Robinhood has agreed to a settlement of $29.75 million with the Financial Industry Regulatory Authority (FINRA) following investigations into its supervision and compliance practices.
Robinhood has agreed to a settlement of $29.75 million with the Financial Industry Regulatory Authority (FINRA) following investigations into its supervision and compliance practices. The settlement includes a civil fine of $26 million and $3.75 million in restitution to customers.
FINRA's findings revealed that Robinhood failed to adequately respond to multiple “red flags” indicating potential misconduct. This included violations related to Anti-Money Laundering, along with supervisory and disclosure shortcomings.
Notably, the firm did not effectively supervise its clearing system during peak trading periods from March 2020 to January 2021, coinciding with restrictions on trading for certain high-profile stocks like GameStop and AMC Entertainment.
Further investigations uncovered that Robinhood Financial and Robinhood Securities did not detect or report suspicious trading activities, including manipulative trades and unauthorized account takeovers.
The regulator also noted that the company opened thousands of accounts without properly verifying customer identities, undermining its Anti-Money Laundering programs.
In addition to these issues, Robinhood was criticized for inadequately supervising social media communications, particularly in promoting posts from paid influencers. Despite these findings, both Robinhood Financial and Robinhood Securities consented to the settlement without admitting to or denying the charges.
Amidst these regulatory challenges, Robinhood reported a record net income of $916 million and over $1 billion in revenue in the fourth quarter of 2024, with significant contributions from its crypto trading activities.
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