The Arkansas Securities Department announced that online brokerage Robinhood Financial LLC will pay the department a $200,000 fine as part of a $10.2 million multi-state settlement over platform outages in March 2020.
The outages “harmed Main Street investors,” the department said in a news release, as they came at a time when hundreds of thousands of investors were relying on the Robinhood app to make trades.
The department also said there were deficiencies in Robinhood’s review and approval process for options and margin accounts, weaknesses in the company’s monitoring and reporting tools, and insufficient customer service protocols that in some cases left users unable to process trades.
The settlement stems from an investigation spearheaded by state securities regulators in Alabama, Colorado, California, Delaware, New Jersey, South Dakota, and Texas coordinated through the North American Securities Administrators Association.
Alleged violations include:
- Failure to have a reasonably designed customer identification program
- Failure to supervise technology critical to providing customers with core broker-dealer services
- Failure to have a reasonably designed system for dealing with customer inquiries
- Failure to report all customer complaints to Financial Industry Regulatory Authority (FINRA) and state securities regulators, as may be required
The Arkansas Securities Department found no evidence of willful or fraudulent conduct by Robinhood.
Under the settlement, Robinhood neither admits nor denies wrongdoing, but it will provide states with access to a compliance implementation report ordered by the Financial Industry Regulatory Authority.
The company has one year from the settlement date to achieve full compliance.
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