California Based Robinhood will pay $70 million in penalties for its systemwide outages and misleading communication and trading practices, the Financial Industry Regulatory Authority said Wednesday.The settlement regards the technical failures Robinhood experienced in March of 2020, Robinhood’s lack of due diligence before approving customers to place options trades and purveying misleading information to customers about aspects like margin trading.
The stock market was diving that month in especially wild trading amid the outbreak of the Covid-19 pandemic. FINRA, a self-regulatory organization that oversees brokerage firms and their registered representatives, said it fined California Based Robinhood $57 million and ordered the stock trading app to pay nearly $13 million in restitution to thousands of clients.
California Based Robinhood, expected to go public sometime this year, suffered multiple days of outages beginning in early March of 2020, leaving clients unable to trade equities, options or cryptocurrency. The platform remained offline during some of the highest volume trading days amid the fastest bear market in history.The popular online brokerage also faced criticism over the death of a 20-year old trader who killed himself after believing he racked up huge losses on Robinhood. The suicide was mentioned in the FINRA press release.