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Robinhood Financial LLC approves the payment of close to $70 million for resolving the regulatory allegations that the firm misled clients, approving ineligible traders for risky approaches, and did not monitor the failure of technology, and locked out investors from trading.
Source: The Wall Street Journal.
The enforcement action will cause a huge blow to the online brokerage firm, which was started in 2014 and gained more users with its mobile app and commission-free trades.
Robinhood gained new millions of customers and came under more scrutiny as numerous investors registered on Robinhood to speculate on meme stocks, including AMC Entertainment Holdings Inc and GameStop Corp.
The growth of the firm emerges from customer trading, which tripled in the first quarter as numerous customers complained about technology outages and poor customer service.
Robinhood enraged customers when it restricted trading in popular stocks as they became more volatile, causing the brokerage’s clearinghouse to post billions in extra collateral.
The Front-line inspector of broker-dealers, the Financial Industry Regulatory Authority, announced the settlement as Robinhood did not admit or deny the claims.
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