Mike Peterson
A financial industry regulator has ordered Robinhood to pay $70 million for "systemic supervisory failures" and causing "significant harm" to consumers.
Robinhood will need to pay $12.6 million in restitution to thousands of its consumers, while the remaining $57 million will be a fine. That represents the largest fine ever levied by the Financial Industry Regulatory Authority (FINRA), a private corporation that acts as a regulatory organization for member firms and markets.
FINRA cites the "millions of customers" who received false or misleading information from Robinhood, as well as outages that affected millions of customers in March 2020. Additionally, FINRA cites inappropriate customer approvals and the exposure of some customers to excessively risky trading tools.
According to the regulatory body, the resolution deals with issues stretching back to September 2016. In one instance, a Robinhood customer took his own life after being confused by the app's user interface and seeing a negative cash balance on his account.
"This action sends a clear message— all FINRA member firms, regardless of their size or business model, must comply with the rules that govern the brokerage industry, rules which are designed to protect investors and the integrity of our markets," head of FINRA's enforcement department Jessica Hopper said. "Compliance with these rules is not optional and cannot be sacrificed for the sake of innovation or a willingness to break things' and fix them later."
This isn't the first time Robinhood has had to pay a fine. In December, the company agreed to pay $65 million to the Securities and Exchange Commission to settle charges that it lied to customers about its revenue sources.
Robinhood also courted controversy earlier in 2021 when it began to freeze trades of stocks that were being backed by Reddit users.
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5 Comments
What about all the BS short sellers put online? Let's try and be consistent. Why are short sellers even a thing?
I can’t help feeling this is about getting a company that is outside the official fraternity.