Robinhood Markets Inc. is in talks to pay a fine to settle investigations into its options-trading practices and outages the stock-trading app suffered in March 2020, according to a securities filing.
The Securities and Exchange Commission, state regulatory authorities and the Financial Industry Regulatory Authority, Wall Street’s self-regulatory arm, are examining Robinhood’s conduct in those matters, including how Robinhood “displays cash and buying power to customers and its options trading approval processes,” the company said in the filing.
Two subsidiaries—Robinhood Financial and Robinhood Securities—are currently negotiating a settlement with Finra over the outages and the options-trading practices, which could include charges of violations of Finra rules, a fine, restitution to customers and the hiring of a compliance consultant. The probes could cost the company at least $26.6 million, according to the filing.
Robinhood also drew the interest of prosecutors and regulators, and the ire of many customers, for its decision last month to restrict purchases of GameStop Corp. and other highflying stocks. The U.S. attorney for the northern district of California, the SEC, Finra and the attorneys general for New York and other states have sent Robinhood inquiries about the trading restrictions, according to the filing. Robinhood also faces dozens of lawsuits from users over the trading restrictions.
Perhaps no company has benefited more from the retail stock-trading boom of the past year than Robinhood. Its ease of use and zero-commission model brought millions of new users to its app in 2020. But a surge in trading activity during the market swoons of last March strained Robinhood’s infrastructure, causing its trading platform to go off-line for all or part of three days that month and prompting user outrage.