ROBINHOOD Markets, the online trading platform, agreed to pay US$29.75 million to resolve several Financial Industry Regulatory Authority (Finra) probes into its supervision and compliance practices, including failure to respond to “red flags” of potential misconduct.
The brokerage regulator said on Friday (Mar 7) that Robinhood will pay a US$26 million civil fine and US$3.75 million of restitution to customers.
Finra accused Robinhood of violating “numerous” rules, including a failure to implement reasonable anti-money laundering programmes that caused it to miss suspicious or unauthorised trading and hackings of customer accounts.
It also said Robinhood failed to properly supervise social media influencers who promoted the company, or respond to several warnings of delays in processing trades.
Finra said the latter turned into a “severe” problem in January 2021. Late that month, Robinhood restricted trading in “meme” stocks such as GameStop and AMC Entertainment Holdings.
Restitution will go to customers who were not informed about Robinhood’s practice of “collaring” market orders, which led to some trades being cancelled and reentered at inferior prices.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
Robinhood did not admit or deny wrongdoing in agreeing to settle, and said it has remediated the problems, which date back to 2014.
The Menlo Park, California-based company set aside money covering the settlement in 2023 and 2024.
Erica Crosland, Robinhood’s head of regulatory enforcement and investigations, said the company was pleased to settle.
Robinhood agreed in January to pay US$45 million in civil fines to settle US Securities and Exchange Commission charges over record keeping, trade reporting and other rule violations.
Founded in 2013, Robinhood became known for commission-free trading and letting investors trade cryptocurrencies. REUTERS
Share with us your feedback on BT’s products and services
