Robinhood has been fined approximately $10.2 million by the California Department of Financial Protection and Innovation (DFPI) as part of a multi-state settlement. The firm was found to have registered operational deficiencies that impacted investors during the COVID-19 pandemic.
Last year, it was hit with a $30 million penalty by the New York State Department of Financial Services (NYDFS) for violating anti-money laundering and cybersecurity laws.
Further Scrutiny for Robinhood
The DFPI’s participation in the multi-million dollar settlement sees the regulator join those of Alabama, Colorado, New Jersey, Delaware, Texas, and South Dakota in highlighting policies that Robinhood neglected, allegedly harming its investors in March 2020.
That included not informing users about risk, failing to design a customer identification program, not exercising due diligence before approving specific option accounts, and not cooperating with the Financial Industry Regulatory Authority (FINRA) or other relevant agencies. The operational issues occurred during the early stages of the COVID-19 pandemic when hundreds of thousands of investors were relying on Robinhood’s platform.
According to NASAA President Andrew Hartnett, this settlement shows Robinhood must take its client care obligations seriously.
“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,” he added.
DFPI Commissioner Clothilde Hewlett emphasized that platforms such as Robinhood “must comply with common-sense protections for investors and consumers as required by law.”
The regulator found no evidence of fraudulent activity conducted by Robinhood and the company fully participated in the investigation.
Previous Settlement with NYDFS
In August 2022, Robinhood Crypto was fined $30 million by the NYDFS after the department found “significant failures” in the firm’s compliance programs.
Robinhood violated anti-money laundering rules and allegedly did not make sufficient upgrades to its transaction monitoring system. Additionally, the firm followed cybersecurity policies that did not comply with New York standards.
“DFS will continue to investigate and take action when any licensee violates the law or the Department’s regulations, which are critical to protecting consumers and ensuring the safety and soundness of the institutions,” said Superintendent Adrienne A. Harris at the time.
