Robinhood Ordered to Pay $70M After 'Significant Harm Suffered by Millions of Customers'
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Robinhood Ordered to Pay $70M After 'Significant Harm Suffered by Millions of Customers'

The settlement means that Robinhood neither admits nor denies the charges.

Robinhood Ordered to Pay $70M After 'Significant Harm Suffered by Millions of Customers'

Зміст

Robinhood has been ordered to pay $70 million by the Financial Industry Regulatory Association — the largest penalty it has ever given.

The sum consists of a $57 million fine, and the trading company will also have to pay $12.6 million in restitution to “thousands of harmed customers.”

FINRA said Robinhood customers suffered “widespread and significant harm” — with the firm relaying “false or misleading information” to customers. It also claims that millions of people were affected by system outages that affected the company back in March 2020, the month of the crypto flash crash.

The regulator’s executive vice president, Jessica Hopper, said: 

“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. 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.”

What Happened?

According to FINRA, the false and misleading information relayed to customers concerned whether they could place trades on margin, how much cash was in their accounts, whether the customers faced margin calls, and the risk of loss that customers faced in certain options transactions.

The regulator noted how one customer who turned margin off took his own life in June 2020 — expressing confusion at how he could have used margin to purchase securities.

FINRA also concluded that Robinhood had failed to exercise due diligence before allowing customers to perform options trades. This meant thousands of customers who did not fit the company’s eligibility criteria, or had red flags indicating such traders were not appropriate for them, ended up being approved.

The settlement means that Robinhood neither admits nor denies the charges. A spokesperson for the company said:

“Robinhood has invested heavily in improving platform stability, enhancing our educational resources, and building out our customer support and legal and compliance teams. We are glad to put this matter behind us and look forward to continuing to focus on our customers and democratizing finance for all.”
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