The investigation looked into complaints of Robinhood’s system outages that caused users to miss out on trades while many of its services were unavailable.
The California Department of Financial Protection and Innovation said that the company behind cryptocurrency and stock trading platform Robinhood will likely pay more than $10 million in penalties “for operational and technical failures that harmed main street investors.”
In an April 6 announcement, the DFPI said the settlement — up to $10.2 million — was the result of an investigation by the North American Securities Administrators Association in conjunction with securities regulators from Alabama, Colorado, California, Delaware, New Jersey, South Dakota and Texas. The platform suffered a series of system outages in March 2020 causing users to miss out on trades while many of its services were unavailable.
“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,” said NASAA president Andrew Hartnett.
.@RobinhoodApp faces multi-state settlement for operational & technical failures impacting investors, following a @NASAA investigation by 7 states. Robinhood has implemented recommendations from an independent consultant. More info: https://t.co/atk86Z0Xmk #Investing #Cryptonews pic.twitter.com/B5QWU0m3yq
— CA Department of Financial Protection & Innovation (@CaliforniaDFPI) April 6, 2023
Robinhood experienced significant growth at the start of the COVID-19 pandemic when many people shifted to working from home and conducting online trades through the app. However, the platform’s outages caused some affected users to file a class-action lawsuit against Robinhood. The U.S. Financial Industry Regulatory Authority, or FINRA, also penalized the firm for roughly $70 million for causing “widespread and significant harm” to thousands of users.
“There were deficiencies at Robinhood in its review and approval process for options and margin accounts, weaknesses in the firm’s monitoring and reporting tools, and insufficient customer service and escalation protocols that in some cases left Robinhood users unable to process trades even as the value of certain stocks was dropping.”
The DFPI order accuses Robinhood of “negligent dissemination of inaccurate information to customers” in regard to margin trading and risks with multi-leg option spreads, as well as failures related to services available to customers and transparency with FINRA and state regulators. As part of the settlement, Robinhood “neither admits nor denies” the regulators’ findings, which did not include evidence of “willful or fraudulent conduct.”
Related: US DOJ announces seizure of 55M Robinhood shares
The New York Department of Financial Services — which was not a part of the NASAA investigation — announced a $30 million penalty on Robinhood’s crypto business arm in August 2022 for alleged violations related to Anti-Money Laundering, cybersecurity and consumer protection laws between January and September 2019. The U.S. Securities and Exchange Commission also issued an investigative subpoena against the firm in December 2022 for its crypto listings and custody services.
Magazine: Scott Melker on defying the odds with crypto trading
You can get bonuses upto $100 FREE BONUS when you:
💰 Install these recommended apps:
💲 SocialGood – 100% Crypto Back on Everyday Shopping
💲 Maiar – DeFi For The Next Billion
💲 CryptoTab Browser – Lightweight, fast, and ready to mine!
💰 Register on these recommended exchanges:
🟡 Binance🟡 Bitfinex🟡 Bitmart🟡 Bittrex🟡 Bitget
🟡 CoinEx🟡 Crypto.com🟡 Gate.io🟡 Huobi🟡 Kucoin.
