Robinhood ordered to pay $70M for 'significant harm' to consumers
A financial industry regulator has ordered Robinhood to pay $70 million for "systemic supervisory failures" and causing "significant harm" to consumers.
Credit: Robinhood
Robinhood will need to pay $12.6 million in restitution to thousands of its consumers, while the remaining $57 million will be a fine. That represents the largest fine ever levied by the Financial Industry Regulatory Authority (FINRA), a private corporation that acts as a regulatory organization for member firms and markets.
FINRA cites the "millions of customers" who received false or misleading information from Robinhood, as well as outages that affected millions of customers in March 2020. Additionally, FINRA cites inappropriate customer approvals and the exposure of some customers to excessively risky trading tools.
According to the regulatory body, the resolution deals with issues stretching back to September 2016. In one instance, a Robinhood customer took his own life after being confused by the app's user interface and seeing a negative cash balance on his account.
"This action sends a clear message-- all FINRA member firms, regardless of their size or business model, must comply with the rules that govern the brokerage industry, rules which are designed to protect investors and the integrity of our markets," head of FINRA's enforcement department Jessica Hopper said. "Compliance with these rules is not optional and cannot be sacrificed for the sake of innovation or a willingness to break things' and fix them later."
This isn't the first time Robinhood has had to pay a fine. In December, the company agreed to pay $65 million to the Securities and Exchange Commission to settle charges that it lied to customers about its revenue sources.
Robinhood also courted controversy earlier in 2021 when it began to freeze trades of stocks that were being backed by Reddit users.
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Credit: Robinhood
Robinhood will need to pay $12.6 million in restitution to thousands of its consumers, while the remaining $57 million will be a fine. That represents the largest fine ever levied by the Financial Industry Regulatory Authority (FINRA), a private corporation that acts as a regulatory organization for member firms and markets.
FINRA cites the "millions of customers" who received false or misleading information from Robinhood, as well as outages that affected millions of customers in March 2020. Additionally, FINRA cites inappropriate customer approvals and the exposure of some customers to excessively risky trading tools.
According to the regulatory body, the resolution deals with issues stretching back to September 2016. In one instance, a Robinhood customer took his own life after being confused by the app's user interface and seeing a negative cash balance on his account.
"This action sends a clear message-- all FINRA member firms, regardless of their size or business model, must comply with the rules that govern the brokerage industry, rules which are designed to protect investors and the integrity of our markets," head of FINRA's enforcement department Jessica Hopper said. "Compliance with these rules is not optional and cannot be sacrificed for the sake of innovation or a willingness to break things' and fix them later."
This isn't the first time Robinhood has had to pay a fine. In December, the company agreed to pay $65 million to the Securities and Exchange Commission to settle charges that it lied to customers about its revenue sources.
Robinhood also courted controversy earlier in 2021 when it began to freeze trades of stocks that were being backed by Reddit users.
Keep up with everything Apple in the weekly AppleInsider Podcast -- and get a fast news update from AppleInsider Daily. Just say, "Hey, Siri," to your HomePod mini and ask for these podcasts, and our latest HomeKit Insider episode too.If you want an ad-free main AppleInsider Podcast experience, you can support the AppleInsider podcast by subscribing for $5 per month through Apple's Podcasts app, or via Patreon if you prefer any other podcast player.
Comments
https://www.rt.com/usa/513960-hedge-fund-losses-shorting-gamestop/
https://www.rt.com/usa/513956-robinhood-class-action-lawsuit-gamestop/
https://www.msn.com/en-us/money/companies/feds-seized-robinhood-ceos-phone-as-part-of-gamestop-trading-probe/ar-AALFHty
Hedge funds have been trying to profit from GameStop and AMC stock dropping and retail investors didn't want to see them fail so they decided to buy the shares at higher prices and have held it for months, some using the Robinhood trading app. This caused some hedge funds to lose billions.
It shows very clearly the corrupt side to what hedge funds are doing to businesses, they are actually helping drive these companies into the ground. The investment from retail investors has helped turn the companies around.
https://www.nasdaq.com/articles/gamestop-gme-raises-%241.1-billion-through-atm-equity-offering-2021-06-23
That's what investment should be about - being part of a company's success and not trying to kick them when they are down for personal gain.
Short selling and leveraged trading needs to be banned. It's crazy that this is going on. Average people can't buy lottery tickets with a credit card ( https://moneyinc.com/cant-buy-lottery-tickets-credit-card/ ) but hedge funds get to leverage their bets multiple times into the billions and cause price movement:
https://www.msn.com/en-us/money/other/bill-hwang-lost-around-20-billion-in-2-days-when-his-archegos-fund-imploded-report-says/ar-BB1ft2An
https://prospect.org/power/gamestop-mess-exposes-the-naked-short-selling-scam/
It's gambling and it need to be regulated like gambling. No gambling on credit and no trading shares you don't own.
These fines are nothing compared to the amount of money they are dealing with and it's ridiculous that $70m is the highest ever fine. If a criminal is caught, they usually have all their assets confiscated.
https://www.nytimes.com/2021/07/01/technology/robinhood-ipo-financials.html
"Robinhood has raised $5.6 billion in funding that valued it at $11.9 billion, according to Pitchbook. Its biggest shareholders include Ribbit Capital, Index Ventures, New Enterprise Associates and DST Global.
It raised two rounds of emergency funding totaling $4.4 billion to meet lending requirements for stock trades and to continue making trades."