The Financial Regulatory Authority (FINRA) has just fined the trading app Robinhood $70 million, which is the largest penalty ever imposed by the organization.
According to a statement from FINRA, Robinhood has caused harm by “systemic supervisory failures” and has provided “false or misleading information” to its investors.
Jessica Hopper, head of enforcement at FINRA, added, “The fine imposed in this matter, the highest ever levied by FINRA, reflects the scope and seriousness of Robinhood’s violations.”
The fines were related to the practices of the company over the last few years. However, the system outages in March 2020 are the primary focus of the current investigations.
Robinhood must now pay a $57 million fine to the regulator. Additionally, under the terms of the settlement, it must pay $12.6 million (plus interest) in compensation to the affected customers.
FINRA says that Robinhood has violated the regulations on options and margins trading. It also had system outages that cost customers money and failed to report complaints.
In its own investigation, FINRA found that the company has “negligently communicated false and misleading information” since September 2016.
Another allegation was that Robinhood’s communication failures led to customers not being properly informed on their balance, the risks they faced, and on other issues.
The regulator added that, collectively, customers of Robinhood have lost approximately $7 million due to these failings.
“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.”
Robinhood said that it has now made changes to its app to improve customer support and information and ensure the platform is suitable for use.
“We are glad to put this matter behind us and look forward to continuing to focus on our customers and democratizing finance for all,” a Robinhood spokesperson said in the statement.
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