Mobile trading firm Robinhood Financial LLC is settling allegations brought by U.S. state securities regulators concerning alleged investor harm that resulted from outages in the firm’s trading platform back in 2020.
The North American Securities Administrators Association (NASAA) announced a settlement with Robinhood over operational and compliance failures that will see the firm ordered to pay up to US$10.2 million in penalties.
NASAA said the regulators’ investigation was sparked by trading outages the firm suffered in March 2020, “a time when hundreds of thousands of investors were relying on the Robinhood app to make trades.”
Additionally, regulators alleged there were deficiencies in the firm’s review and approval processes for options and margin accounts, supervisory weaknesses, and inadequate customer service that “in some cases left Robinhood users unable to process trades even as the value of certain stocks was dropping.”
The firm settled the allegations without admitting or denying the regulators’ findings, and regulators noted that Robinhood cooperated with their investigation.
The firm also beefed up its compliance procedures.
“Robinhood repeatedly failed to serve its clients, but this settlement makes clear that Robinhood must take its customer care obligations seriously and correct these deficiencies,” said NASAA president Andrew Hartnett in a release.
In 2021, the U.S. Financial Industry Regulatory Authority Inc. fined Robinhood US$57 million and ordered it to pay approximately US$12.6 million in restitution to harmed customers, stemming from the same outages in 2020 and concerns about improper options account approvals.