Robinhood Financial LLC has agreed to pay a fine of up to $10.2 million due to mistakes that caused harm to ordinary investors.
A group of state security regulators, led by the North American Securities Administrators Association (NASAA), have reached a settlement with Robinhood following a probe into the company’s mishandling of the retail market. The investigation was launched due to outages on the Robinhood platform in March 2020 when many investors were using the app to make trades.
Prior to March 2021, Robinhood had problems in its system for checking and approving options and margin accounts, weak reporting and tracking tools, and inadequate customer service and escalation procedures that in some cases stopped Robinhood customers from trading even as the value of certain stocks was declining.
The order lists the following breaches:
- Providing incorrect information to customers about margin and risk for multi-leg option spreads.
- Not having an effective way to identify customers.
- Not taking steps to ensure the technology needed for services works properly.
- Not having an efficient system to manage customer inquiries.
- Not properly evaluating some option accounts. Not reporting all customer complaints to the relevant authorities.
Robinhood does not agree or disagree with the findings from the States’ orders. It will give access to a FINRA-requested report about how it is following the consultant’s advice. In one year, it will confirm to Alabama that it is following the consultant’s advice or is doing something better. Texas did not find that Robinhood did anything bad on purpose or did not help in the investigation.
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