E-trading platform Robinhood may be incredibly popular and accessible for retail investors. However, some dark spots in its history are catching up with it today… and causing Robinhood to cough up a big chunk of money. To what events can we attribute this $70 million Robinhood fine? And what can investors expect down the line for the platform?
The Financial Industry Regulatory Authority (FINRA) is ordering Robinhood to pay a $57 million fine, and an additional $12.6 million to investors as restitution.
According to FINRA, the sanctions are the largest the regulatory body has ever imposed. These penalties are relating to a March 2020 trading outage, which saw users barred from trading for nearly the full trading session. It was not just once, either; the platform saw three long outages in two weeks during the spring 2020 season.
It is definitely worth noting the punishment we are seeing today is entirely unrelated to the fiasco surrounding the GameStop (NYSE:GME) saga which saw trading outages and some tickers completely banned on the platform. Nor is it related to the Dogecoin (CCC:DOGE-USD) frenzy of just two months ago, which saw traders barred from purchasing DOGE during peak hours for the coin’s value.
The $70 million FINRA settlement is related only to the March 2020 outages.
Today’s Robinhood Fine Could Just Be the Beginning
Many are now wondering what a Robinhood fine might look like for the misdoings of this year. That is because a move by Robinhood to block trading in several popular meme stocks remains top of mind. These failures are so wide in scope in fact that Congress is putting the brunt of the GameStop legal battle on Robinhood’s shoulders.
According to Robinhood, the company has fixed many issues, including ones that affect its app. It shared many of these fixes with Yahoo Finance, including:
“… [the] restructuring and enhancement of its legal, compliance, and anti-fraud functions; strengthening of its supervisory structure and written supervisory procedures, including with respect to supervision of technology; expansion of customer support, including with respect to options and margin trading; remediation of certain customer communications and data displays at issue in the AWC; and improved supervision of options trading.”
For now, we must wait and see what comes of the GameStop probe. With the company planning to come public in the near future, we are entering an interesting era for Robinhood.
On the date of publication, Brenden Rearick did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.