By Andrew Welsch

Robinhood Markets will pay nearly $30 million in restitution and fines for allegedly violating "numerous" rules, brokerage industry self-regulatory organization Finra announced late Friday.

Finra said two units of the company, Robinhood Financial and Robinhood Securities, agreed to settle without admitting or denying the charges. A representative for Robinhood didn't respond to a late Friday request for comment.

Finra ordered Robinhood to pay $3.75 million in restitution to customers and fined the company $26 million for violating its rules, including failing to respond to red flags regarding potential misconduct.

Finra took the brokerage firm to task for what it said were inadequate supervisory procedures and policies. "Today's action reminds Finra members that compliance with core regulatory obligations remains critical to safeguarding and serving all investors," said Bill St. Louis, the regulator's head of enforcement.

Finra said its investigation found that the two Robinhood units' anti-money laundering programs were lax and that they failed to detect, investigate or report suspicious activity, including manipulative trading, suspicious money movements, and instances where customers' accounts were taken over by third-party hackers. Finra also said Robinhood Financial failed to establish a reasonable customer identification program, which resulted in the firm opening thousands of accounts when it had not reasonably verified the customer's identity.

The regulator also said its investigation found that Robinhood provided customers with inaccurate or incomplete disclosures regarding its practice of "collaring" market orders by converting them to limit orders. Robinhood Financial agreed to pay restitution to customers whose market orders were collared and canceled, and who then re-entered their orders and received executions at an inferior price, Finra said.

In addition, Finra said Robinhood failed to reasonably supervise and retain social media communications promoting the firm that were posted by paid social media influencers. Some posts included statements that were misleading to investors, Finra said.

Robinhood, best known for its zero commission trading app, is one of the nation's largest brokerage firms. It has more than 25 million customers with funded accounts and $204 billion in assets under custody.

Write to Andrew Welsch at andrew.welsch@barrons.com

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March 07, 2025 17:23 ET (22:23 GMT)

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