Robinhood fined $ 70 million by FINRA
The Financial Sector Regulatory Authority (FINRA) imposed a fine Robinhood $ 57 million and ordered the company to pay approximately $ 12.6 million in restitution, plus interest, to thousands of aggrieved customers.
The sanctions represent the largest financial sanction ever ordered by FINRA and reflect the extent and seriousness of the violations, the regulator said in a statement.
“In determining the appropriate penalties, FINRA took into account the widespread and significant harm suffered by customers, including millions of customers who received false or misleading information from the company, millions of affected customers by the failures of the company’s systems in March 2020, and thousands of customers the company was allowed to trade options even when it was not appropriate for customers to do so, ”FINRA wrote in the statement. .
In response to the fines, Jacqueline Ortiz Ramsay, Robinhood’s public policy communications manager, said in an emailed statement to GOBankingRates that “Robinhood has invested heavily in improving the stability of the platform, l ” improving our educational resources and strengthening our customer support and legal and compliance teams. We are happy to put this business behind us and look forward to continuing to focus on our clients and democratizing finance for all. “
Jessica Hopper, executive vice president and head of the enforcement department at FINRA, offered her perspective, saying the action sends a clear message: “All FINRA member firms, regardless of size or size. their business model, must comply with the rules that govern the brokerage industry, rules designed to protect investors and the integrity of our markets. Respecting these rules is not optional and cannot be sacrificed in the name of innovation or a desire to “break things” and fix them later.
“The fine imposed in this case, the highest ever imposed by FINRA, reflects the extent and seriousness of Robinhood’s violations, including FINRA’s finding that Robinhood communicated false and misleading information to millions of its customers, ”she said.
FINRA further says it found in its investigation that, “despite Robinhood’s self-proclaimed mission to ‘demystify finance for all’, for some periods since September 2016, the company has negligently disclosed false and misleading information to The false and misleading information related to a variety of critical issues, including the ability of customers to trade on margin, the amount of cash in customer accounts, purchasing power or “power”. negative buying ‘from clients, the risk of loss to which clients certain option trades and whether clients have faced margin calls.
FINRA adds that, for example, a Robinhood client who had ‘turned off’ the margin tragically committed suicide in June 2020. In a note found after his death, he expressed confusion over how he could have used it. margin to buy securities because he believed he had not “activated” margin on his account, according to the document.
“As stated in the settlement, Robinhood also displayed inaccurate negative cash balances to this person (and certain other clients). In addition, due to Robinhood’s inaccuracies, thousands of other clients suffered total losses of over $ 7 million. As part of this settlement, Robinhood is required to pay over $ 7 million in restitution to these customers, ”he continued.
Second, FINRA found in its investigation that since Robinhood started offering options trades to its clients in December 2017, the company has failed to do due diligence before allowing clients to trade. options.
Finally, it was found that from January 2018 to February 2021 Robinhood did not reasonably oversee the technology it relied on to provide basic brokerage services such as order acceptance and execution. client.
“Between 2018 and the end of 2020, Robinhood experienced a series of failures and failures of critical systems. The most serious outage occurred on March 2-3, 2020, when Robinhood’s website and mobile apps were shut down, preventing Robinhood clients from accessing their accounts during a period of historic market volatility. Although the company had a business continuity plan at the time of the March 2-3 outage, it did not implement it because the plan was unreasonably limited to events that impacted the location. physical business. Robinhood’s inability to accept or fulfill customer orders during these outages has cost individual customers tens of thousands of dollars and FINRA is demanding that the company pay more than $ 5 million in restitution to affected customers ” , underlines the press release.
“In settling this case, Robinhood has neither admitted nor denied the charges, but consented to the entry of FINRA’s findings,” he said.
Robinhood has been in the news consistently over the past few months, following a slew of chases and platform crashes. He also submitted a registration for an IPO with the SEC in March.
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