Robinhood will pay a $57 million fine to the Financial Industry Regulatory Authority and more than $12 million in restitution to customers in the highest fine ever imposed by FINRA, as punishment for misleading customers and failing to maintain technology during outages.
The company must pay the fine for providing misleading information to thousands of customers that caused them significant financial harm, and for failing to exercise "due diligence" in approving customers for options trading, the brokerage industry's self-regulatory body said. Robinhood also failed to adequately monitor and maintain its technology, which contributed to outages during high-trading moments like those that overwhelmed the platform during massive runs on GameStop and Bitcoin, as well as a two-day outage in March after a Federal Reserve interest rate cut caused unusually high-trading volume, according to FINRA.
"Robinhood's inability to accept or execute customer orders during these outages resulted in individual customers losing tens of thousands of dollars, and FINRA is requiring that the firm pay more than $5 million in restitution to affected customers," FINRA representatives wrote in a statement.
Robinhood neither denied nor admitted the charges in making the settlement with FINRA. The company said in March it had filed paperwork with the Securities and Exchange Commission to seek an initial public offering of its shares, but that offering has reportedly been delayed due to intense regulatory scrutiny.
Correction: This story was updated to correct the amount that Robinhood was fined. This story was updated August 2, 2021.