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Robinhood pays $70 million to settle range of allegations
Also: FINRA Orders Record Financial Penalties Against Robinhood Financial LLC (FINRA)
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Source: Associated Press
Robinhood pays $70 million to settle range of allegations
By STAN CHOE
June 30, 2021
NEW YORK (AP) — Robinhood Financial will pay nearly $70 million to settle a wide range of allegations, including that it gave customers misleading information and improperly allowed some users to make riskier trades after they lied about their trading experience.
The financial penalty is the largest ever ordered by the Financial Industry Regulatory Authority, 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.
Since its 2014 launch, Robinhood has shaken up the brokerage industry with zero-commission trading and an easy-to-use app that’s drawn a new generation of investors into the market. It already has more than 31 million customers, many of whom were earlier getting left behind as the stock market rose without them. But it’s also faced criticism and penalties from a range of regulators over allegations that it encouraged novices to make trades too risky for them and hurt them in other ways.
Robinhood neither admitted nor denied the allegations in the settlement announced Wednesday. In a blog post, 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.
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By STAN CHOE
June 30, 2021
NEW YORK (AP) — Robinhood Financial will pay nearly $70 million to settle a wide range of allegations, including that it gave customers misleading information and improperly allowed some users to make riskier trades after they lied about their trading experience.
The financial penalty is the largest ever ordered by the Financial Industry Regulatory Authority, 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.
Since its 2014 launch, Robinhood has shaken up the brokerage industry with zero-commission trading and an easy-to-use app that’s drawn a new generation of investors into the market. It already has more than 31 million customers, many of whom were earlier getting left behind as the stock market rose without them. But it’s also faced criticism and penalties from a range of regulators over allegations that it encouraged novices to make trades too risky for them and hurt them in other ways.
Robinhood neither admitted nor denied the allegations in the settlement announced Wednesday. In a blog post, 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.
-snip-
Read more: https://apnews.com/article/business-f0bc3a496862363ed8f8b3a8ef63fe2d
______________________________________________________________________
Source: Financial Industry Regulatory Authority
News Release
June 30, 2021
FINRA Orders Record Financial Penalties Against Robinhood Financial LLC
Firm Ordered to Pay Approximately $70 Million for Systemic Supervisory Failures and Significant Harm Suffered by Millions of Customers
WASHINGTON—FINRA announced today that it has fined Robinhood Financial LLC $57 million and ordered the firm to pay approximately $12.6 million in restitution, plus interest, to thousands of harmed customers. The sanctions represent the largest financial penalty ever ordered by FINRA and reflect the scope and seriousness of the violations. In determining the appropriate sanctions, FINRA considered the widespread and significant harm suffered by customers, including millions of customers who received false or misleading information from the firm, millions of customers affected by the firm’s systems outages in March 2020, and thousands of customers the firm approved to trade options even when it was not appropriate for the customers to do so.
“This action sends a clear message—all FINRA member firms, regardless of their size or business model, must comply with the rules that govern the brokerage industry, rules which are designed to protect investors and the integrity of our markets. Compliance with these rules is not optional and cannot be sacrificed for the sake of innovation or a willingness to ‘break things’ and fix them later,” said Jessica Hopper, Executive Vice President and Head of FINRA’s Department of Enforcement. “The fine imposed in this matter, the highest ever levied by FINRA, reflects the scope and seriousness of Robinhood’s violations, including FINRA’s finding that Robinhood communicated false and misleading information to millions of its customers.”
First, FINRA found in its investigation that, despite Robinhood’s self-described mission to “de-mystify finance for all,” during certain periods since September 2016, the firm has negligently communicated false and misleading information to its customers. The false and misleading information concerned a variety of critical issues, including whether customers could place trades on margin, how much cash was in customers’ accounts, how much buying power or “negative buying power” customers had, the risk of loss customers faced in certain options transactions, and whether customers faced margin calls.
