Robinhood Inks $10M Settlement With Seven State Regulators

According to the California Department of Financial Protection and Innovation (DFPI), financial service provider Robinhood Financial LLC has finally signed a $10.2 million multi-state settlement with seven state securities regulators including itself. These regulators are from Alabama, Colorado, California, Delaware, New Jersey, South Dakota, and Texas. 

This settlement is a result of an investigation conducted by the North American Securities Administrators Association (NASAA) which looked into Robinhood’s operational and technical failures that harmed main street investors. Markedly, the investigation was driven by the state securities from the seven aforementioned cities.

As per a published statement, NASAA President Andrew Hartnett said, “Today’s multistate agreement represents states at their best – working together for the benefit of Main Street investors. Robinhood repeatedly failed to serve its clients, but this settlement makes clear that Robinhood must take its customer care obligations seriously and correct these deficiencies.”

Robinhood Dispoointed Traders in The Past

Three years ago, the Robinhood platform experienced an outage that was significantly detrimental to many users. Noteworthy, this was the time when a very large percentage of traders were highly dependent on the platform to make their trades. Over the years, Robinhood has encountered several deficiencies in its system including “weaknesses in the firm’s monitoring and reporting tools, and insufficient customer service and escalation protocols.”

Currently, these regulators have successfully listed six violations that ultimately target customers’ protection. Two of these violations are failure to conduct due diligence on certain option accounts and failure to escalate customers’ complaints to the Financial Industry Regulatory Authority (FINRA) and other regulators based on the standard requirements.

Based on the DFPI report, Robinhood did not raise any defense against the allegations nor did it admit to the violations. Rather, the trading platform complied with the regulators in the investigation. 

In February, the Menlo Park-based trading app received a notification of an investigation inquiry from the United States regulator, the Securities and Exchange Commission (SEC) amidst several bankruptcies in the crypto space. The U.S. watchdog requested more information on some crypto assets offered on the Robinhood app, crypto presentation as well as methods of operation. 

The subpoena came shortly after Robinhood began to recover from the crypto winter which had caused a huge drop in its Q3 earnings.

Thank you for taking the time to read this message. If you’re interested in learning more about Robinhood, we suggest checking out our Robinhood review, which provides an in-depth analysis of the popular investing app. We hope you find it informative and helpful!