Robinhood was fined a record $ 70 million from FINRA
Robinhood will pay a record fine of $ 70 million, the largest ever imposed by the Financial Industry Regulatory Authority (FINRA).
The regulator discovered that the popular trading platform misled millions of customers, allowed unqualified accounts to trade options and mismanaged a widespread outage in March 2020.
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The sanction sends a “clear message” about non-compliance with the rules of the brokerage industry.
“The fine imposed in this case, the highest ever imposed by FINRA, reflects the extent and seriousness of Robinhood’s violations, including FINRA’s finding that Robinhood communicated false and misleading information to millions of its clients, ”said Jessica Hopper, Executive Vice President and Director. of the FINRA Enforcement Department in the disclosure.
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Part of the enforcement action stemming from the suicide of Alex Kearns after the 20-year-old student at the University of Nebraska-Lincoln, mistakenly thought he owed more than $ 700,000 on a risky option bet.
“For example, a Robinhood customer who had deactivated the margin” tragically committed suicide in June 2020. In a note found after his death, he expressed his confusion as to how he could have used the margin to buy securities because, according to him, he had not “activated” the margin on his account. As stated in the settlement, Robinhood also displayed inaccurate negative cash balances to this individual (and some other clients), ”FINRA detailed.
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Robinhood, which is expected to be made public in the second half of 2021, has neither admitted nor denied the accusations, but consented to the entry of FINRA’s findings.
the the company has published, almost in tandem with the fine, a list of ongoing improvements, including expanded customer support as well as service around options.
“We’ve improved our options offering, our education about options and the way information is displayed in the app. Read on for more details,” the blog post explained.
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Robinhood has seen its popularity grow among retail traders, fueled first by the pandemic lockdown. Then, in early January of this year, that popularity turned into a PR crisis after heavy trading in so-called ‘meme’ stocks, such as GameStop and AMC, forced the platform to restrict trading to the in the midst of a liquidity crisis. The actions prompted several congressional hearings to assess the chaos and whether or not the company has colluded with certain hedge funds, a move CEO Vladimir Tenev refuse.
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The company has also stepped up its cryptocurrency offerings and reported six million new cryptocurrency traders on its platform during the first two months of 2021.