Robinhood Markets has agreed to pay nearly $30 million in restitution and fines following allegations of multiple regulatory violations, according to a statement from the Financial Industry Regulatory Authority (Finra) late Friday.
Two divisions of the company, Robinhood Financial and Robinhood Securities, have settled without admitting or denying the charges. "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," said Erica Crosland, associate general counsel and head of regulatory enforcement and investigations at Robinhood Markets.
As part of the settlement, Robinhood will pay $3.75 million in restitution to affected customers and a $26 million fine for rule violations, including failure to address red flags indicating potential misconduct. Finra cited the firm’s inadequate supervisory procedures and policies as a primary concern.
"Today’s action reminds Finra members that compliance with core regulatory obligations remains critical to safeguarding and serving all investors," said Bill St. Louis, Finra’s head of enforcement.
Finra’s investigation revealed that Robinhood’s anti-money laundering programs were insufficient. The firm failed to detect, investigate, or report suspicious activities, including manipulative trading, unauthorized fund movements, and third-party account takeovers. Additionally, Robinhood Financial did not implement an adequate customer identification program, leading to the opening of thousands of accounts without reasonable verification of customer identities.
The regulator also found that Robinhood provided misleading or incomplete disclosures regarding its practice of "collaring" market orders by converting them into limit orders. As a result, customers who had their market orders collared and canceled, then re-entered their trades at potentially inferior prices, will receive restitution.
Further, Finra cited Robinhood for failing to adequately supervise and retain social media communications promoting the firm through paid influencers. Some of these posts contained misleading statements, potentially influencing investors improperly.
Robinhood, known for its zero-commission trading app, remains one of the largest brokerage firms in the U.S. with over 25 million funded accounts and $204 billion in assets under custody. The settlement underscores the importance of rigorous compliance programs for firms catering to retail investors, especially as regulatory scrutiny continues to intensify.
