FINRA Fines Robinhood A Record $70M

With its IPO just around the corner, trading app Robinhood received a record fine on Wednesday for the mismanagement of its platform during extreme periods of market volatility in March 2020.

What Happened? The Financial Industry Regulatory Authority, better known as FINRA, issued a $57 million fine for Robinhood, which includes $12.6 million in restitution to millions of traders who endured losses earlier this year related to Robinhood outages and misleading communication and trading practices.

The settlement is focused specifically on Robinhood’s technical failures in March 2020, the company’s lack of due diligence in approving inexperienced customers for options trading and its misleading information related to margin trading.

Related Link: Payment For Order Flow Explained: Why Zero-Commission Trades Aren't Really Free

Why It’s Important: The fine appears not to be directly related to Robinhood’s controversial decision to temporarily halt buying in so-called meme stocks like AMC Entertainment Holdings Inc AMC and GameStop Corp. GME earlier this year.

As part of the settlement, Robinhood neither admitted to nor denied the charges.

“Robinhood has invested heavily in improving platform stability, enhancing our educational resources, and building out our customer support and legal and compliance teams,” Robinhood head of public policy communications Jacqueline Ortiz Ramsay said in a statement.

In a settlement document, Robinhood revealed it now has 31 million customers and 18 million funded customer accounts.

Robinhood is expected to go public in the near future at a valuation in the range of $30 billion, making it one of the largest and most highly anticipated IPOs in recent history.

Benzinga’s Take: Robinhood is likely happy to close the door one of several negative headlines surrounding the company in recent years. Robinhood is reportedly also dealing with more than 90 lawsuits related to its trading halts of GameStop and others back in February, and it remains to be seen how much, if any, these negative headlines will have on the company’s ultimate IPO valuation.