Robinhood Markets Inc. has agreed to a settlement with state securities regulators over outages that occurred on its platform, Financial Advisor reports.
The California-based brokerage firm will pay penalties of up to $10.2 million following allegations brought by seven states. The case stemmed from the outages that occurred in March 2020 after the start of the COVID-19 pandemic. Hundreds of thousands of investors utilizing Robinhood to conduct stock trades were unable to use the firm’s app while it was offline and as a result missed out on a major rally during a volatile trading day.
The North American Securities Administrators Association conducted an investigation into the matter and found a number of deficiencies in Robinhood’s operations. In particular, the NASAA detected violations pertaining to platform outages, options and margin approvals, and customer support. Investigators determined that the firm gave customers inaccurate margin and risk information on options spreads, failed to conduct proper diligence before approving certain option accounts, and was deficient in supervising platform technology that provided broker-dealer services and fielded customer complaints.
“Robinhood repeatedly failed to serve its clients, but this settlement makes clear that Robinhood must take its customer care obligations seriously and correct these deficiencies,” said Andrew Hartnett, Iowa’s securities regulator and head of the North American Securities Administrators Association.
Robinhood agreed to the settlement without admitting or denying the findings, and issued a statement on the matter that said they were “pleased to put it behind us.” The company added that it had made major investments in improving its operations, including round the clock chat and phone support, increased supervision of technology, and expanding use of educational materials.
The states involved in the settlement were Alabama, Colorado, California, Delaware, New Jersey, South Dakota and Texas.
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