Suing Robinhood AGAIN | Summary and Q&A

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July 2, 2021
by
Andrei Jikh
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Suing Robinhood AGAIN

TL;DR

Popular stock trading app Robinhood has been ordered to pay $70 million for supervisory failures and harm to customers by finra.org.

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Questions & Answers

Q: What were the main accusations against Robinhood?

Robinhood was accused of misleading customers about their revenue source, approving risky margin accounts without proper assessments, and failing to have a backup plan in case of service failures.

Q: How did Robinhood mislead customers about their revenue source?

Robinhood was routing user orders to market makers that didn't provide the best stock prices, in order to financially benefit from payments for order flow.

Q: How did Robinhood approve risky margin accounts?

Robinhood approved margin accounts for customers without properly assessing their eligibility, disregarding factors such as age, net worth, and trading experience.

Q: What was the impact of Robinhood's service failures?

During service failures between 2018 and 2020, customers were unable to sell their stocks or buy during market dips, resulting in potential losses of millions or billions of dollars.

Summary & Key Takeaways

  • Robinhood has been fined $70 million by finra.org for systemic supervisory failures and harm inflicted on customers.

  • The fine includes $57.4 million for finra.org and $12.6 million for customer restitution.

  • The accusations against Robinhood include misleading customers about how they make money, approving risky margin accounts, and failing to have a backup plan during service failures.

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