Alert: Trading App Robinhood Fined $70M By Regulators
Robinhood, the popular stock trading app, will pay a record-setting $70mn fine levied by regulators against a stockbroker. The company has been fined that amount by the US Financial Industry Regulatory Authority (FINRA) for systemwide outages during crucial trading periods and misleading communication and trading practices.
- Robinhood will pay $57mn as an upfront penalty and make $13mn in restitution to some customers who lost money due to systemwide outages at some points. If you remember, Robinhood caught a lot of flak for serial outages at certain points of high trading activity on the markets.
- Also, Robinhood was accused by FINRA of providing false and misleading communication to customers regarding how they could trade, such as the risk of loss they faced when trading options, how much cash they had in their accounts, and if they faced margin calls.
- A case FINRA singled out was that of a Robinhood user who committed suicide last year after seeing a large negative net balance on his trading account, even though that was inaccurate.
- Last December, Robinhood was fined $65mn by the US Securities and Exchange Commission (SEC) for similar behavior to its FINRA case. In theory, these fines are quite large but in actuality not biting to a company that raised $3.4bn from investors just this February.