Robinhood Settles Compliance Investigations with FINRA

Robinhood has agreed to pay $29.75 million to settle investigations by FINRA regarding its supervision and compliance practices. The settlement includes a $26 million fine and $3.75 million in restitution to customers.

Trading System Mismanagement

FINRA found that Robinhood didn’t properly manage or oversee its system for processing trades, despite clear signs of delays caused by a huge increase in trading activity between March 2020 and January 2021. This period coincided with Robinhood’s restriction of trading in popular meme stocks like GameStop and AMC Entertainment Holdings. Robinhood failed to address the issues causing the delays, which FINRA indicated were apparent red flags of potential misconduct, leading to violations related to Anti-Money Laundering and supervisory requirements.

Oversight Failures

Robinhood also failed to detect and investigate suspicious activities, such as manipulative trades, unusual money transfers, and accounts hacked by criminals. Additionally, the company opened thousands of accounts without performing adequate customer identity verification. This failure contributed to weak Anti-Money Laundering programs, according to FINRA.

The company did not properly monitor or record misleading social media posts, including those from paid influencers, which distorted facts and made unfair promises to investors.

The $3.75 million restitution was based on customers receiving incorrect or incomplete information when market orders were adjusted to limit orders, affecting their trades.

Acceptance of Findings

Robinhood Financial and Robinhood Securities accepted FINRA’s findings without admitting or denying the charges. This settlement comes two months after they agreed to pay $45 million to the US securities regulator for breaches of over 10 securities laws. In that case, Robinhood acknowledged failing to maintain customer communication records from 2020 to 2021.

In the fourth quarter of 2024, Robinhood achieved a record $916 million in net income and surpassed $1 billion in revenue, with crypto revenue increasing to $358 million, up 200%, and crypto trading volumes rising 450% to $71 billion.