Robinhood Fined $29.75M by FINRA Over Compliance Failures

Robinhood Markets (NASDAQ: HOOD) has agreed to pay $29.75 million to settle multiple Financial Industry Regulatory Authority (FINRA) probes into its compliance and supervision practices. The settlement includes a $26 million civil fine and $3.75 million in restitution to affected customers.

FINRA accused Robinhood of violating numerous regulations, including failing to implement adequate anti-money laundering programs, which led to missed red flags on suspicious trading and unauthorized account access. The brokerage also failed to properly monitor social media influencers promoting its services and ignored repeated warnings about trade processing delays.

The regulator highlighted significant issues in January 2021, when Robinhood restricted trading on meme stocks like GameStop (NYSE: GME) and AMC Entertainment (NYSE: AMC), exacerbating customer frustrations. Additionally, the company did not fully disclose its practice of "collaring" market orders, which resulted in some trades being canceled and executed at worse prices. Affected customers will receive compensation as part of the settlement.

Robinhood neither admitted nor denied wrongdoing but stated that it has since addressed the issues, which date back to 2014. The company had already set aside funds for the settlement in 2023 and 2024.

This fine follows a separate $45 million penalty Robinhood agreed to in January for violations related to record keeping and trade reporting with the U.S. Securities and Exchange Commission. Erica Crosland, Robinhood’s head of regulatory enforcement, stated that the company is pleased to resolve the matter.

As Robinhood continues to expand its trading services, regulatory scrutiny remains high, emphasizing the need for strong compliance measures in online brokerage platforms.