The Robinhood trading platform has been hit with a $70 Million Dollar fine from the U S Financial Industry Regulatory Authority (FINRA).
According to the statement released, Robinhood was authorized to pay the penalty for misleading customers, systemwide outages, and trading practices. The record setting $70 Million dollar fine is the largest ever levied against any firm. FINRA released a statement saying: “The fine imposed in this matter, the highest ever levied by FINRA, reflects the scope and seriousness of Robinhood’s violations, including FINRA’s finding that Robinhood communicated false and misleading information to millions of its customers.” said Jessica Hopper, Head of FINRA’s Department of Enforcement. Hopper statement articulated the sincerity of the matter.
The false information includes allegations that Robinhood misrepresented margin trades, customer’s cash holdings in the app accounts, the risk of loss in options transactions, the extent of the buying power users had, and information regarding margin calls.
FINRA also revealed that millions of customers were deliberately affected by Robinhood’s systems outages in March 2020.
The division of the $70 million dollar fine will be split in a couple of different ways, First, Robinhood has been ordered to pay $57 million in fines, then $13 million would be paid in restitution to the customers. Including those customers who reported seeing inaccurate negative cash balances in their accounts and those affected by Robinhood’s outages.
Robinhood has neither admitted nor denied the FINRA’s charges and are currently expected to resolve the fines financial obligations. In response to the charges, Robinhood invested heavily in improving its platform stability while building its customer support, legal, and compliance teams.
This was not the first time Robinhood was fined by FINRA,in December 2019, FINRA fined Robinhood a staggering $1.25 million for violating trading rules.
