Robinhood Faces FINRA Penalties Same Week It Files For IPO

Robinhood, the leading retail investor financial services platform, has been fined $70 million in penalties following systemwide outages and misleading trading practices and communications. The Financial Industry Regulatory Authority (FINRA), an independent financial regulatory organization overseeing brokerages and their representatives, assessed these penalties following technical failures Robinhood experienced in March 2020 — as the stock market was experiencing volatility at the onset of the coronavirus pandemic. The penalties also punish the brokerage for misleading and under-educating clients regarding options and margin trading. FINRA assessed $57 million in fines and ordered Robinhood to pay an astounding $13 million in restitution to thousands of affected clients. The total fines are the largest levied by FINRA in its history.

The penalties come in the same week that the digital brokerage announced and filed for its impending IPO, with an expected valuation of more than $30 billion. Robinhood also says it intends to reserve between 20-35% of its shares for its own retail customers, in an attempt to further appease the company’s often frustrated base. “Meme stocks” like GameStop and AMC Theaters have been popular with retail investors, and Robinhood faces scrutiny and lawsuits after halting their trading during moments of extreme volatility.

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