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FINRA Orders Robinhood to Pay Record $70 Million Fine

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FINRA Orders Robinhood to Pay Record $70 Million Fine

The FINRA has ordered Robinhood to pay $70 million as a penalty for harm caused to consumers for various reasons.

American private regulatory organization Financial Industry Regulatory Authority (FINRA) has ordered Robinhood to pay a record financial penalty for “significant harm” to customers. The agency has asked Robinhood to pay roughly $70 million to customers for false or misleading information related to system outages that occurred during March 2020.

Specifically, it notes that thousands of customers were approved to trade options even when it was “not appropriate to do so.” This alludes to Robinhood’s mission, which has been described as demystifying financial for all. The notice says that false and misleading information related to a variety of issues, including whether customers could trade on margin, the risks associated with options transactions, buying power, and where they could face margin calls.

Jessica Hopper, Executive Vice President and Head of FINRA’s Department of Enforcement, said that the action would send a message.

“This action sends a clear message—all FINRA member firms, regardless of their size or business model, must comply with the rules that govern the brokerage industry, rules which are designed to protect investors and the integrity of our markets. Compliance with these rules is not optional and cannot be sacrificed for the sake of innovation or a willingness to ‘break things’ and fix them later.”

The statement also refers to a tragic incident where one user took his life because his account inaccurately showed a negative cash balance. This was a major headline maker, and immediately drew swift criticism towards Robinhood. There is a long list of incidents that FINRA uses to justify its penalization of Robinhood. Robinhood has neither admitted nor denied the charges, but “but consented to the entry of FINRA’s findings.”

FINRA is a non-profit organization that regulates brokerage firms and is overseen by the United States Securities and Exchange Commission. The organization focuses on investor protection and market integrity, something which has been placed in the spotlight since the start of the year.

Robinhood faces struggles alongside growth

Robinhood has been on the receiving end of criticism on multiple levels since the GameStop incident earlier this year. Users have blamed the firm for failing to live up to its mission of democratizing finance for all, while regulators have also targeted it for the same reasons FINRA has.

Still, that has not stopped the firm from experiencing the strongest growth yet, backed by internet-fuelled movements like that of the GameStop share and the cryptocurrency market rally. Q1 2021 showed its strongest growth yet.

The company plans to launch an IPO this year, though one wonders how much of an effect incidents such as the FINRA fine will have. The company’s platform will likely continue to do well, as it is popular with younger investors for its streamlined interface and accessibility.

The post FINRA Orders Robinhood to Pay Record $70 Million Fine appeared first on BeInCrypto.

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