Robinhood Fined $10.2 Million for Outages and Compliance Lapses
Robinhood, the commission-free trading app that has attracted millions of users, has agreed to pay $10.2 million in penalties to settle charges that it harmed “main street investors” by failing to provide adequate customer care and compliance oversight. The settlement stems from an investigation by seven state securities regulators, who probed Robinhood’s platform outages in March 2020 and identified deficiencies in the company’s review and approval process for options and margin accounts, as well as its customer identification program and technology supervision.
Regulators: Robinhood Failed Customers and Regulations
According to the North American Securities Administrators Association, which led the investigation, Robinhood repeatedly failed to serve its clients and disseminated inaccurate information to them, while neglecting to report all customer complaints to the Financial Industry Regulatory Authority and state regulators. The regulators also criticized Robinhood’s customer service and escalation protocols, which left some users unable to process trades during market volatility. As a result, the regulators said, Robinhood violated state securities laws and rules that require brokers to act in their customers’ best interests and to maintain adequate compliance and supervisory systems.
Robinhood Settles Without Admitting Guilt
Although Robinhood did not admit or deny the allegations, the California Department of Financial Protection and Innovation, one of the participating regulators, said the company “fully cooperated” with the investigation and agreed to pay the fine, which will be distributed among the participating states. The regulators said they found no evidence of willful or fraudulent conduct by Robinhood, but emphasized that the settlement sends a message to the industry that platforms like Robinhood must comply with common-sense protections for investors and consumers as required by law.
Robinhood Faces Ongoing Scrutiny
The settlement marks another episode in the ongoing saga of Robinhood, which has disrupted the brokerage industry with its app-based model but also drawn criticism for its business practices and impact on retail investors. The company has faced regulatory probes, lawsuits, and public scrutiny over issues ranging from payment for order flow to gamification of trading. As Robinhood prepares to go public later this year, its ability to address these concerns and maintain its growth trajectory will be closely watched by investors and regulators alike.
Source: TheBlock
