Back in June 2021,Robinhood was ordered to pay a $57 million fine by financial regulator FINRA for “outages and misleading customers” during market volatility in March 2020. An additional $13 million in restitution was included as part of the penalty, bringing the total fine to over $70 million. It was, and still is, the largest FINRA penalty imposed.
It also wasn’t the first fine against the controversial new-age broker-dealer, and obviously wouldn’t be the last. FINRA looks prepared to make Robinhood pay up for its role in the January 2020 stock market volatility, during which the broker-dealer froze trading in retail-popular stocks like GameStop, AMC Entertainment, American Airlines, and Koss. The regulator has ordered Robinhood to pay $29,460.77 to a 27-year-old truck driver from Connecticut who suffered “significant investment losses“ due to Robinhood’s decision to limit trading. 🤭 At face value, $29,000 isn’t much to a $14 billion company. However, it’s a first-of-its-kind judgment related to the January market volatility. When you start to consider how many tens of thousands of other cases might be filed with the regulator, $29,000 might be the least of Robinhood’s problems. 😬
At least, that’s what MarketWatch opinions writer Thornton McEnery claims in a new piece. McEnery suggests that this fine might open the floodgates for a flurry of other big settlements. ❄️ While there are several class action suits filed against Robinhood and other companies speculated to be involved in the “stock freeze,” FINRA settlements could bring quicker resolutions for retail investors wronged by the broker giant. Based on the sheer size of the January volatility episode, there could be a lot more high-dollar FINRA settlements incoming.
$HOOD is down 53.3% from IPO, trading at $16.41/share. At just $14 billion, Robinhood even feels like a potential acquisition target for a larger finserv company such as Charles Schwab, Vanguard, or Ameriprise… but that’s just speculation. 🤷 Take it for what it’s worth.