Robinhood Hit With Record $57M FINRA Fine + $12M Restitution


Robinhood Financial LLC was hit with a record $57 million fine and also ordered to pay $12.6 million in restitution plus interest, according to a Wednesday (June 30) press release from the Financial Industry Regulatory Authority (FINRA).

The penalty is the biggest ordered by FINRA and is an example of the scope and range of the financial harm people experienced allegedly due to misleading information extended by the Robinhood platform, according to the release. The loss by customers is also due to March 2020 outages and associated trade options.

Jessica Hopper, executive vice president and head of FINRA’s Department of Enforcement, called the fines a “clear message” that member firms of all sizes are expected to adhere to the industry mandates, which were put in place for integrity and safety. She added that adherence “is not optional” — not even for innovation.

“The fine imposed in this matter, the highest ever levied by FINRA, reflects the scope and seriousness of Robinhood’s violations, including FINRA’s finding that Robinhood communicated false and misleading information to millions of its customers,” Hopper said.

FINRA, a nonprofit regulatory agency overseen by the Securities and Exchange Commission (SEC), found in its investigation that since September 2016, Robinhood extended to its users “false and misleading information” that included numerous issues considered to be “critical” and regardless of a customer’s “buying power” and other issues, according to the release.

Information from CBS MoneyWatch found that Robinhood users tapping margins were most likely to default. Margin investing more than doubled in the first six months of last year, usually with dire financial consequences.  

This latest fine dates to February, when the startup first began talks with FINRA, other state watchdogs, and the U.S. Securities and Exchange Commission. The company’s two subsidiaries Robinhood Securities and Robinhood Financial worked out a deal.