Robinhood to Pay $29.75M in FINRA Settlement Over Compliance Failures

Robinhood, the online trading giant, has agreed to settle multiple investigations by the Financial Industry Regulatory Authority (FINRA) for $29.75 million, addressing issues related to supervision, compliance, and anti-money laundering (AML) deficiencies.

Of the total settlement, $26 million will be paid as a civil fine, while $3.75 million will go toward customer restitution, FINRA disclosed on March 7. The regulator found that Robinhood repeatedly ignored red flags related to suspicious activity, failing to establish adequate monitoring systems.

Regulatory Scrutiny on Robinhood

One of FINRA’s primary concerns stemmed from Robinhood’s clearing system, which experienced severe processing delays due to surging trading demand between March 2020 and January 2021. This period notably coincided with Robinhood’s controversial trading restrictions on meme stocks like GameStop (GME) and AMC Entertainment (AMC).

Additionally, FINRA’s investigation revealed that Robinhood Financial and Robinhood Securities failed to detect or report manipulative trading, suspicious fund transfers, and even instances where hackers took over customer accounts.

The company was also found to have opened thousands of accounts without proper identity verification, violating AML regulations.

Misleading Promotions and Social Media Oversight

Robinhood’s compliance failures extended beyond transaction monitoring. According to FINRA, the platform failed to supervise and retain records of its social media promotions, which included posts by paid influencers. Some of these promotions allegedly contained misleading or exaggerated statements, which misinformed investors about the risks of trading.

Further, the regulator criticized Robinhood for “collaring” market orders—converting them into limit orders—which resulted in inaccurate or incomplete disclosures to customers. This practice led to the $3.75 million in restitution payments.

Without admitting or denying FINRA’s findings, Robinhood Financial and Robinhood Securities accepted the settlement terms.

This development follows a $45 million settlement Robinhood reached with U.S. securities regulators in January, where the company admitted to violating over 10 securities law provisions, including failing to preserve electronic customer communications between 2020 and 2021.

Despite these regulatory setbacks, Robinhood’s financial performance remains strong. In Q4 2024, the company posted a record $916 million net income and $1 billion in revenue. Notably, crypto trading contributed $358 million—a 200% year-on-year surge, with crypto trading volumes skyrocketing by 450% to $71 billion.