Stock Trading App Robinhood has been fined $70 million by the Financial Industry Regulatory Authority or FINRA. The company has also been ordered by FINRA to pay $12.6 Million in restitution, plus interest, to its affected customers.
According to Businesswire, the multimillion-dollar fine is due to Robinhood’s “systematic supervisory failures and significant harm suffered by millions of customers.”
FINRA reportedly considered the significant harm suffered by Robinhood’s customers, including those who received false and misleading information and those affected by the system outages last year, in determining the sanctions that will be imposed on the firm.
Robinhood will likewise have to pay back its customers more than $7 million that they lost due to the firm’s spreading of false and misleading information among its clients, according to Forbes. Robinhood’s false and misleading information included in a false negative cash balance that resulted to the suicide of a college student.
Stock Trading App Robinhood: What Went Wrong
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SAN ANSELMO, CALIFORNIA – DECEMBER 17: In this photo illustration, the Robinhood logo is displayed on an iPhone on December 17, 2020 in San Anselmo, California.
Stock trading app Robinhood and its parent company have been in hot water not just with FINRA, but with other regulatory bodies as of late due to its questionable business practices.
In December 2020, the Securities and Exchange Commission charged Robinhood for misleading customers, posting a false claim on its official website, and depriving investors up to $34.1 million due to the firm’s inferior trading prices. Robinhood neither confirmed nor denied the allegations, but agreed to pay a settlement of $65 million.
In April, the Massachusetts Securities Division filed an administrative complaint against the firm for influencing its customers to make bad investments. The business practice of Robinhood “violates a recently passed state fiduciary rule raising the standards of conduct for broker-dealers,” according to the Massachusetts Securities Division.
The reviews being conducted by regulatory boards has caused the firm to postpone their initial public offerings or IPO.
Also Read: Robinhood’s IPO to be Postponed in July Following SEC Review; Regulators to Scrutinize Cryptocurrency Business
Criticisms Mount for Robinhood
Criticism aimed at Robinhood has been mounting from both customers and personalities alike. In January, Tesla CEO Elon Musk called out Robinhood for what he referred to as “unfair” policies that he described as “BS.” A month later, Elon Musk went on to shade Robinhood’s CEO on Clubhouse.
Related Article: Elon Musk on Clubhouse Grills Robinhood CEO Over ‘Shady’ Dealings in App’s Stock Trading!
Also in February, the Federal Trade Commission (FTC) revealed that it has received more than 100 Robinhood-related complaints in the time period of January 24 to February 2.
Robinhood: What It Is
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Robinhood is a stock trading app owned by California-based financial services company Robinhood Markets, Inc. The company was founded in 2013. The app was officially launched in 2015.
Robinhood offers commission-free trading on its platform. Its products also include cash management and Robinhood Crypto, which lets customers “tap into the bitcoin market,” according to the company website.
Among the cryptocurrencies customers can buy, HODL, or sell are Bitcoin, Ethereum, and Dogecoin.
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Written by Isabella James
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