The Strategist

Robinhood settles $70M with US authorities for various violations

07/01/2021 - 08:21

Investment app Robinhood has agreed with the US Financial Industry Regulatory Authority (FINRA) to pay $70m in exchange for a settlement of claims against it.

Tech Daily via flickr
Tech Daily via flickr
The watchdog announced this on Wednesday. In a statement, FINRA said there had been "systematic failures in terms of oversight and controls and significant damage suffered by millions of customers".

Of this $57 million is the fine Robinhood will pay to the regulator, with another $12.6 million the service will pay as compensation to customers. This is a record fine imposed by FINRA. Robinhood's violations include technical glitches on the platform in March 2020, which prevented customers of the app from trading in it for several days, as well as providing users with incorrect information. 

In addition, FINRA criticises the app's previous practice of automatically creating accounts on the app. According to the regulator, between 2016 and 2019, 90,000 new accounts were created on it, despite the fact that in these cases there were indications of identity theft or other variants of fraud.

Robinhood had already been at the centre of a lawsuit this winter when it was accused of restricting transactions on GameStop and AMC shares, which were then bought up by Reddit users as part of a flash mob.