State securities regulators led
by Alabama have fined Robinhood’s brokerage subsidiary up to $10.2 million in
penalties for what they called “operational and technical failures” of the firm
that hurt Main Street investors. The North American Securities Administrators
Association’s (NASAA) settlement with Robinhood comes after a seven-state investigation on the
broker-dealer’s retail market activities between early 2020 and 2021.
Robinhood Financial LLC will pay up to $10.2 million in penalties for operational and technical failures that harmed main street investors. Details: https://t.co/23UQeqNjWU pic.twitter.com/fgDDgQJhou
— NASAA (@NASAA) April 6, 2023
NASAA Accuses Robinhood of Multiple
Violations
In a statement released on Thursday, NASAA said outages on Robinhood’s platform in March 2020 spurred its investigation. During
this period, “hundreds of thousands of investors” relied on Robinhood’s app to
trade stocks and cryptocurrencies, the regulators said.
Furthermore, NASAA said it found
several lapses in Robinbood’s activities in the period before March 2021. This
includes shortfalls in how the broker-dealer reviewed and approved options and
margin accounts, poor monitoring and reporting tools and deficient customer
service and escalation protocols. These weaknesses “in some cases left
Robinhood users unable to process trades even as the value of certain stocks
was dropping,” NASAA explained.
As a result of the lapses, NASAA
said its order to Robinhood contained several alleged violations such as
negligent dissemination of inaccurate information to customers and failure to
have “a reasonably designed” customer identification programme.
“Robinhood repeatedly failed to
serve its clients, but this settlement makes clear that Robinhood must take its
customer care obligations seriously and correct these deficiencies,” Andrew
Hartnett, NASAA President, noted.
Robinhood Agrees to Compliance Programme
According to NASAA, Robinhood
neither admitted nor denied its findings. The membership-based regulator also
said that it “found no evidence of willful or fraudulent conduct by Robinhood.”
In addition, the firm also cooperated with the regulators’ investigations.
However, NASAA said the brokerage firm
agreed to file a compliance implementation report to the state regulators
involved in the settlement. The firm has also implemented remedial
recommendations made by an independent compliance consultant, NASAA said,
adding that the company also retained the consultant’s services.
“One year after the settlement
date, Robinhood will attest to the lead state, Alabama, that it is in full
compliance with the FINRA-ordered independent compliance consultant’s
recommendations or has otherwise instituted measures that are more effective at
addressing the recommendations,” NASAA explained.
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This article was written by Solomon Oladipupo at www.financemagnates.com.
