After facing countless class actions and probes from multiple regulators, the financial platform Robinhood is finally paying up. On Wednesday, the Financial Industry Regulatory Authority (FINRA) announced it fined the company $57 million and ordered the company to pay back $12.6 million in restitution, plus interest, to the thousands of customers it had screwed over in myriad ways over the past year. All told, the settlement will cost Robinhood about $70 million.
“The sanctions represent the largest financial penalty ever ordered by FINRA and reflect the scope and seriousness of the violations,” the authority wrote, adding that the multi-million dollar fine was determined to be an appropriate punishment for the “widespread and significant harm” Robinhood’s customers suffered during the company’s widespread outages last March. FINRA also notes that the fine is meant to repay the “thousands of customers” that the company approved to trade risky options, even when they probably shouldn’t have.
Authorities first launched their investigation into Robinhood this past August, following the company’s bungled response to multiple outages in March 2020 that coincided with two dismal days for stocks. At least one Robinhood customer responded by filing a class action suit against the company, alleging that the company breached its contract by failing to offer a trading platform that… actually worked. And while FINRA’s announcement doesn’t address Robinhood’s role in the Gamestop fiasco at all, Robinhood faced dozens more class actions from irate customers after the platform restricted trades of certain stocks, including Gamestop’s.
On top of those flubs, FINRA’s investigation also found that Robinhood had “negligently communicated” information that was either misleading or flat out false to its customers about a “variety of critical issues.” Whether Robinhood’s customers could place trades on margin, how much cash was in a person’s account, and how much “buying power” these customers had are just a few of the topics that investigators found Robinhood being less-than-truthful on. According to the authority, Robinhood’s misstatements cost thousands of these customers “more than $7 million” in lost cash, which it will need to pay back in restitution. That’s on top of the $5 million that Robinhood is now required to pay back to the customers who lost “tens of thousands” in cash lost during the platform outages.
Not long after FINRA published its announcement, Robinhood published its own blog that didn’t deny any of the charges the authority made but didn’t really address them either.
“We’ve made investments in expanding customer support – and are now offering phone support for several areas, including options and equities trading, account security, and other use cases,” the company wrote. “We’ve enhanced our options offering, education about options, and how information is displayed in the app.” Now we just need to see if the company will stop lying to its customers, too.