Robinhood Fined $70 Million for Misleading 'Millions'
Wall Street’s industry regulator fined Robinhood $70 million (roughly Rs. 520.72 crores) on Wednesday for “systemic” failures, including systems outages, providing “false or misleading” information, and weak options trading controls, saying those factors combined harmed millions of the app’s customers.
The Financial Industry Regulatory Authority (FINRA) fine is the latest hit to Robinhood’s reputation. The broker, which has been credited with democratizing trading, is under scrutiny by federal and state policymakers following this year’s meme-stock fiasco which raised questions over the California firm’s business model, risk management and customer treatment.
However, the sweeping agreement, which resolves alleged FINRA violations dating back to September 2016, likely paves the way for the firm to move forward quickly with a planned initial public offering that has been delayed due to meme-stock backlash and other regulatory queries.
Robinhood’s resolution with FINRA includes $12.6 million (roughly Rs. 93.73 crores) in restitution to thousands of customers and a $57 million (roughly Rs. 424 crores) penalty, the largest in the regulator’s history, and covers a range of issues dating back to September 2016, FINRA said in a statement.
“The fine… 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, Head of Enforcement at FINRA.
According to FINRA, those communications related to whether customers could place trades on margin, how much cash was in their accounts, how much buying power they had, the risk of loss customers faced in certain transactions, and whether customers faced margin calls.
