Robinhood’s Luster Stained Again With a Record $70 Million Fine
Annie Massa and Benjamin Bain, 30 June 2021
Robinhood Markets Inc. unleashed a revolution, marshaling throngs of new traders to financial markets in an upside-down year. But the free trading app’s breakneck growth hurt the same small-time investors it sought to empower.
That’s the accusation leveled by Wall Street’s self-funded watchdog, which extracted almost $70 million from the brokerage in a record settlement Wednesday, including a $57 million fine and about $12.6 million in payments to aggrieved customers. It follows Robinhood’s meteoric rise against the backdrop of the Covid-19 pandemic and the frenzy over hot stocks such as GameStop Corp. that warped the realm of retail trading.
Robinhood’s settlement with the Financial Industry Regulatory Authority also comes at a crucial moment, as the brokerage prepares a public offering this year, a move that will require the trust of small-time investors and mainstream financial institutions alike. Though Robinhood long stood out as one of Silicon Valley’s biggest threats to Wall Street’s status quo, Finra signaled its impatience with the “move fast and break things” approach embedded in the tech industry’s DNA.
Complying with rules governing brokerages “is not optional and cannot be sacrificed for the sake of innovation or a willingness to ‘break things’ and fix them later,” Jessica Hopper, Finra’s head of enforcement, said in a statement.
