NEW YORK (AP) – Robinhood Financial to pay a fine of $ 57 million and return an additional $ 12.6 million to thousands of its clients to settle charges of a wide range of supervisory failures, such as injuring clients by giving them misleading information and allowing some more risky trades.
The financial sanction is the largest ever ordered by FINRA, a non-governmental organization that oversees the brokerage industry, and which “reflects the extent and seriousness of Robinhood violations,” said Jessica Hopper, head of the department of application of FINRA.
Robinhood has neither admitted nor denied the charges in the settlement. In a blog post on Wednesday, Robinhood explained how it has improved support for its customers, including the ability to call and speak with a service representative for certain issues.
“We are happy to leave this business behind and look forward to continuing to focus on our clients and democratizing finance for all. Said Jacqueline Ortiz Ramsay, public policy communications manager at Robinhood.
Robinhood has shaken up the brokerage industry with its no-cost, easy-to-use trading app that has attracted a new generation of investors to the market. But it has also come under heavy criticism that it has encouraged first-time clients to trade too risky for them and harm them in other ways.
Among the examples cited by FINRA was Robinhood’s use of “approval bots” to decide whether to allow clients to trade options with limited oversight. Options trading can be riskier than stock trading, with trades more easily going to zero. FINRA said these bots often approved clients on the basis of “inconsistent or illogical information.”
FINRA also said Robinhood failed to report tens of thousands of customer complaints as required between 2018 and 2020, among other charges.
Robinhood, which says it wants to promote “investment for all”, is preparing to sell its own shares on the public market.