TLDR
- Robinhood agreed to pay $26 million fine and $3.75 million in customer restitution to settle FINRA allegations
- FINRA cited failures to respond to red flags, verify customer identities, and properly supervise social media influencers
- The settlement follows a separate $45 million SEC settlement from January 2025
- Issues included improper oversight of “collaring” market orders and failing to report suspicious activity
- Despite regulatory challenges, Robinhood reported record $916 million net income in Q4 2024, with crypto revenue up 200% year-on-year
Robinhood Markets Inc. has reached a $29.75 million settlement with the Financial Industry Regulatory Authority (FINRA) over multiple compliance and supervision failures. The settlement, announced on March 7, 2025, includes a $26 million fine and $3.75 million in customer restitution.
The settlement involves two Robinhood units – Robinhood Securities and Robinhood Financial. Both entities agreed to the settlement without admitting or denying FINRA’s findings.
FINRA’s investigation found that Robinhood failed to respond to red flags about potential misconduct. The company also did not verify the identities of thousands of customers when opening new accounts.
“Today’s action reminds FINRA members that compliance with core regulatory obligations remains critical to safeguarding and serving all investors,” said Bill St. Louis, FINRA’s head of enforcement. His statement emphasized the importance of following regulatory rules.
The latest settlement comes shortly after another regulatory penalty. In January 2025, Robinhood paid $45 million to settle charges with the U.S. Securities and Exchange Commission (SEC).
Among FINRA’s concerns was Robinhood’s handling of social media promotions. The regulator found the company failed to properly supervise social media influencers who were paid to promote the trading platform.
Social media posts misleading
FINRA determined some of these social media communications were misleading to investors. The posts sometimes contained promises or unbalanced statements that could mislead potential customers.
The regulator also cited problems with Robinhood’s “collaring” mechanism. This feature prevented customers from buying or selling stocks whose prices moved up or down by more than 5% between order placement and execution.
FINRA said customers received unclear disclosures about this process. When customers had to re-enter their orders due to collaring, they sometimes received worse prices than initially expected.
Another issue involved compliance with reporting obligations. FINRA found Robinhood fell short on compliance with data files called “blue sheets,” which contain detailed trading information regulators use to investigate suspicious activity.
The company also failed to detect, investigate, or report manipulative trades. FINRA noted problems with monitoring suspicious money movements and instances where customer accounts were taken over by hackers.
Erica Crosland, Robinhood’s head of regulatory enforcement and investigations, addressed the settlement in a statement. “We are pleased to resolve these historical matters, many of which date as far back as 2014, and which Robinhood Securities and Robinhood Financial have since remediated,” she said.
This isn’t the first time Robinhood has faced regulatory action. In December 2020, the company paid $65 million to settle SEC allegations that it failed to properly inform clients about selling their stock orders to high-frequency traders.
FINRA previously imposed a nearly $70 million fine on Robinhood in 2021. Those allegations involved misleading customers about margin trading and oversight lapses related to technology and options trader approvals.
Despite challenges, Robinhood reported strong financial results
Despite these regulatory challenges, Robinhood recently reported strong financial results. The company announced a record $916 million net income and over $1 billion in revenue for the fourth quarter of 2024.
Crypto trading has become an important part of Robinhood’s business. Crypto revenue reached $358 million in the fourth quarter, representing a 200% year-on-year increase.
The company’s crypto trading volumes also saw huge growth, rising 450% year-on-year to $71 billion. This growth shows the increasing importance of cryptocurrency to Robinhood’s business model.
Robinhood gained popularity during the pandemic when many new retail investors started trading stocks. The company’s app helped fuel the “meme stock” trend that caused shares in companies like GameStop and AMC Entertainment to surge dramatically.
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