Robin Hood pays $29.75 million to solve FINRA probes over compliance issues

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Robinhood agrees to pay $29.75 million to resolve investigations into FINRA’s oversight and compliance practices. The settlement includes a $26 million fine to clients and $3.75 million in reparations.

Robinhood failed to manage its trading system during a surge in activity

FINRA has found that Robinhood does not properly manage or oversee the system for the processing of transactions, even if there are clear indications of delays in processing due to a significant increase in trading activities.

This occurred between March 2020 and January 2021. This was the same as Robinhood restricted trading of popular meme stocks such as GameStop and AMC Entertainment Holdings. In other words, Robinhood did not do enough to address the issues that were causing delays in the system.

Robin Hood “failed to respond to the red flag of potential fraud,” FINRA noted, leading to money laundering and oversight and disclosure violations.

Robinhood missed suspicious activity and failed to verify account

FINRA has found that Robinhood has detected, failed to investigate, failed to investigate operational transactions, abnormal remittances, suspicious activity when a hacker takes over a customer account. What’s more, Robinhood has also opened thousands of accounts without properly checking the identity of its customers. According to FINRA, due to these issues, Robinhood was unable to set up a powerful money laundering program.

Robinhood has also failed to properly monitor and maintain records of social media posts, including those from paid influencers. Some of these posts were misleading or unfair promises to investors.

The $3.75 million in compensation comes as Robinhood gave customers fraud or incomplete information to change market orders and limit orders.

Robin Hood agrees to FINRA’s findings

Robinhood Financial and Robinhood Securities agreed to the FINRA findings without acknowledging or denying the charges. This comes two months after setting it up for $45 million with US securities regulators in January following an investigation into more than 10 securities law violations. Robinhood Financial and Robinhood Securities acknowledged its failure to maintain and maintain customer communications from 2020 to 2021.

Recently, in the fourth quarter of 2024, Robinhood recorded net profit of $916 million and more than $1 billion. Cryptocurrency revenues increased by $358 million, a 200% increase, while crypto trading volumes increased by 450% to $71 billion.