Rafael Henrique/SOPA Images/LightRocket via Getty Images. Brendan McDermid/ReutersRobinhood agreed to pay FINRA's largest fine ever, $57 million.FINRA stated that Robinhood had misled millions of customers. They also approved ineligible traders to trade risky strategies.Robinhood has not confirmed or denied the allegations.Subscribe to our daily newsletter 10 Things Before The Opening Bell.Robinhood agreed to pay almost $70 million to settle claims made by FINRA. The regulator stated today that Robinhood had misled millions of customers and approved traders who were not eligible for risky strategies. It also failed to supervise technology that prevented millions from trading.Robinhood was fined $57 million by the regulator and ordered Robinhood to pay $12.6 million to restitution thousands of customers.The regulator stated that the fine was the largest ever imposed by FINRA. It reflects the severity of the violations."FINRA determined the appropriate sanctions after considering the widespread and serious harm caused by customers including millions of customers who received misleading or false information from the firm, millions affected by the firm’s March 2020 system outages and thousands of customers that the firm allowed to trade options even though it was inappropriate for them to do so," FINRA stated in a statement.FINRA stated that Robinhood had "negligently transmitted false and misleading information" to customers. This included information about whether customers could trade on margin and how much cash customers had. It also addressed the risk of loss customers would face in certain options transactions.FINRA cited a Robinhood customer, who believed he had his margin turned off, who tragically took his own death in June 2020. He left a note after his death expressing confusion about how he could have used margin for securities purchases because he did not believe he had "turned on" his margin.Robinhood's misstatements caused customers to suffer more than $7,000,000 in total losses. The regulator stated that the firm will have to repay this amount as restitution.FINRA also found the brokerage firm had not exercised due diligence before approving customers placing risky options trades.FINRA stated that a customer aged 20 had indicated that he had very little experience in investing and was not comfortable with high risk trading. He changed his risk appetite from "medium" to "medium", and increased his experience to three-years within minutes. According to FINRA's settlement documents, Robinhood approved him for options trading just seconds later.FINRA also found that Robinhood did not supervise its technology for accepting and executing customer orders. It experienced a series outages and critical system failures between January 2018 and February 2021, which resulted in customers suffering losses of tens to thousands of dollars.Robinhood has not denied or admitted the charges.The mobile trading app is preparing to launch an initial public offering. The SEC, which is examining Robinhood's cryptocurrency business, reportedly slowed Robinhood's plans for a public listing.
