The Financial Industry Regulatory Authority (FINRA) has hit trading platform Robinhood with $70 million in penalties for its “supervisory failures” in a variety of its services.
The fine is the highest penalty FINRA has levied against any firm. It’s ordered Robinhood to pay $57 million in fines and $12.6 million in restitution with interest. The self-regulatory body said the fine reflects “the scope and seriousness of the violations,” in its statement published Wednesday.
Robinhood has settled with FINRA over the claims but has neither admitted nor denied the charges but rather “consented to the entry of FINRA’s findings,” according to FINRA.
The alleged “supervisory failures” are moments in which FINRA contends Robinhood failed to be transparent with its customers, failed to sufficiently vet those who wished to place options trades and failed to “reasonably supervise” the platform’s tech to mitigate outages.
The case reaches further than Robinhood’s decisions during the early 2020 run-up of meme stocks, but it does point to alleged failures during that time. It refers to various outages from 2018 to 2021 as supervisory failures but mentioned the March 2-3 outage 6as the “most serious” of the outages.
FINRA contends that Robinhood failed to be transparent with customers since 2016, saying the firm “negligently communicated false and misleading information to its customers.”
“The false and misleading information concerned a variety of critical issues, including whether customers could place trades on margin, how much cash was in customers’ accounts, how much buying power or “negative buying power” customers had, the risk of loss customers faced in certain options transactions, and whether customers faced margin calls,” said FINRA in a statement.
But the body also contends Robinhood failed to be transparent with FINRA itself. It did not report “tens of thousands” of written customer complaints that the body says it was required to report. This was due to a firm-wide policy that exempted some categories from reporting despite their mandate to send them to FINRA, according to the statement.
Robinhood has reportedy been eyeing an initial public offering, going so far as to choose NASDAQ for its listing.