them with false information about their investments. FINRA, which has federal authority to regulate financial firms, said the company also failed to reasonably maintain its technology and neglected to do proper due diligence before approving customers for complex trades called options.
“FINRA considered the widespread and significant harm suffered by customers, including millions of customers who received false or misleading information from the firm, millions of customers affected by the firm’s systems outages in March 2020, and thousands of customers the firm approved to trade options even when it was not appropriate for the customers to do so,” FINRA said in a statement.
In the beginning of the pandemic, Robinhood suffered multiple days of outages in March 2020 that left clients unable to trade stocks, options or cryptocurrencies when financial markets suffered a swift decline.
The settlement, however, is not related to the meme-stock frenzy from earlier this year when Robinhood temporarily restricted customers from buying shares of several companies, including high-flying stocks like GameStop.
Wed, 30 Jun 2021 21:59 UTC Robinhood will pay a record $70 million fine, the largest ever slapped down by the Financial Industry Regulatory Authority (FINRA).
The regulator found the popular trading platform misled millions of customers, allowed unqualified accounts to trade options and mishandled a widespread outage in March of 2020.
The penalty sends a clear message about breaking the brokerage industry s rules. The fine imposed in this matter, the highest ever levied by FINRA, reflects the scope and seriousness of Robinhood s violations,
including FINRA s finding that Robinhood communicated false and misleading information to millions of its customers, said Jessica Hopper, executive vice president and head of FINRA s Department of Enforcement in the disclosure.
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Robinhood, the app that looks like the lovechild of a stock-trading platform and a video game, was hit with a record $70m bill by a US watchdog for causing investors to lose millions in total from misleading financial information and system outages.
The Financial Industry Regulatory Authority (FINRA) ordered the software biz to cough up $57m in fines plus pay back $12.6m to customers to cover their losses with interest.
“The fine imposed in this matter, the highest ever levied by FINRA, reflects the scope and seriousness of Robinhood’s violations, including FINRA’s finding that Robinhood communicated false and misleading information to millions of its customers,” Jessica Hopper, the head of FINRA’s Department of Enforcement, said in a statement.