According to the regulatory authority, Robinhood was fined $57 million and ordered to pay restitution close to $12.6 million. These sanctions are the largest FINRA has ever doled out.
“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,” said Jessica Hopper, executive vice president and head of FINRA’s Department of Enforcement.
In addition to citing the trading platform for making misleading statements and failing to adequately address system outages, FINRA also indicated the company had inappropriately approved options trading for certain customers. “The fine imposed in this matter, the highest ever levied by FINRA, reflects the scope and seriousness of Robinhood’s violations,” said Hopper.
"#Robinhood has settled a wrongful death lawsuit over the suicide of a college student who killed himself thinking he lost $730,000 on the app."
Specifically, FINRA said it found Robinhood communicated false and misleading data to customers regarding whether or not they were able to make trades on margin, how much money was in their accounts, how much “buying power” or “negative buying power” they had and their risks with respect to certain options trades.
On the same day that FINRA announced its fine, Robinhood said it was making some changes to its business model.
“Here at Robinhood, we take our responsibilities to our customers very seriously… We’ve made investments in expanding customer support - and are now offering phone support for several areas, including options and equities trading, account security, and other use cases,” reads information from the company. “We’ve enhanced our options offering, education about options, and how information is displayed in the app.”
According to Robinhood, it now employs a customer support staff of close to 2,700 individuals, which is more than triple the amount of support staff employed in early March of 2020.
The company has also enhanced its in-app educational resources, it announced, as well as bolstered its supervisory structure, improved communications and data displays, improved options supervision and enhanced its legal, risk, compliance and anti-fraud functionality.
“We continue to grow and enhance our legal, compliance, and risk functions and programs, and have hired dozens of experienced professionals in the past year alone,” reads the company announcement. “Our customers are at the forefront of every decision we make and we’re committed to making continuous improvements so that investing can be accessible to all.”