Robinhood agreed to pay $29.75 million to settle FINRA probes over supervision and compliance issues
The settlement includes $26 million in fines and $3.75 million in customer restitution
FINRA cited failures to detect suspicious trades, verify customer identities, and properly supervise social media communications
This settlement follows a separate $45 million SEC settlement from January 2025
Robinhood reported record earnings with $916 million net income in Q4 2024, with crypto revenue up 200% year-over-year
Robinhood, the popular online trading platform, has agreed to pay $29.75 million to settle several investigations by the Financial Industry Regulatory Authority (FINRA). The settlement, announced on March 7, includes $26 million in civil fines and $3.75 million in restitution to customers.
The settlement resolves multiple probes related to the company’s supervision and compliance practices. FINRA found that Robinhood failed to respond to “red flags” of potential misconduct, which led to violations in Anti-Money Laundering protocols, supervision, and disclosure requirements.
According to FINRA, Robinhood Financial did not properly supervise its clearing system despite clear signs of processing delays. These delays occurred between March 2020 and January 2021, which coincides with the period when Robinhood restricted trading in “meme stocks” like GameStop and AMC Entertainment Holdings.
The regulator also determined that both Robinhood Financial and Robinhood Securities failed to detect, investigate, or report manipulative trades. They missed suspicious money movements and instances where customer accounts were taken over by hackers.
FINRA discovered that Robinhood Financial opened “thousands of accounts” without properly verifying customer identities. This practice violated requirements to establish and implement reasonable Anti-Money Laundering programs.
The trading platform also fell short in supervising social media communications. FINRA found that Robinhood promoted posts from paid social media influencers that included misleading statements to investors.
Some of these communications were described by FINRA as “promissory or not fair and balanced.” The regulator considered these messages misleading to potential investors who might see them on social media platforms.
The $3.75 million in restitution relates to Robinhood Financial providing inaccurate or incomplete disclosures to customers. This occurred through a practice called “collaring,” where market orders were converted to limit orders.
FINRA explained that through collaring, customers were prevented from buying or selling stocks whose prices moved more than 5% between placing and executing a trade. When customers re-entered their orders, they sometimes received worse prices than they should have.
Both Robinhood entities consented to FINRA’s findings without admitting or denying the charges. This settlement approach is common in regulatory actions and allows companies to resolve issues without legal admissions.
This settlement comes just two months after Robinhood reached a separate $45 million settlement with the Securities and Exchange Commission (SEC). That January 2025 investigation accused the company of violating more than 10 securities law provisions.
In the SEC case, Robinhood was accused of failing to maintain and preserve electronic customer communications between 2020 and 2021. The company “admitted to certain findings” in that investigation, marking a different approach than in the FINRA settlement.
Erica Crosland, Robinhood’s head of regulatory enforcement and investigations, addressed the FINRA settlement in a statement. “We are pleased to resolve these historical matters, many of which date as far back as 2014, and which Robinhood Securities and Robinhood Financial have since remediated,” she said.
Despite these regulatory challenges, Robinhood recently reported strong financial results. The company announced a record $916 million net income and over $1 billion in revenue for the fourth quarter of 2024.
Crypto trading has become a major revenue source for the platform. Crypto revenue accounted for $358 million of Robinhood’s $672 million transaction-based revenues, marking a 200% increase compared to the previous year.
The platform’s crypto trading volumes have also seen massive growth, rising 450% year-over-year to reach $71 billion. This growth shows the company’s success in expanding beyond traditional stock trading into digital assets.
This is not the first time Robinhood has faced regulatory penalties. In December 2020, the firm agreed to pay the SEC $65 million to settle allegations that it failed to properly inform clients it was selling their stock orders to high-frequency traders.
FINRA imposed a nearly $70 million fine on Robinhood in 2021. Those allegations claimed the firm misled customers about margin trading and failed in its oversight of technology and options trader approvals.
This articles is written by : Nermeen Nabil Khear Abdelmalak
All rights reserved to : USAGOLDMIES . www.usagoldmines.com
You can Enjoy surfing our website categories and read more content in many fields you may like .
Why USAGoldMines ?
USAGoldMines is a comprehensive website offering the latest in financial, crypto, and technical news. With specialized sections for each category, it provides readers with up-to-date market insights, investment trends, and technological advancements, making it a valuable resource for investors and enthusiasts in the fast-paced financial world.
By Nermeen Nabil Khear