FINRA Sanctions Robinhood Financial over Supervisory Issues
According to the public records on FINRA’s website, on December 19, 2019, the regulator reportedly sanctioned Robinhood Financial (CRD No. 165998, Menlo Park, CA) with a $1.5 million fine for allegedly failing to ensure investors received the best prices on securities orders.
Robinhood Financial, a mobile trading app, settled the case by reportedly agreeing to the fine and to retain an independent consultant to review the firm’s systems and procedures.
The firm reportedly does not charge commission on equity trades made using its app, instead it’s paid by broker-dealers for routing orders to them.
According to FINRA, this practice requires firms to review how orders are executed and to use reasonable diligence to ensure customers are getting the best price possible for buying or selling a security.
FINRA states in a Letter of Acceptance,Waiver and Consent, that between October 2016 to November 2017, Robinhood purportedly routed equity orders to one of four broker-dealers, each of which paid Robinhood for the order flow.
The firm reportedly did not reasonably consider alternative markets that could have resulted in a better price, according to the AWC.
According to FINRA, Robinhood’s supervisory system allegedly didn’t comply with best execution obligations, and its written procedures did not provide descriptions of its supervisory system. Further, FINRA said that the firm did not perform systematic review of order types, including limit orders, stop orders and orders received outside of regular trading hours. Consequently, hundreds of thousands of orders allegedly fell outside the company’s review process.
For FINRA’s full findings see FINRA Case #2017056224001.
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This information is publicly available on FINRA’s website and provided to you by The White Law Group. If you are concerned about investments you made with Robinhood Financial the securities attorneys at The White Law Group may be able to help.
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