Robinhood will pay a record $70 million fine, the largest ever slapped down by the Financial Industry Regulatory Authority (FINRA).

The regulator found the popular trading platform misled millions of customers, allowed unqualified accounts to trade options and mishandled a widespread outage in March of 2020. 

ROBINHOOD IPO DETAILS ON TAP

The penalty sends a "clear message" about breaking the brokerage industry's rules. 

"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, executive vice president and head of FINRA’s Department of Enforcement in the disclosure. 

ROBINHOOD CHANGES PROTOCOLS AFTER CUSTOMER SUICIDE

Part of the enforcement action stemmed by the suicide of Alex Kearns after the 20-year student at the University of Nebraska-Lincoln, mistakenly thought he owed more than $700,000 over a risky options bet.

"For instance, one Robinhood customer who had turned margin "off," tragically took his own life in June 2020. In a note found after his death, he expressed confusion as to how he could have used margin to purchase securities because, he believed, he had not "turned on" margin in his account. As noted in the settlement, Robinhood also displayed to this individual (and certain other customers) inaccurate negative cash balances" FINRA detailed. 

READ MORE ON FOX BUSINESS BY CLICKING HERE  

Robinhood, which is set to go public during the second half of 2021, neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.

SEC MULLS GAMESTOP, AMC ‘GAMIFICATION’ CRACKDOWN WITH REGULATORY LAYER

Robinhood has seen its popularity grow among retail traders fueled first by the pandemic lockdown. Then in early January of this year, that popularity morphed into a public relations crisis after heavy trading in so-called "meme" stocks, such as GameStop and AMC, forced the platform to restrict trading amid a liquidity crunch. The actions spawned several Congressional hearings to assess the chaos and whether or not the firm colluded with select hedge funds, a move CEO Vladimir Tenev denied.

NYSE HALTS AMC STOCK, ROBINHOOD TAKES THE HEAT

The firm has also stepped up its cryptocurrency offerings and reported six million new cryptocurrency traders on its platform in the first two months of 2021.

Source Link:
https://www.foxbusiness.com/markets/robinhood-finra-record-fine-70-million-retail-ipo

[-0.482423,"negative"]

Comments

comments

Advertisement