The California Department of Financial Protection and Innovation (DFPI) has announced a settlement of up to $10.2 million with Robinhood for failing investors. This is the result of a joint investigation by securities regulators from seven U.S. states: Alabama, California, Colorado, Delaware, New Jersey, South Dakota, and Texas.
Robinhood has been a popular stock and cryptocurrency trading platform since the onset of the COVID-19 pandemic, when many investors shifted towards online trading. However, the company experienced a series of system outages during March 2020, resulting in missing trades and interruption of services. This led to user backlash and class action lawsuit against Robinhood, as well as a $70 million penalty from the U.S. Financial Industry Regulatory Authority (FINRA) for causing “widespread and significant harm” to investors.
The DFPI order accused Robinhood of negligence in disseminating inaccurate information to customers concerning margin trading and option spreads, failure to provide proper service to customers, and insufficient transparency with FINRA and state regulators. This settlement entails Robinhood to pay $10.2 million in penalties, but the firm neither admits nor denies the findings of the regulators, who did not discover any evidence of willful or fraudulent behavior.
In a separate issue, the New York Department of Financial Services has also penalized Robinhood’s crypto business arm with a $30 million fine. This was due to alleged violations of Anti-Money Laundering, cybersecurity, and consumer protection laws between January and September 2019. On top of this, the U.S. Securities and Exchange Commission has sent Robinhood a subpoena over crypto listings and custodian services.
Clearly, Robinhood has faced numerous issues concerning the safety of users and their investments. They have implemented several recommendations from an independent consultant and made numerous new hires in response. Hopefully, this measures will help protect their users against future disruptions and restore trust in the company.
Isabel Hall
- 2023-04-06
Robinhood Fined for Failing Investors in U.S.
The California Department of Financial Protection and Innovation ordered Robinhood to pay $10.2 million after a joint investigation by seven securities regulators. This is the result of multiple service outages and false information to customers.
