The post Robinhood To Pay $29.75M to Settle FINRA Probe Over Compliance Issues appeared first on Coinpedia Fintech News
Robinhood has agreed to pay $29.75 million to settle investigations by FINRA regarding its supervision and compliance practices. The settlement includes a $26 million fine and $3.75 million in restitution to customers.
Robinhood Failed to Manage Trading System During Activity Surge
FINRA found that Robinhood didn’t properly manage or oversee its system for processing trades, even though there were clear signs of delays in processing due to a huge increase in trading activity.
This happened between March 2020 and January 2021, which was the same time Robinhood restricted trading in popular meme stocks like GameStop and AMC Entertainment Holdings. In other words, Robinhood didn’t do enough to address the issues that were causing delays in its system, even though they could have seen it coming.
Robinhood failed to “respond to red flags of potential misconduct,” FINRA noted, leading to Anti-Money Laundering and supervisory and disclosure violations.
Robinhood Missed Suspicious Activities and Failed to Verify Accounts
FINRA found that Robinhood failed to detect, investigate suspicious activities, like manipulative trades, unusual money transfers, or cases where hackers took over customer accounts. Besides, Robinhood also opened thousands of accounts without properly checking customers’ identities. Because of these issues, Robinhood failed to set up strong Anti-Money Laundering programs, according to FINRA.
Robinhood also failed to properly monitor and keep records of social media posts, including those from paid influencers. Some of these posts were misleading or made unfair promises to investors.
The $3.75 million in restitution was because Robinhood gave customers incorrect or incomplete information when it changed market orders to limit orders, which impacted their trades.
Robinhood Agrees To FINRA’s Findings
Robinhood Financial and Robinhood Securities agreed to FINRA’s findings without admitting or denying the charges. This comes two months after the company settled for $45 million with the US securities regulator in January, following an investigation into violations of over 10 securities laws. Robinhood Financial and Robinhood Securities admitted to failing to maintain and preserve customer communications from 2020 to 2021.
Recently, in Q4 2024, Robinhood hit a record $916 million in net income and over $1 billion in revenue. Crypto revenue reached $358 million, a 200% increase, while crypto trading volumes jumped 450% to $71 billion.
