Robinhood Was Hit with the Biggest Penalty Ever By a Wall Street Self-Regulator

The Financial Industrial Regulatory Authority (FINRA) has slapped Robinhood with its biggest fine ever, ordering the company to pay a penalty of about $70 million.

The reason? For harming millions of customers. It’s the biggest penalty ever imposed by a Wall Street’s self-regulator.

The Financial Industrial Regulatory Authority had accused the trading app of “systemic supervisory failures” and hurting investors by giving them “false or misleading information.”

FINRA’s sanctions on the company hit the platform in March of last year.

Robinhood has also been dealing with a lawsuit filed by the family of 20-year-old Robinhood trader Alexander Kearns, who died by suicide in 2020.

“The fine imposed in this matter, the highest ever levied by FINRA, reflects the scope and seriousness of Robinhood’s violations,” Jessica Hopper, head of FINRA’s department of enforcement, stated.

FINRA fined Robinhood $57 million and ordered the startup to pay about $12.6 million in restitution, plus interest, to thousands of harmed customers.

Hooper said that compliance with FINRA’s rules “is not optional” and can’t be sacrificed by a willingness to “‘break things’ and fix them later.”
“We are glad to put this matter behind us and look forward to continuing to focus on our customers and democratizing finance for all,” a Robinhood spokesperson said.
FINRA pointed to Alexander Kearns, the 20-year-old trader who died by suicide last June after he saw a negative balance of $730,000 in his trading account.

Kearns had mistakenly believed that was the sum of money he owed.

The FINRA investigation found that thousands of other customers suffered more than $7 million in total losses “due to Robinhood’s misstatements.”

This news came ahead of Robin Hood getting ready for its IPO.

The company revealed this week in its prospectus, that it had grown its funded accounts, those which have bank accounts linked to them, to 18 million in March of this year from 7.2 million in March of 2020. This was an increase of 151%.

Robinhood said it plans to trade under the symbol “HOOD” on the Nasdaq. The company plans to allocate between 20% and 35% of its IPO shares to its retail customers.

Disclaimer: We have no position in any of the companies mentioned and have not been compensated for this article.