Robinhood expects to pay a hefty fine to regulators, especially to FINRA as we can see more in today’s Crypto news.
The trading app is going through some regulatory drama and Robinhood expects to pay a hefty fine to settle with the regulators worth about $26.6 million in a potential settlement. Robinhood is preparing to go public and is valued at $20 billion, adding 6 million crypto users in 2021 alone. The stock trading app announced that US regulators are preparing to probe its trading restrictions on the GameStop shares and others. The company said in a filing with the US SEC that it is cooperating with the regulatory bodies including the SEC, the FINRA, and the NYAG.
In the SEC filing, Robinhood said that it is prepared to pay at least $26.6 million potential settlement with the FINRA over the trading outages back in March 2020 and its options trading policies around display and approval. Robinhood said that it’s:
“engaged in discussions with FINRA staff regarding a possible negotiated resolution of certain FINRA matters, including the March 2020 Outages and options trading and expecting any resolution, if reached, would involve charges of violations of FINRA rules, a fine, customer restitution, a censure, and a compliance consultant. We have accrued in our statement of financial condition for the year ended December 31, 2020 of $26.6 million representing the bottom of the range of our probable losses. We cannot predict, however, whether these discussions will result in a resolution of these matters.”
The options trading policies are contentions when Alex Kearns who is a 20-year old trader committed suicide in 2020 after he thought that he lost nearly $750K in an options bet that was made on this app. He had a balance of $16K which was allegedly miscommunicated. The app came under scrutiny ever since and especially now after stopping the buying of the GameStop shares amid the trading frenzy that was pushed by short-squeeze investors on social media. With the frenzy unraveling, Robinhood put a stop to trading on GME and other shares that were subject to unusual demand like NOKIA, AMC, and more.
The SEC FINRA and many other regulators waiting for payments from Robinhood as unfortunately that is all that happens in the securities industry when you blow up trading and lie/cheat your customers.
— Ross Gerber (@GerberKawasaki) February 27, 2021
The company defended the trading restriction with the demand spiking the bills to clearing house companies and forced them to make a decision in an effort to justify the controversial move:
“It was not because we wanted to stop people from buying these stocks.”
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