The Financial Industry Regulatory Authority has fined Robinhood Financial and Robinhood Securities to pay a combined $29.75 million for alleged violations dating back as far as 2014, a year after the firm was founded.
In a 127-page document released Friday, FINRA detailed various alleged violations by the entities of parent company Robinhood Markets Inc., ordering Robinhood Financial to pay $3.75 million to customers in restitution and $26 million to FINRA for conduct violations.
Robinhood’s entities have agreed to pay the fines without admitting or denying the charges; the firms also agreed to certify that they have fixed the issues.
“Today’s action reminds FINRA members that compliance with core regulatory obligations remains critical to safeguarding and serving all investors,” Bill St. Louis, FINRA’s executive vice president and head of enforcement, said in a statement.
The customer restitution payments by Robinhood Financial are related to a practice known as “collaring” market orders. In these cases, FINRA alleged that Robinhood made market orders that were “collared” and then canceled them and re-entered them for an inferior price.
The FINRA fines for Robinhood Financial and Robinhood Securities were partly due to allegations of not establishing stringent enough anti-money laundering programs to catch bad actors, including third-party hackers. Robinhood Financial was charged with not sufficiently verifying customer identities when they opened accounts.
Both firms were fined for not adequately supervising clearing technology systems and social media promotions from paid social media influencers. Robinhood Securities was charged with failing to comply with securities trading information.
“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,” Erica Crosland, Robinhood’s associate general counsel and head of regulatory enforcement and investigations, said in an emailed statement. “Robinhood will continue to democratize finance for the next generation of investors.”
This is not the first time Robinhood has had to settle with FINRA, which is supervised by the Securities and Exchange Commission.
In 2021, Robinhood paid $70 million to FINRA to settle various violations, including that it misled customers with false information and let clients trade options that might not have been appropriate for them.
Robinhood, a FINRA member since 2017, settled the charges but neither admitted nor denied the allegations.
In February, Robinhood reported that revenue more than doubled to $1.01 billion in the fourth quarter, in part due to crypto-market transactions surrounding the U.S. presidential election.
Last week, Robinhood closed on its acquisition of TradePMR, the technology and custodial services provider for RIAs, for $300 million in cash and stock.
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