A popular investing app Robinhood will pay fines worth about $70 million for its system outages and spreading misleading information to its users, the Financial Industry Regulatory Authority (FINRA) announced Wednesday.
Robinhood is required to pay a $57 million fine and $12.6 million in restitution to its clients who were affected by the firm’s actions, FINRA said in a Wednesday statement.
Robinhood’s systemwide outages prevented its users from trading in early March 2020, when the stock market experienced one of its fastest downfalls in history fueled by fears of the coronavirus pandemic. This 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,” the regulatory body said.
Breaking News: FINRA Slams Robinhood with $70m Fine
The company significantly harming customers.
This sends a strong message as Robinhood arrogantly thought fine would be 1/3 less. Real protections must be put in place. https://t.co/juFfOGTAMg
— Charles V Payne (@cvpayne) June 30, 2021
“In determining the appropriate sanctions, FINRA considered the widespread and significant harm suffered by customers, including millions of customers who received false or misleading information from the firm,” the statement reads. (RELATED: DOJ Investigating Traders Who Triggered GameStop Frenzy: Report)
FINRA has allegedly found proof of Robinhood communicating misleading information to its users, including “whether customers could place trades on margin, how much cash was in customers’ accounts, how much buying power or ‘negative buying power’ customers had, the risk of loss customers faced in certain options transactions, and whether customers faced margin calls,” FINRA claimed.
Democratic Massachusetts Sen. Elizabeth Warren repeated her call for more stringent regulation of the investing app, criticizing the settlement’s leniency.
2019: Robinhood cheats customers, pays a fine
2020: Robinhood cheats customers, pays a fine
2021: Robinhood cheats customers, pays a fine
Robinhood won’t clean up its act with slap-on-the-wrist settlements. Our regulators need to show some backbone to hold Robinhood accountable. https://t.co/4APpNv6DLt
— Elizabeth Warren (@SenWarren) June 30, 2021
“Robinhood won’t clean up its act with slap-on-the-wrist settlements. Our regulators need to show some backbone to hold Robinhood accountable,” Warren tweeted Wednesday.