Robinhood Settles FINRA Investigations with $29.75 Million Payment
Online trading platform Robinhood has agreed to pay a total of $29.75 million to resolve multiple investigations by the Financial Industry Regulatory Authority (FINRA) concerning its supervision and compliance practices.
The settlement includes a $26 million civil fine and $3.75 million in restitution to affected customers, according to FINRA’s statement on March 7. The regulator found that Robinhood failed to adequately address red flags indicating potential misconduct, leading to violations related to Anti-Money Laundering (AML), supervisory practices, and disclosure requirements.
Supervisory Failures and Trading Restrictions
FINRA determined that Robinhood Financial did not properly oversee its clearing system, particularly during a period of heightened trading activity between March 2020 and January 2021. This timeframe coincides with Robinhood’s controversial decision to restrict trading in high-volatility meme stocks, including GameStop (GME) and AMC Entertainment Holdings (AMC).
Additionally, FINRA found that Robinhood Financial and Robinhood Securities failed to detect, investigate, and report manipulative trading activity, suspicious financial transactions, and instances where hackers took control of customer accounts.
Robinhood Financial also reportedly opened thousands of customer accounts without sufficiently verifying user identities, a direct violation of FINRA regulations. As a result, the firm failed to implement a robust Anti-Money Laundering program, further exacerbating its compliance issues.
The regulatory body also noted that Robinhood failed to “reasonably supervise and retain” social media communications. Specifically, the platform promoted content from paid social media influencers, some of which contained misleading, promissory, or unbalanced statements that could mislead investors.
Restitution and Market Order Disclosures
The $3.75 million in restitution stems from Robinhood Financial providing customers with incomplete or inaccurate disclosures related to “collaring” market orders. This practice involves converting market orders into limit orders, which may impact trade execution.
Robinhood Financial and Robinhood Securities consented to FINRA’s findings without admitting or denying the allegations.
This settlement follows a $45 million agreement reached with the U.S. Securities and Exchange Commission (SEC) on January 13, 2025, where Robinhood was accused of violating over 10 securities laws. As part of that case, Robinhood Financial and Robinhood Securities admitted to certain findings, including failing to maintain and preserve customer electronic communications from 2020 to 2021.
Robinhood’s Financial Performance
Despite ongoing regulatory challenges, Robinhood reported record-breaking financial performance in Q4 2024, with a net income of $916 million and over $1 billion in revenue. Crypto trading played a significant role in the firm’s growth, contributing $358 million to its $672 million transaction-based revenues—a staggering 200% year-over-year increase. Additionally, crypto trading volumes surged by 450% year-over-year, reaching $71 billion.
Read Also: Donald Trump’s Memecoin Generates $350M in Revenue: Report
Disclaimer: The information provided in this article is for informational purposes only and should not be construed as financial or investment advice. Cryptocurrency investments are subject to market risks, and individuals should seek professional advice before making any investment decisions.
Comments are closed.