2021-7-2 21:24 |
The Financial Industry Regulatory Authority (FINRA) has ordered Robinhood Financial LLC to pay approximately $70 million ($50.68 million) in penalties for unethical trade practices. The self-regulating organization unveiled this news through a press release earlier today, noting that it had fined Robinhood $57 million (£41.26 million). On top of this, FINRA ordered the financial services company to pay $12.6 million (£9.12 million) in restitution to thousands of clients who suffered due to its misleading communication.
According to the news release, this is the largest amount that FINRA has ever directed a company to pay, and it serves to highlight the seriousness of the offenses. Explaining why it decided to impose such a hefty fine on Robinhood, FINRA said it considered the widespread harm that the company caused its customers.
Per FINRA, Robinhood’s violations include casually offering millions of its users’ misleading information in instances dating as far back as 2016, allowing millions of its customers to suffer due to its systemwide outages in March 2020, and allowing thousands of users to trade options even when it was not appropriate. On top of this, FINRA claims Robinhood failed to have a reasonable customer identification and that the company failed to display complete market data.
Looking out for investors’ interestsPer Jessica Hopper, the Executive Vice President and Head of FINRA’s Department of Enforcement, this penalty seeks to remind all FINRA member companies that they must adhere to rules that regulate the brokerage space come what may. She asserted that these rules are there to protect investors and maintain market integrity. As such, firms cannot bend or sacrifice them to stay innovative or simply because they are willing to break things and fix them later.
Explaining why it is vital to focus on investor protection, FINRA highlighted the case of a 20-year-old margin trader who took his life in June 2020 after believing to have suffered massive losses. In reality, Robinhood had displayed inaccurate negative cash balances to the deceased among other customers. This false information also saw thousands of other users suffer losses amounting to $7 million.
While Robinhood did not acknowledge or refute these charges, its head of public policy communications, Jacqueline Ortiz Ramsay, said Robinhood has invested heavily in enhancing the stability of its platform. She added that the firm is also working on building customer support and legal compliance teams. Reportedly, the firm currently has 2,700 employees working in its customer support department.
The post FINRA directs Robinhood to pay $70M in penalties for March 2020 outages appeared first on Invezz.
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