Robinhood to Pay $29.75M in FINRA Settlement Over Compliance Failures

Robinhood has agreed to a $29.75 million settlement with the Financial Industry Regulatory Authority (FINRA) following multiple probes into its compliance and supervisory practices. The settlement includes a $26 million fine and $3.75 million in customer restitution, FINRA announced on March 7.

The regulator found that Robinhood failed to respond to red flags of potential misconduct, leading to violations in Anti-Money Laundering (AML) procedures, trade supervision, and disclosure requirements. Specifically, the company did not properly oversee its clearing system during a surge in demand between March 2020 and January 2021—when it restricted trading in meme stocks like GameStop (GME) and AMC Entertainment (AMC).

Robinhood was also cited for failing to detect and report manipulative trades, suspicious money movements, and cases of third-party account takeovers. Additionally, the company opened thousands of accounts without adequately verifying customer identities and did not implement reasonable AML measures, FINRA stated.

Another violation involved Robinhood’s failure to supervise social media communications, as it promoted posts from paid influencers that contained misleading or unbalanced investment claims.

The $3.75 million restitution stems from Robinhood converting certain market orders into limit orders, resulting in inaccurate or incomplete disclosures to customers. While Robinhood consented to FINRA’s findings, it neither admitted nor denied the charges.

This settlement follows a separate $45 million agreement with the U.S. Securities and Exchange Commission in January, where Robinhood admitted to violating multiple securities laws, including failing to maintain electronic communications between 2020 and 2021.

Despite regulatory challenges, Robinhood reported record earnings in Q4 2024, with a net income of $916 million and over $1 billion in revenue. Crypto trading played a significant role, contributing $358 million in transaction-based revenues—a 200% year-over-year increase—while trading volumes surged 450% to $71 billion.