Robinhood to Pay $10.2 Million in Outage Settlement


Robinhood Markets Inc. has agreed to pay up to $10.2 million in fines to settle a multistate investigation into outages that left customers unable to trade during market volatility in March 2020, caused by the pandemic.

State securities regulators conducted the probe and found that the brokerage had deficiencies in several aspects of its operations, such as approving options trading without due diligence, failing to report complaints to regulators, and neglecting to supervise the technology necessary for core broker-dealer services. The settlement involves regulators from several states, including Alabama, Colorado, California, Delaware, New Jersey, South Dakota, and Texas.

Andrew Hartnett, the head of the North American Securities Administrators Association, said that Robinhood repeatedly failed to serve its clients. However, the settlement makes it clear that the company must take customer care seriously and rectify its shortcomings. The regulators’ findings were neither admitted to nor denied by Robinhood. In March 2020, the platform went down for an entire trading day, leaving customers angry about missing out on a significant rally. Lawsuits ensued, and the outage occurred as the pandemic fueled a boom in online trading, expanding the firm’s user base.

Robinhood settled similar allegations with the Financial Industry Regulatory Authority in 2021. However, regulatory scrutiny is ongoing.

The Securities and Exchange Commission has been investigating Robinhood’s cryptocurrency business since February. Although the company said it had invested heavily in improving its operations, including expanding its educational materials, launching 24/7 chat and phone support, and enhancing its technology supervision, regulatory investigations are still ongoing.

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