The North American Securities Administrators Association (NASAA) orders Financial services company Robinhood Financial LLC to pay up to $10.2 million in penalties for “operational and technical failures that harmed main street investors.”
The penalty was decided after an inquiry into Robinhood’s operational shortcomings, led by state securities regulators in Alabama, Colorado, California, Delaware, New Jersey, South Dakota, and Texas.
According to the NASAA report, Robinhood neither admitted nor denied the findings of the 7-state investigation.
In March 2020, disruptions on the Robinhood platform affected traders, which served as the catalyst for the investigation.
Before March 2021, Robinhood also had issues with its review and approval procedures for options and margin accounts, flaws in its monitoring and reporting tools, etc., that occasionally prevented traders from using the platform.
NASAA President Andrew Hartnett stated: “Today’s multistate agreement represents states at their best – working together for the benefit of Main Street investors. 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.”
Borg stated that no proof of fraudulent behavior by Robinhood was discovered and that Robinhood completely cooperated with the state investigation led by Alabama.
The 7-states will be given access to a FINRA-ordered compliance implementation by Robinhood. In July 2021, FINRA charged Robinhood $70 million for harming clients through outages and critical system failures.
“One year after the settlement date, Robinhood will attest to the lead state, Alabama, that it is in full compliance with the FINRA-ordered independent compliance consultant’s recommendations or has otherwise instituted measures that are more effective at addressing the recommendations,” NASAA added.
