- Robinhood didn’t do its homework before allowing options trading as per regulators.
- Several lawsuits were filed after the interruption due to client’s losing trading prospects.
The California Department of Financial Protection and Innovation (DFPI) projected that Robinhood, the major fintech firm behind the cryptocurrency and stock trading platform, will pay more than $10 million in penalties. In March 2020, the global epidemic was at its peak. Robinhood experienced operational and technological problems that prevented many users from making trades.
The examination conducted by state securities authorities revealed that the California brokerage business, which had been at the forefront of offering individual investors free stock trading, had several operational flaws.
Among other things, regulators are concerned that Robinhood didn’t do its homework. Before allowing options trading, didn’t report customer complaints to the proper authorities. And didn’t keep an eye on the technology it needed to offer consumers basic broker-dealer services.
Users Lost Out on Trading Prospects
Moreover, the platform had a spate of system interruptions in March 2020, causing consumers to lose out on transactions and leaving a large portion of the site’s services unavailable. A number of states, including Alabama, Colorado, California, Delaware, New Jersey, South Dakota, and Texas, have accepted the settlement’s binding provisions. While speaking about the settlement, Andrew Hartnett, Iowa’s securities regulator emphasized the role of this penalty.
Andrew stated:
“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.”
In March 2020, while the pandemic was fueling an unprecedented surge in online trading and similarly boosting the company’s user base, the company’s online platform remained unavailable for the length of a trading day. Several lawsuits were filed after the interruption due to client’s unhappiness over lost trading prospects.
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