FINRA Imposes Historic Fine on Robinhood


June 30, 2021, | AtoZ Markets- The U.S. Financial Industry Regulatory Authority (FINRA) has imposed a historic fine with a record of $70 million on trading firm Robinhood for damages caused to its customers.

FINRA announced today that it has fined Robinhood Financial LLC $57 million and ordered the firm to pay approximately $12.6 million in restitution, plus interest, to thousands of harmed customers.

The sanctions represent the largest financial penalty ever ordered by FINRA, and reflect the scope and seriousness of the violations committed by the company.

FINRA found in its investigation that, despite Robinhood’s self-described mission to “de-mystify finance for all,” during certain periods since September 2016, the firm has negligently communicated false and misleading information to its customers.

“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”, noted the watchdog.

What Did FiNRA Say in Its Press Release?

FINRA found that since Robinhood began offering options trading to customers in December 2017, the firm has failed to exercise due diligence before approving customers to place options trades.

The firm relied on algorithms—known at Robinhood as “option account approval bots”—to approve customers for options trading, with only limited oversight by firm principals.

From January 2018 to February 2021, Robinhood failed to reasonably supervise the technology that it relied upon to provide core broker-dealer services, such as accepting and executing customer orders.

Read here the entire FINRA statement

Between 2018 and late 2020, Robinhood experienced a series of outages and critical systems failures.

The most serious outage occurred on March 2 and 3, 2020, when Robinhood’s website and mobile applications shut down, preventing Robinhood’s customers from accessing their accounts during a time of historic market volatility

Additionally, between January 2018 and December 2020, Robinhood failed to report to FINRA tens of thousands of written customer complaints that it was required to report.

Meanwhile, Robinhood neither admitted nor denied the charges, but consented to the entry of FINRA’s findings. We are sure that this story will have new chapters, so follow them closely with the crypto news from Atoz Markets.

 

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