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Robinhood Agrees to Pay $26M for FINRA Allegations Settlement
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Robinhood Markets Inc.’s (HOOD - Free Report) units — Robinhood Financial and Robinhood Securities — have to pay $26 million to settle Financial Industry Regulatory Authority (“FINRA”) allegations for failing to respond to red flags about potential misconduct and not verifying the identities of thousands of customers.
Also, FINRA has ordered Robinhood Financial to pay $3.75 million in compensation to the trading platform’s customers.
Details of Allegation Against HOOD
FINRA found that Robinhood Financial provided customers with inaccurate or incomplete disclosures regarding its practice of “collaring” market orders by converting them to limit orders.
FINRA asserts that suspicious behavior and account takeovers resulted from HOOD units' inadequate anti-money-laundering systems. Additionally, thousands of accounts were opened without enough verification because they were unable to set up a reasonable consumer identification program. Reporting requirements for data files known as blue sheets, which contain comprehensive trade data that authorities requested to look into suspicious activity, were also not met by the company.
The company failed to supervise and retain social media communications promoting the firm, which were posted by paid social media influencers. Some of these communications included statements that were promissory or not fair and balanced, and, thus, were misleading to investors.
Robinhood’s Response to Allegations
In settling these matters, HOOD and its units consented to the entry of FINRA’s findings without admitting or denying the charges.
Erica Crosland, HOOD's head of regulatory enforcement and investigations, stated, “We are pleased to resolve these historical matters, many of which date as far back as 2014, and which Robinhood Securities and Robinhood Financial have since remediated.”
HOOD’s Other Regulatory Issues
This latest fine follows a separate $45-million settlement that Robinhood Securities and Robinhood Financial reached with the US Securities and Exchange Commission in January 2025. The commission accused HOOD of several issues, including failing to maintain records and failing to promptly report suspicious activity.
In September 2024, in a settlement with the California Department of Justice over crypto withdrawals, Robinhood’s cryptocurrency platform agreed to pay $3.9 million. Per the claims, HOOD prevented its customers from withdrawing cryptocurrency from their accounts between 2018 and 2022. As part of the settlement, Robinhood’s crypto platform is required to allow customers to withdraw crypto assets to their wallets, and honor its representations of its trading and order handling practices.
Robinhood’s Zacks Rank & Price Performance
Over the past three months, HOOD shares have gained 17.4% against the industry’s 3.4% decline.
In September 2024, The Toronto-Dominion Bank (TD - Free Report) agreed to pay a $28-million penalty in response to the Consumer Financial Protection Bureau (“CFPB”) order concerning credit reporting issues. The bank has been accused of mishandling customers’ credit information and failing to make necessary amendments to its practices.
The alleged violations against TD comprise the sharing of imprecise data regarding credit card delinquencies and the submission of bad information about certain accounts that the CFPB suspected to be fraudulent. The CFPB claims certain accounts remained open despite the voluntary closure of the said accounts by clients.
In August, an order was issued by the Commodity Futures Trading Commission (“CFTC”) for The Bank of New York Mellon Corporation (BK - Free Report) to pay a civil penalty of $5 million for failing to report millions of swap transactions to a registered swap data repository in violation of a prior CFTC order.
BNY Mellon also failed to supervise its swap dealer business as required by the Commodity Exchange Act and CFTC regulations.
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Robinhood Agrees to Pay $26M for FINRA Allegations Settlement
Robinhood Markets Inc.’s (HOOD - Free Report) units — Robinhood Financial and Robinhood Securities — have to pay $26 million to settle Financial Industry Regulatory Authority (“FINRA”) allegations for failing to respond to red flags about potential misconduct and not verifying the identities of thousands of customers.
Also, FINRA has ordered Robinhood Financial to pay $3.75 million in compensation to the trading platform’s customers.
Details of Allegation Against HOOD
FINRA found that Robinhood Financial provided customers with inaccurate or incomplete disclosures regarding its practice of “collaring” market orders by converting them to limit orders.
FINRA asserts that suspicious behavior and account takeovers resulted from HOOD units' inadequate anti-money-laundering systems. Additionally, thousands of accounts were opened without enough verification because they were unable to set up a reasonable consumer identification program. Reporting requirements for data files known as blue sheets, which contain comprehensive trade data that authorities requested to look into suspicious activity, were also not met by the company.
The company failed to supervise and retain social media communications promoting the firm, which were posted by paid social media influencers. Some of these communications included statements that were promissory or not fair and balanced, and, thus, were misleading to investors.
Robinhood’s Response to Allegations
In settling these matters, HOOD and its units consented to the entry of FINRA’s findings without admitting or denying the charges.
Erica Crosland, HOOD's head of regulatory enforcement and investigations, stated, “We are pleased to resolve these historical matters, many of which date as far back as 2014, and which Robinhood Securities and Robinhood Financial have since remediated.”
HOOD’s Other Regulatory Issues
This latest fine follows a separate $45-million settlement that Robinhood Securities and Robinhood Financial reached with the US Securities and Exchange Commission in January 2025. The commission accused HOOD of several issues, including failing to maintain records and failing to promptly report suspicious activity.
In September 2024, in a settlement with the California Department of Justice over crypto withdrawals, Robinhood’s cryptocurrency platform agreed to pay $3.9 million. Per the claims, HOOD prevented its customers from withdrawing cryptocurrency from their accounts between 2018 and 2022. As part of the settlement, Robinhood’s crypto platform is required to allow customers to withdraw crypto assets to their wallets, and honor its representations of its trading and order handling practices.
Robinhood’s Zacks Rank & Price Performance
Over the past three months, HOOD shares have gained 17.4% against the industry’s 3.4% decline.
Currently, Robinhood carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Legal Issues Faced by Other Finance Firms
In September 2024, The Toronto-Dominion Bank (TD - Free Report) agreed to pay a $28-million penalty in response to the Consumer Financial Protection Bureau (“CFPB”) order concerning credit reporting issues. The bank has been accused of mishandling customers’ credit information and failing to make necessary amendments to its practices.
The alleged violations against TD comprise the sharing of imprecise data regarding credit card delinquencies and the submission of bad information about certain accounts that the CFPB suspected to be fraudulent. The CFPB claims certain accounts remained open despite the voluntary closure of the said accounts by clients.
In August, an order was issued by the Commodity Futures Trading Commission (“CFTC”) for The Bank of New York Mellon Corporation (BK - Free Report) to pay a civil penalty of $5 million for failing to report millions of swap transactions to a registered swap data repository in violation of a prior CFTC order.
BNY Mellon also failed to supervise its swap dealer business as required by the Commodity Exchange Act and CFTC regulations.