Retail trading platform Robinhood is set to pay up to $10.2 million in penalties for operational and technical failures that harmed investors, according to a Thursday announcement from a California regulator. The California Department of Financial Protection and Innovation (DFPI) has joined the multi-state settlement, which followed a North American Securities Administrators Association (NASAA) investigation into Robinhood platform outages in March 2020.
In addition, prior to March 2021, there were deficiencies at Robinhood in its review and approval process for options and margin accounts, weaknesses in the firm’s monitoring and reporting tools, and insufficient customer service and escalation protocols that in some cases left Robinhood users unable to process trades even as the value of certain stocks was dropping,” the DFPI said. The investigation was spearheaded by securities regulators in California, Alabama, Colorado, Delaware, New Jersey, South Dakota and Texas.
This isn’t Robinhood’s first multi-million dollar penalty. In 2021, Robinhood’s crypto arm said it was set to pay a $30 million settlement to the New York State Department of Financial Services (NYDFS) over violations of regulatory requirements. This came after a $65 million payment to the U.S. Securities and Exchange Commission in 2020 to settle allegations the platform misled investors. The platform was also slapped with a $70 million fine by the Financial Industry Regulatory Authority (FINRA) for failing to protect customers.
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,” NASAA President Andrew Hartnett said in a press statement.