For instance, one Robinhood customer who had turned margin “off,” tragically took his own life in June 2020. In a note found after his death, he expressed confusion as to how he could have used margin to purchase securities because, he believed, he had not “turned on” margin in his account. As noted in the settlement, Robinhood also displayed to this individual (and certain other customers) inaccurate negative cash balances. Additionally, due to Robinhood’s misstatements, thousands of other customers suffered more than $7 million in total losses. As part of this settlement, Robinhood is required to pay more than $7 million in restitution to these customers.
Second, FINRA found that since Robinhood began offering options trading to customers in December 2017, the firm has failed to exercise due diligence before approving customers to place options trades. The firm relied on algorithms—known at Robinhood as “option account approval bots”—to approve customers for options trading, with only limited oversight by firm principals. Those bots often approved customers to trade options based on inconsistent or illogical information. As a result, Robinhood approved thousands of customers for options trading who either did not satisfy the firm’s eligibility criteria or whose accounts contained red flags indicating that options trading may not have been appropriate for them.
-snip-
June 30, 2021
FINRA Orders Record Financial Penalties Against Robinhood Financial LLC
Firm Ordered to Pay Approximately $70 Million for Systemic Supervisory Failures and Significant Harm Suffered by Millions of Customers
WASHINGTON—FINRA announced today that it has fined Robinhood Financial LLC $57 million and ordered the firm to pay approximately $12.6 million in restitution, plus interest, to thousands of harmed customers. The sanctions represent the largest financial penalty ever ordered by FINRA and reflect the scope and seriousness of the violations. In determining the appropriate sanctions, FINRA considered the widespread and significant harm suffered by customers, including millions of customers who received false or misleading information from the firm, millions of customers affected by the firm’s systems outages in March 2020, and thousands of customers the firm approved to trade options even when it was not appropriate for the customers to do so.
“This action sends a clear message—all FINRA member firms, regardless of their size or business model, must comply with the rules that govern the brokerage industry, rules which are designed to protect investors and the integrity of our markets. Compliance with these rules is not optional and cannot be sacrificed for the sake of innovation or a willingness to ‘break things’ and fix them later,” said Jessica Hopper, Executive Vice President and Head of FINRA’s Department of Enforcement. “The fine imposed in this matter, the highest ever levied by FINRA, reflects the scope and seriousness of Robinhood’s violations, including FINRA’s finding that Robinhood communicated false and misleading information to millions of its customers.”
First, FINRA found in its investigation that, despite Robinhood’s self-described mission to “de-mystify finance for all,” during certain periods since September 2016, the firm has negligently communicated false and misleading information to its customers. The false and misleading information concerned a variety of critical issues, including whether customers could place trades on margin, how much cash was in customers’ accounts, how much buying power or “negative buying power” customers had, the risk of loss customers faced in certain options transactions, and whether customers faced margin calls.
For instance, one Robinhood customer who had turned margin “off,” tragically took his own life in June 2020. In a note found after his death, he expressed confusion as to how he could have used margin to purchase securities because, he believed, he had not “turned on” margin in his account. As noted in the settlement, Robinhood also displayed to this individual (and certain other customers) inaccurate negative cash balances. Additionally, due to Robinhood’s misstatements, thousands of other customers suffered more than $7 million in total losses. As part of this settlement, Robinhood is required to pay more than $7 million in restitution to these customers.
Second, FINRA found that since Robinhood began offering options trading to customers in December 2017, the firm has failed to exercise due diligence before approving customers to place options trades. The firm relied on algorithms—known at Robinhood as “option account approval bots”—to approve customers for options trading, with only limited oversight by firm principals. Those bots often approved customers to trade options based on inconsistent or illogical information. As a result, Robinhood approved thousands of customers for options trading who either did not satisfy the firm’s eligibility criteria or whose accounts contained red flags indicating that options trading may not have been appropriate for them.
-snip-
Read more: https://www.finra.org/media-center/newsreleases/2021/finra-orders-record-financial-penalties-against-robinhood-financial
1 replies
= new reply since forum marked as read
= new reply since forum marked as read
Robinhood. The Sheriff of Nottingham was always after him, for his thievery.
