FINRA fines Robinhood $70M

FINRA just announced a major enforcement action against Robinhood for $70M, which breaks down to $57M fines and $12.6M restitution to clients. Here’s the press release, and the full action.

This is a pretty standard enforcement action - Robinhood neither admits nor denies the findings, and it’s essentially a slap on the wrist. Robinhood collected $331M in PFOF in Q1 2021.

Robinhood intentionally mislead their customers:

There are many other violations in the order. Among them:

• Failure to exercise due diligence before approving options accounts

• Failure to supervise technology critical to providing customers with core broker-dealer services

• Failure to create a reasonably designed business continuity plan

• Failure to report customer complaints to FINRA

• Failure to have a reasonably designed customer identification program

• Failure to display complete market data information

This is a pretty disturbing set of violations, and honestly it’s surprising that they can continue to operate as a broker-dealer. This is an important enforcement action, but overall I’d call it a disappointment in terms of the cost to Robinhood and the remedial actions they need to take.