Stealing from the rich, giving to...regulators? Robinhood ($HOOD) fined $10M settlement for system outages.
Robinhood experienced significant growth at the start of the COVID-19 pandemic when many people shifted to working from home and conducting online trades through the app. However, the platform’s outages caused some affected users to file a class-action lawsuit against Robinhood. The U.S. Financial Industry Regulatory Authority, or FINRA, alsofor roughly $70 million for causing “widespread and significant harm” to thousands of users.
“There were deficiencies at Robinhood in its review and approval process for options and margin accounts, weaknesses in the firm’s monitoring and reporting tools, and insufficient customer service and escalation protocols that in some cases left Robinhood users unable to process trades even as the value of certain stocks was dropping.”
The DFPI order accuses Robinhood of “negligent dissemination of inaccurate information to customers” in regard to margin trading and risks with multi-leg option spreads, as well as failures related to services available to customers and transparency with FINRA and state regulators. As part of the settlement, Robinhood “neither admits nor denies” the regulators’ findings, which did not include evidence of “willful or fraudulent conduct.
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