Robinhood to Pay $26 Million to Settle FINRA Allegations
Robinhood Markets Inc., through its units Robinhood Financial and Robinhood Securities, has agreed to a $26 million settlement with the Financial Industry Regulatory Authority (FINRA). The settlement addresses allegations that the company overlooked warning signs of possible misconduct and failed to properly verify the identities of a significant number of its customers. Additionally, FINRA has mandated that Robinhood Financial compensate its users with $3.75 million.
Inaccurate Disclosures and Inadequate Systems
Investigations by FINRA revealed that Robinhood Financial provided customers with misleading or incomplete information regarding its practice of “collaring” market orders by converting them into limit orders. The regulatory body highlighted that the inadequate anti-money laundering systems within HOOD units led to questionable activities and account takeovers. Furthermore, numerous accounts were established without sufficient verification due to the company’s inability to implement an adequate consumer identification program. The company also failed to comply with reporting obligations for blue sheets—data files that contain detailed trading information requested by authorities to investigate suspicious activities.
Failure to Supervise Communications
Robinhood did not effectively monitor or retain social media communications that promoted its services, especially those posted by compensated social media influencers. Some of these communications contained misleading statements that were either overly optimistic or not presented fairly, potentially deceiving investors. In settling these allegations, Robinhood and its subsidiaries accepted FINRA’s findings without admitting or denying the charges.
Comments from Robinhood’s Regulatory Head
Erica Crosland, who oversees regulatory enforcement and investigations at Robinhood, expressed satisfaction in resolving these historical issues, many of which date back to 2014. She noted that Robinhood Securities and Robinhood Financial have since implemented necessary remedial actions. This settlement follows an earlier $45 million agreement that Robinhood Securities and Financial reached with the U.S. Securities and Exchange Commission in January 2025 concerning various compliance failures, including the failure to maintain records and to promptly report suspicious activities.
Previous Settlements and Current Developments
In September 2024, Robinhood’s cryptocurrency division settled with the California Department of Justice, agreeing to pay $3.9 million for restricting customers from withdrawing cryptocurrency from their accounts between 2018 and 2022. As part of this agreement, Robinhood’s crypto platform must permit customers to transfer their crypto assets to personal wallets and fulfill its commitments regarding trading and order handling practices.
Stock Performance and Analyst Ratings
Over the last three months, Robinhood’s stock has seen a rise of 17.4%, contrasting with a 3.4% decline in the broader industry. Currently, Robinhood holds a Zacks Rank of #1 (Strong Buy), reflecting positive sentiment among analysts regarding its potential performance.
Toronto-Dominion Bank Faces CFPB Order
In a separate regulatory action, The Toronto-Dominion Bank has agreed to pay a $28 million penalty following an order from the Consumer Financial Protection Bureau (CFPB) related to credit reporting issues. The bank was accused of mishandling customer credit information and not making necessary changes to its practices. Allegations against TD include sharing inaccurate data on credit card delinquencies and submitting erroneous information regarding certain accounts suspected to be fraudulent. The CFPB also pointed out that some accounts remained open despite clients voluntarily closing them.
BNY Mellon Penalized by CFTC
The Commodity Futures Trading Commission (CFTC) has also issued a civil penalty of $5 million against The Bank of New York Mellon Corporation for failing to report millions of swap transactions to a registered swap data repository, violating a previous CFTC order. BNY Mellon was found to be deficient in supervising its swap dealer operations, which is a requirement under the Commodity Exchange Act and CFTC regulations.
