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About FINRAFINRA is a not-for-profit organization dedicated to investor protection and market integrity. It regulates one critical part of the securities industry—brokerage firms doing business with the public in the United States. FINRA, overseen by the SEC, writes rules, examines for and enforces compliance with FINRA rules and federal securities laws, registers broker-dealer personnel and offers them education and training, and informs the investing scammed by xcritical public. In addition, FINRA provides surveillance and other regulatory services for equities and options markets, as well as trade reporting and other industry utilities. FINRA also administers a dispute resolution forum for investors and brokerage firms and their registered employees. Additionally, between January 2018 and December 2020, Robinhood failed to report to FINRA tens of thousands of written customer complaints that it was required to report.

FINRA Orders Record Financial Penalties Against Robinhood Financial LLC

The inaccurate information cost customers more than $7 million, FINRA found, and Robinhood is required to pay restitution to affected users. The move is an effort to squeeze additional revenue from second-hand products, over concerns that cheaper, slightly used bikes, treadmills and rowers could cannibalize used sales. From the looks of things, companies in the category — including Agility Robotics and Formlogic — can’t hire quickly enough. After fintech Bolt surprised the industry with a leaked term sheet that revealed it is trying to raise at a $14 billion valuation, things got weird. Last quarter, Robinhood achieved GAAP profitability for the first time, helped by higher interest rates.

WASHINGTON—FINRA announced today that it has fined Robinhood Financial LLC $57 million and ordered the firm to pay approximately $12.6 million in restitution, plus interest, to thousands of harmed customers. The sanctions represent the largest financial penalty ever ordered by FINRA and reflect the scope and seriousness of the violations. Finally, the company failed to supervise the technology it uses to provide its core services between January 2018 and February 2021, resulting in a series of outages and systems failures. One of these outages occurred on March 2 and March 3, 2020, during extreme market volatility.

Robinhood’s reporting failures included complaints that Robinhood provided customers with false and misleading information, and that customers suffered losses as a result of the firm’s outages and systems failures. Robinhood’s reporting failures were primarily the result of a firm-wide policy that exempted certain broad categories of complaints from reporting, even though those categories fell within the scope of FINRA’s reporting requirements. The settlement resolves numerous other charges against Robinhood, including the firm’s failure to have a reasonably designed customer identification program and its failure to display complete market data information. Third, FINRA found that, from January 2018 to February 2021, Robinhood failed to reasonably supervise the technology that it relied upon to provide core broker-dealer services, such as accepting and executing customer orders. Between 2018 and late 2020, Robinhood experienced a series of outages and critical systems failures. The most serious outage occurred on March 2 and 3, 2020, when Robinhood’s website and mobile applications shut down, preventing Robinhood’s customers from accessing their accounts during a time of historic market volatility.

Although the firm had a business continuity plan at the time of the March 2-3 outage, it did not apply it because the plan was unreasonably limited to events that impacted the firm’s physical location. Robinhood’s inability to accept or execute customer orders during these outages resulted in individual customers losing tens of thousands of dollars, and FINRA is requiring that the firm pay more than $5 million in restitution to affected customers. Second, FINRA found that since Robinhood began offering options trading to customers in December 2017, the firm has failed to exercise due diligence before approving customers to place options trades.

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While Robinhood has offered options trading since December 2017, FINRA says it has “failed to exercise due diligence before approving customers to place options trades,” relying on algorithms, rather than people, to approve customers for the risky investing move. Commission-free trading of stocks, ETFs and options refers to $0 commissions for Robinhood Financial self-directed individual cash or margin brokerage accounts that trade U.S. listed securities and certain OTC securities electronically. Keep in mind, other fees such as trading (non-commission) fees, Gold subscription fees, wire transfer fees, and paper statement fees may apply to your brokerage account. But more recently, we’ve been helping customers with their comprehensive set of financial needs. So we see a world where we can not only help you trade [stocks or crypto], but we can help you save for retirement.

