A Wall Street regulator has ordered retail trading platform Robinhood to pay more than $70m in penalties for causing what it described as “widespread and significant” harm to its customers.
Finra announced on Wednesday that it was fining Robinhood $57m, and ordering it to pay $12.6m plus interest in restitution to its customers, the largest penalty ever ordered by the financial regulator.
The fine is the same as the total amount levied by the regulator for the whole of 2020.
Robinhood has become synonymous with the rise of retail daytrading since the start of the pandemic. Finra alleges that the broker gave misleading information to its customers, and that widespread technical failures on the platform during periods of high volatility damaged customers.
It also said that Robinhood allowed thousands of customers to trade risky derivative products when “it was not appropriate” for them.
“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,” said Jessica Hopper, head of Finra’s enforcement department. “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.”
Robinhood responded, saying: “Robinhood has invested heavily in improving platform stability, enhancing educational resources, and building out our customer support and legal and compliance teams. We are glad to put this matter behind us and look forward to continuing to focus on our customers and democratising finance for all.”
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