FINRA said Robinhood changed the way stocks are traded, but failed to play by the rules. Photo by John Angelillo/UPI | License Photo
June 30 (UPI) -- The Financial Industry Regulatory Authority on Wednesday fined trading app Robinhood $57 million and ordered it to pay $12.6 million in restitution for "misleading" customers and systems outages last year.
The watchdog said Robinhood also approved trade options for customers even when it was "not appropriate" to do so.
"This action sends a clear message -- all FINRA member firms, regardless of their size or business model, must comply with the rules that govern the brokerage industry, rules which are designed to protect investors and the integrity of our markets," said Jessica Hopper, executive vice president and head of FINRA's Department of Enforcement.
"Compliance with these rules is not optional and cannot be sacrificed for the sake of innovation or a willingness to 'break things' and fix them later. The fine imposed in this matter, the highest ever levied by FINRA, reflects the scope and seriousness of Robinhood's violations, including FINRA's finding that Robinhood communicated false and misleading information to millions of its customers."
The Menlo Park, Calif.-based trading app was created in 2013 with an apparent mission to upend the status quo among U.S. trading companies. It began offering commission-free trades on its mobile app in 2015, forcing other companies to drop fees to compete.
The FINRA announcement noted outages on the Robinhood app between January 2018 and February 2021, most notably in March 2020.
"Robinhood's inability to accept or execute customer orders during these outages resulted in individual customers losing tens of thousands of dollars, and FINRA is requiring that the firm pay more than $5 million in restitution to affected customers," FINRA said.
The FINRA fines are unrelated to Robinhood's shuttering of trades earlier this year during the so-called meme stock trading involving GameStop shares.
Robinhood posted to its website Wednesday that it's made changes -- including adding more customer support and offering better information -- to its app and process.
"Our customers are at the forefront of every decision we make and we're committed to making continuous improvements so that investing can be accessible to all," the company said.