Finra orders Robinhood to pay $70m penalty

FT Alphaville is shocked, shocked, to find out that commission-free trading app Robinhood might not have been strictly following the rules when it comes to its wildly popular stonk market service.

US broker-dealer sheriff Finra just announced it’s slapping a $57m fine on the trading platform, plus ordering it to pay $12.6m in restitution, plus interest, to customers. The reason? For communicating “false and misleading information to its customers” on “a variety of critical issues, including whether customers could place trades on margin, how much cash was in customers’ accounts, how much buying power or ‘negative buying power’ customers had, the risk of loss customers faced in certain options transactions, and whether customers faced margin calls”. Quite a mouthful of alleged malfeasance, that.

That makes it the largest penalty the self-regulatory organisation has ever handed out. For the record, Finra states that Robinhood has neither admitted nor denied the charges.

The press release, as you might imagine, has all sorts of mouldy nuggets (or tendies?). For instance, did you know that Finra found that Robinhood was offering call-option trading to customers without exercising the necessary due diligence on whether they should be given access to these financial products? Just wow, who could have guessed?

More on this one to come we’re sure. $70m might not seem like a lot, but given the apparent political interest in retail investors, we doubt this is the end of the story.