Robinhood Agrees to Pay $26M for FINRA Allegations Settlement

Core Insights - Robinhood Markets Inc. has agreed to pay $26 million to settle allegations from FINRA regarding failures in responding to misconduct red flags and inadequate customer identity verification [1] - Additionally, Robinhood Financial is required to compensate customers with $3.75 million [1] Allegations Against Robinhood - FINRA found that Robinhood Financial provided customers with inaccurate or incomplete disclosures about its practice of "collaring" market orders by converting them to limit orders [2] - The company’s anti-money-laundering systems were deemed inadequate, leading to suspicious behavior and account takeovers, with thousands of accounts opened without sufficient verification [3] - Robinhood failed to meet reporting requirements for blue sheets, which contain comprehensive trade data requested by authorities [3] - The company did not supervise or retain social media communications from paid influencers, which included misleading statements to investors [4] Company Response and Other Regulatory Issues - In settling these matters, Robinhood and its units consented to FINRA's findings without admitting or denying the charges [5] - The head of regulatory enforcement stated that the company is pleased to resolve historical matters, many dating back to 2014, which have since been remediated [5] - This settlement follows a separate $45 million settlement with the SEC in January 2025 for failing to maintain records and report suspicious activity [5] Recent Settlements - In September 2024, Robinhood's cryptocurrency platform settled with the California Department of Justice for $3.9 million over issues related to preventing customers from withdrawing cryptocurrency between 2018 and 2022 [6] Stock Performance - Over the past three months, Robinhood shares have increased by 17.4%, contrasting with a 3.4% decline in the industry [7]