Robinhood, an American financial services company, recently came to a head with New York State Regulators after the latter charged the company with anti-money laundering and inadequate cybersecurity in its recent S-1 filing.
The New York State Department of Financial Services (NYDFS) began investigating the company in 2020 and found it violating multiple regulatory requirements.
Robinhood became increasingly popular after a rise in digital currency trading.
The company explained:
“[Robinhood Crypto] and the [New York Department of Financial Services] have reached a settlement in principle with respect to these allegations, subject to final documentation, in connection with which, among other things, [Robinhood Crypto] expects to pay a monetary penalty of $30 million and engage a monitor.”
According to the settlement between the regulatory body and the trading platform, Robinhood would have to pay a $30 million fine. The company would also be henceforth ‘monitored’ by a third party.
Other penalties
This is not the first time the company came under fire with regulatory authorities. Robinhood was charged with a $65 million fine in December 2020 by the Securities and Exchange Commission (SEC) as a settlement for misleading customers.
In another case, the Financial Industry Regulatory Authority (FINRA) fined Robinhood $70 million after accusing the company for not protecting its users’ privacy. It was the largest ever fine imposed by the regulatory authority.
In the statement issued by FINRA, Jessica Hopper, Executive Vice President and Head of FINRA’s Department of Enforcement said:
“This action sends a clear message—all FINRA member firms, regardless of their size or business model, must comply with the rules that govern the brokerage industry, rules which are designed to protect investors and the integrity of our markets. Compliance with these rules is not optional and cannot be sacrificed for the sake of innovation or a willingness to ‘break things’ and fix them later. The fine imposed in this matter, the highest ever levied by FINRA, reflects the scope and seriousness of Robinhood’s violations, including FINRA’s finding that Robinhood communicated false and misleading information to millions of its customers.”
