Robinhood Markets, the popular online trading platform, has agreed to pay $29.75 million to settle investigations by the Financial Industry Regulatory Authority (FINRA). The regulator looked into Robinhood’s supervision and compliance practices. FINRA accused the company of failing to respond to “red flags” of potential misconduct.
Robinhood will pay $26 million as a civil fine and $3.75 million in restitution to customers. FINRA claimed that Robinhood violated several rules, including failing to implement anti-money laundering programs. This failure caused the platform to miss suspicious or unauthorized trading activities. It also failed to prevent hacking incidents on customer accounts.
Additionally, FINRA said Robinhood didn’t properly supervise social media influencers who promoted the platform. The company also failed to act on warnings about delays in processing trades. These delays led to major issues in January 2021. During that period, Robinhood restricted trading in “meme” stocks like GameStop and AMC Entertainment Holdings. This caused frustration among investors. Robinhood’s practice of “collaring” market orders also led to trades being canceled and reentered at less favorable prices.
The restitution will go to customers who were impacted and not informed about this practice. Robinhood did not admit or deny the allegations. However, the company stated it has taken steps to fix these issues, which date back to 2014. It set aside funds to cover the settlement in 2023 and 2024.
In January, Robinhood agreed to pay $45 million in civil fines to settle U.S. Securities and Exchange Commission (SEC) charges. These charges were related to record-keeping, trade reporting, and other violations.
Founded in 2013, Robinhood became well-known for its commission-free trading and the ability to trade cryptocurrencies. Despite these regulatory challenges, the company remains a key player in the online trading industry. These ongoing settlements highlight the importance of strong compliance practices to maintain consumer trust and regulatory approval.
Robinhood’s compliance practices have faced scrutiny, but the company’s settlement demonstrates its commitment to resolving past issues. By addressing these problems, Robinhood aims to maintain its competitive position in the trading market. Strong compliance practices will be crucial for the company moving forward.
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