This post could contain affiliate links. Please see our advertiser disclosure to learn more.Robinhood Financial to Pay $70 million FineRobinhood, an investment platform, has settled a lawsuit with FINRA for $70 million. This settlement was made over claims that Robinhood caused customers significant and widespread harm over the years.This is the largest ever financial penalty FINRA has ever issued. FINRA is a non-governmental entity authorized by Congress, to supervise hundreds of thousands of brokers in the U.S.FINRA's investigation revealed that millions of customers had received misleading or false information from the company, that millions of customers were affected in March 2020 by system outages and that thousands of customers were allowed to trade options even though red flags were ignored.FINRA has found that Robinhood negligently provided misleading and false information to customers during certain periods between September 2016 and now. False and misleading information related to a number of critical issues such as whether customers could trade on margin, how much cash customers had, how much buying power or buying power customers had and the risk of losing certain options transactions. Customers also faced margin calls. Robinhood's customer who had disabled margin took his own life one year ago. One note left behind expressed confusion about how he could have used margin for securities purchases because he believed he hadn't turned on margin.FINRA found that Robinhood has not exercised due diligence since December 2017 when it began offering options trading to customers. With very little oversight, the firm relied heavily on automated option account approval bots to approve customers for options trades. Robinhood approved thousands upon thousands of options traders who did not meet the firm's eligibility criteria, or had accounts that were red flags.Robinhood also failed in its responsibility to supervise technology it used to provide core broker-dealer services such as accepting and executing orders from customers. Robinhood suffered a number of system and outages between 2018 and 2020. Robinhood's most severe outage was on March 2, and 3, 2020. This occurred during historic market volatility. Robinhoods website as well as its mobile apps were shut down. Individual customers lost tens to thousands of dollars.Robinhood did not report many customer complaints. Robinhood reported failures that included customers complaining that Robinhood gave false or misleading information to them, and that they suffered losses due to system outages.
