FINRA Hits Robinhood with $70 Million Settlement over Supervisory Failures

Posted on July 14th, 2021 at 1:18 PM
FINRA Hits Robinhood with $70 Million Settlement over Supervisory Failures

From the Desk of Jim Eccleston at Eccleston Law:

The Financial Industry Regulatory Authority (FINRA) has finalized a record $70 million settlement with Robinhood Financial over widespread supervisory failures and outages. The settlement includes $12 million in restitution and a $57 million fine, which represents the “widespread and significant harm suffered by customers”, according to FINRA. FINRA presented numerous allegations against Robinhood, including negligently misleading investors on critical issues related to their account balances and margin trading, enabling thousands of customers to trade options who were not eligible, and failing to report several thousand customer complaints. 

While Robinhood settled the claim without admitting or denying FINRA’s findings, the broker-dealer is required to hire a compliance consultant as part of the settlement. Robinhood, after being founded in 2014, reportedly earned a valuation of $40 billion ahead of the firm’s effort to go public. According to FINRA, Robinhood allegedly failed to supervise its technology system or ensure that it had a business continuity plan in place to sustain trading during the pandemic. Due to the supervisory failure, customers were not able to complete trades on March 2 and March 3 when the firm’s website and mobile applications shut down. Between January 2018 and December 2020, FINRA also alleges that Robinhood failed to report thousands of written customer complaints. According to FINRA, the complaints mostly revolved around misleading information provided by Robinhood and the outages. Furthermore, Robinhood allegedly miscategorized numerous reportable complaints as exempt from reporting.  

Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, regulatory and disciplinary matters.

Tags: eccleston, finra, robinhood, settlement

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