Robinhood in talks with Wall Street regulator Finra over probe

Robinhood is in talks with a Wall Street regulator to settle an investigation into outages in March last year and its options trading processes, as the trading platform favoured by retail investors grapples with a string of regulatory troubles.

The Securities and Exchange Commission, several state regulatory authorities and Wall Street’s self-regulatory body Finra are examining how the trading platform “displays cash and buying power to customers and its options trading approval process”, Robinhood said in a regulatory filing on Friday.

The company said it was in talks with staff at Finra, or the Financial Industry Regulatory Authority, about a possible resolution of the investigation and that it expected to pay a fine as part of any potential settlement.

Robinhood has become a target of regulators and lawmakers as its popularity has exploded. The company’s chief executive, Vlad Tenev, squared off for hours with a congressional committee last week over its role in the GameStop saga, over trading restrictions the company put in place during the peak of the share buying frenzy, and the consequences of its alleged “gamification” of investing.

Even before the “meme stock” mania, Robinhood had already faced a series of regulatory troubles. In December the company agreed to pay $65m to settle charges from the SEC that it had failed to provide its customer with the best trading prices through its platform.

In March last year, as global stock markets began to tumble over the rapid spread of the coronavirus, Robinhood had three outages over the course of a week, drawing a backlash from its customers.

Robinhood also faces a lawsuit from the family of Alex Kearns, a 20-year old trader who committed suicide last summer after believing he lost more than $700,000 after a complicated options trade on the app.

Finra and Robinhood both declined to comment on the disclosure on Friday.

In a continuation of the fall out from the GameStop saga, the SEC also said on Friday that it was halting trading in 15 companies because of “questionable trading and social media activity”. The list of companies included Bebida Beverage, Helix Wind, MediaTechnics and Marani Brands, all of which trade as penny stocks.

The regulator already suspended trading in a handful of other companies earlier this month.

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