TLDR

• Robinhood will pay $26 million in fines and $3.75 million in restitution to settle FINRA allegations
• The violations include failing to respond to red flags, improper customer identity verification, and misleading social media communications
• FINRA found issues with AML compliance and supervision of the clearing system during high-demand periods (2020-2021)
• This settlement follows a separate $45 million SEC settlement from January 2025
• Despite regulatory troubles, 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 includes a $26 million fine and $3.75 million in customer restitution, according to statements released on March 7, 2025.

The settlement involves two Robinhood units – Robinhood Securities and Robinhood Financial. FINRA cited the company for failing to respond to red flags about possible misconduct and not properly verifying thousands of customer identities.

This latest regulatory action comes shortly after Robinhood paid $45 million to the Securities and Exchange Commission (SEC) in January 2025. That case involved failures to preserve records and report suspicious activity on time.

“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. The regulator’s investigation found multiple areas where Robinhood fell short of industry requirements.

FINRA determined that Robinhood Financial did not properly supervise its clearing system despite processing delays that occurred between March 2020 and January 2021. This period coincided with trading restrictions Robinhood placed on popular “meme stocks” like GameStop and AMC Entertainment Holdings.

The company also failed to detect, investigate, or report manipulative trades and suspicious money movements. FINRA found cases where customer accounts were compromised by hackers without proper detection or response from Robinhood.

Social Media Promotions

Another issue centered on Robinhood’s management of social media promotions. The company paid influencers to promote its services but failed to “reasonably supervise and retain” these communications. Some of these posts contained misleading information that was “promissory or not fair and balanced,” according to FINRA’s findings.

The $3.75 million in customer restitution stems from a practice called “collaring.” FINRA said Robinhood converted market orders to limit orders when stock prices moved more than 5% between placement and execution. This sometimes resulted in customers receiving worse prices when they re-entered their orders.

Robinhood agreed to the settlement without admitting or denying the charges. “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,” said Erica Crosland, Robinhood’s head of regulatory enforcement and investigations.

Other Actions

This is not the first time Robinhood has faced regulatory action. In December 2020, the company paid the SEC $65 million to settle allegations that it misled clients about selling their stock orders to high-frequency traders.

FINRA also imposed a nearly $70 million fine on Robinhood in 2021. That case involved misleading customers about margin trading and inadequate oversight of technology and options trader approvals.

Robinhood, which offers commission-free trades via a smartphone app, has grown its customer base rapidly in recent years. The platform gained popularity during the pandemic when many retail investors began trading stocks and crypto assets.

Despite its 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 a major revenue source for Robinhood. The company reported $358 million in crypto revenue during Q4 2024, representing a 200% increase compared to the same period the previous year.

Robinhood’s crypto trading volumes reached $71 billion in the fourth quarter, up 450% year-on-year. This growth in crypto business has helped offset challenges in other areas of the company’s operations.

Robinhood became a publicly traded company in 2021. Its shares were down 0.94% following the announcement of the FINRA settlement on March 7, 2025.