On Wednesday, the Financial Industry Regulatory Authority (“FINRA”) levied its largest fine ever against popular investing app Robinhood. Robinhood, known for letting customers trade stocks through an app, will pay $57 million in fines in addition to $12.6 million in restitution to customers. FINRA is a nonprofit, self-regulatory agency that oversees member brokerages and exchanges.
FINRA found that Robinhood violated regulations and showed false and misleading information to customers. Some customers were allowed to place trades with borrowed money, even though they’d turned off that setting in the app, according to FINRA. Others saw inaccurate negative cash balances. Robinhood also failed to report a variety of customer complaints to FINRA, and suffered a number of outages from 2018 through 2021 that caused customer losses, most prominently during the GameStop stock surge. FINRA determined that the outages and system failures were partially due to the lack of a proper continuity plan.
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