NEW YORK — Robinhood Financial will pay a $57 million fine and return another $12.6 million to thousands of its customers to settle accusations of a wide range of supervisory failures, such as hurting customers by giving them misleading information and improperly allowing some to make riskier trades.
The financial penalty is the largest ever ordered by FINRA, a non-governmental organization that oversees the brokerage industry, and one that “reflects the scope and seriousness of Robinhood’s violations,” said Jessica Hopper, head of FINRA’s department of enforcement.
Robinhood neither admitted nor denied the charges in the settlement. In a blog post today, Robinhood detailed how it has improved support for its customers, including the ability to call in and talk with a service representative for some issues.
“We are glad to put this matter behind us and look forward to continuing to focus on our customers and democratizing finance for all.” said Jacqueline Ortiz Ramsay, Robinhood’s head of public policy communications.
Robinhood has shaken up the brokerage industry with its zero-fee trading and easy-to-use app that’s drawn a new generation of investors into the market. But it’s also faced a lot of criticism that it has encouraged novice customers to make trades that are too risky for them and hurt them in other ways.
Among the examples FINRA cited was Robinhood’s using “approval bots” to decide whether to allow customers to trade options with only limited oversight. Trading options can be riskier than trading stocks, with trades more easily going to zero. FINRA said those bots often approved customers based on “inconsistent or illogical information.”
FINRA also said Robinhood failed to report tens of thousands of complaints from customers between 2018 and 2020 as required, among other accusations.
Robinhood, which says it’s trying to promote “investing for everyone,” is preparing to sell its own stock on the public market.