The US financial industry regulator is sanctioning Robinhood with nearly $70 million based on the findings of an investigation into a stock and cryptocurrency trading app.
In Wednesday’s announcement, the Financial Industry Regulatory Authority, or FINRA, He said Robinhood has been ordered to pay $57 million in fines to the regulator as well as nearly $12.6 million in compensation to some clients. FINRA alleged that the trading platform caused “extensive and significant harm” to thousands of users and exhibited “systematic supervisory failures” starting in September 2016.
“The fine imposed in this matter, the highest ever imposed by FINRA, reflects the scope and severity of Robinhood’s violations, including FINRA’s finding that Robinhood reported false and misleading information to millions of its customers,” said Jessica, FINRA’s Chief Enforcement Officer. Hopper.
The misinformation pointed out by FINRA includes Robinhood’s allegations of misrepresentation of margin trading operations, users’ monetary holdings in the app’s accounts, risk of loss on options transactions, the amount of purchasing power users have, and information regarding margin calls. According to the regulator, “Robinhood has neither admitted nor denied the charges, but has agreed to enter the FINRA findings.”
Regulators said the company was liable to pay $7 million in compensation to customers who reported seeing inaccurate negative cash balances in their accounts. The body pointed to Alexander Kearns, aged 20 Robinhood user who committed suicide In June 2020 after a false negative balance of more than $730,000 appeared in his account. In addition, FINRA has ordered the trading platform to pay users more than $5 million. Influenced by Robinhood’s outages Between 2018 and 2020, many users allegedly lost up to tens of thousands of dollars in trades that the platform was unable to execute during major market volatility.
The fines paid to FINRA appear to be based directly on Robinhood’s policies and the apparent failure to provide a clear picture of market data to clients. Between January 2018 and December 2020, the trading platform failed to report thousands of user complaints to FINRA after all of the above issues, the regulator said. In addition, Robinhood’s process of approving clients for options trading is based on algorithms rather than “company principles”. FINRA said this method led to approval by thousands of users who did not meet the company’s eligibility criteria or whose accounts should have been flagged in another way.
The results of the FINRA investigation come as Robinhood plans to move forward with an initial public offering, or IPO. However, the company currently Under scrutiny by the US Securities and Exchange CommissionAs a result, the company’s public offering was delayed. Robinhood initially planned to launch an initial public offering this month, but reported that it had delayed the offering to July.