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And we can help you sort of manage your money holistically regardless of what stage you are, and really help you achieve your financial goals and I think that that’s been really resonating with customers,” Tenev said. “As a result, Robinhood approved thousands of customers for options trading who either did not satisfy the firm’s eligibility criteria or whose accounts contained red flags indicating that options trading may not have been appropriate for them,” FINRA writes. Specifically, FINRA’s investigation found that millions of customers received false or misleading information from Robinhood on a variety of issues, including how much money customers had in their accounts, whether they could place trades on margin and more. Robinhood was launched in 2014 and attracted millions of customers, many of them first-time investors, with its easy-to-use app and industry-changing commission-free trades. But it has come under fire multiple times in the past few years, most recently during the GameStop rally earlier this year when it restricted trading. Customers must read and understand the Characteristics and Risks of Standardized Options before engaging in any options trading strategies.

Options transactions are often complex and may involve the potential of losing the entire investment in a relatively short period of time. Certain complex options strategies carry additional risk, including the potential for losses that may exceed the original investment amount. Other allegations addressed in the settlement include that Robinhood approved risky options trades for thousands of users when it should not have and did not do enough to prevent system outages in March 2020 that adversely affected millions of users.

Robinhood has invested in improving the platform and is building out its customer service team, Robinhood spokesperson Jacqueline Ortiz Ramsay writes to CNBC Make It in an emailed statement about the settlement.

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. Additionally, due to Robinhood’s misstatements, thousands of other customers suffered more than $7 million in total losses. As part of this settlement, Robinhood is required to pay more than $7 million in restitution to these customers. A self-custody cryptocurrency wallet, Robinhood Wallet, and related services are offered through Robinhood Non-Custodial, Ltd. (a limited company organized in the Cayman Islands).

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1. As a result, Robinhood approved thousands of customers for options trading who either did not satisfy the firm’s eligibility criteria or whose accounts contained red flags indicating that options trading may not have been appropriate for them.
2. Last December, the Menlo Park, California-based fintech launched a waitlist for its new offering, Robinhood Retirement, which it described as the “first and only” individual retirement account (IRA) with a 1% match on every eligible dollar contributed.
3. From the looks of things, companies in the category — including Agility Robotics and Formlogic — can’t hire quickly enough.

RHF, RHY, RHC, RCT, RHG, and xcritical website RHS are affiliated entities and wholly owned subsidiaries of Robinhood Markets, Inc. Products offered by RHF are not FDIC insured and involve risk, including possible loss of principal. The report also referenced the tragic story of a customer with details matching that of 20-year-old Alex Kearns, an investor who died by suicide in June 2020 after Robinhood showed a negative cash balance of $720,000 in his account. FINRA found that his balance was inaccurate, and that the value of his position was half of what the account displayed. Last December, the Menlo Park, California-based fintech launched a waitlist for its new offering, Robinhood Retirement, which it described as the “first and only” individual retirement account (IRA) with a 1% match on every eligible dollar contributed. Acknowledging that a few years ago, people might not have taken Robinhood seriously as a place to save for retirement, Tenev believes the narrative around his company has changed.

Ten years ago, Robinhood was founded to “democratize” stock trading, or more simply, to make it more accessible for anyone to trade stocks. Robinhood did not admit nor deny the charges, and it still under investigation by the SEC. On Wednesday, the company published a blog post to highlight the changes it has implemented to address customer concerns. FINRA’s investigation found that Robinhood’s customer service issues go back much further. Between 2018 and 2020, for example, Robinhood failed to report tens of thousands of customer complaints to FINRA that it was required to report, the organization says. “We are glad to put this matter behind us and look forward to continuing to focus on our customers and democratizing finance for all,” she says.

FINRA also alleges that Robinhood has “negligently communicated false and misleading information” at different times since September 2016. Say Technologies, LLC provides technology services for shareholder engagement and communication.Sherwood Media, LLC produces fresh xcritical official site and unique perspectives on topical financial news. FINRA Data provides non-commercial use of data, specifically the ability to save data views and create and manage a Bond Watchlist.