FINRA Probes Robinhood For 2020 Trading Outages
Things are looking very intense for Robinhood, as the Financial Industry Regulatory Authority (FINRA) probes it for trading outages in March. Some weeks ago, Robinhood received some backlash from social media for restricting the purchase of GameStop and other firms’ shares. The company spoke on the restriction and revealed that it doesn’t want to be an accomplice to the schemes of an army of Reddit traders determined to increase share prices.
Some people concluded that the stock trading firm wanted to protect one of its partners, Citadel, from losing money from the bet. Still, the probing is not only on the restrictions but some past issues that the firm had, and the firm would likely pay heavily in the settlement.
Robinhood to pay at least $26.6 million in FINRA settlement
Last week, the firm revealed that it was facing some sanctions from two US regulatory bodies. The bodies would investigate and eventually probe its restrictions on GameStop shares. The firm told SEC that it was ready to cooperate with some US authorities regarding the investigation.
Some of the authorities include the Securities and Exchange Commission, FINRA, and New York’s Attorney. The business would likely face weeks of continuous investigation before it pays fines for its unjustified restrictions. Robinhood’s restriction some weeks back affected GameStop prices, leading to some shareholders and the firm’s issues.
The stock trading app also revealed that it would pay at least $26.6 million in fine to settle things with FINRA. This fine isn’t because of the GameStop restrictions but because of some trading outages and options trading problems the app faced in March 2020. Robinhood’s filing to SEC explained how the firm was engaging the FINRA to settle some issues dated 2020.
The firm also reveals that the settlement would likely attract some form of sanction, such as fine, customer restitution, a compliance consultant, and others. The firm said it would likely pay a fine while adding that it does not know if the call for settlement would resolve the issues.
Robinhood faces social media backlash
Last year, Robinhood faced more problems when it had problems with its options trading policies because it allegedly resulted in the death of 20-year-old Alex Kearns. Sources shared that trader committed suicide when he thought he lost almost $750,000 in the app’s options trading.
The issue led to sympathy for Alex Kearn and more legal problems for the stock trading firm, who would likely face more investigations. This year also started with more challenges for Robinhood when the GameStop shares incident came to be. An army of low-scale investors wanted to drive the firm’s stocks up to enable them to earn money from the hedge funds. Unfortunately, things were not all they anticipated when the stocking app restricted them from buying the stocks and reducing stock prices.
Many controversies went up on social media regarding the app’s motivation for limiting purchases. Simultaneously, some said the firm was aiding Citadel, and others said it doesn’t want to be taken as an accomplice to plan a large number of traders. The app also prevented people from purchasing cryptos, meaning that the app had strong restrictions.
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