By PAUL O’DONOGHUE, Senior Correspondent
ROBINHOOD, the popular U.S. trading platform, has been fined $45 million by the Securities and Exchange Commission (SEC) for AML and regulatory failures.
The SEC announced on January 13 that two Robinhood broker-dealer units agreed to pay a combined civil penalty. Robinhood Securities will pay $33.5 million, while Robinhood Financial will pay $11.5 million. Both firms committed to conducting an internal audit on compliance.
The SEC filing highlights multiple deficiencies, including Robinhood’s failure to assign experienced staff to handle suspicious activity reports (SARs), creating a significant backlog. Although company policy required SAR reviews within 45 days, the SEC found by the end of 2020, Robinhood was filing SARs an average of 198 days after they were initially flagged for investigation
The delays were reduced to an average of 144 days by mid-2021 and 125 days by the end of the year. Robinhood resolved the backlog by mid-2022.
“From January 2020 to March 2022, Robinhood systematically failed to initiate timely reviews of potentially suspicious transactions, complete reviews within a reasonable time, and file SARs promptly,” the SEC said.
The SEC said this illustrated Robinhood’s AML issues as approach as its user base grew rapidly, with the number of customer accounts surging from 5 million in 2019 to almost 23 million by 2021. “However, [the businesses] did not update their AML program sufficiently to keep up with this growth,” the SEC said.
Other regulatory breaches involved unauthorized access to systems, off-channel communications, and data retention failures, mostly before 2023.
Sanjay Wadhwa, acting director of the SEC’s Division of Enforcement, emphasized the importance of broker-dealers fulfilling their legal duties. “It is essential to protect investors and promote the integrity of our markets,” Wadhwa said, adding that Robinhood’s actions fell short of regulatory standards.
In response, Robinhood stated it was “pleased to resolve these matters.” General Counsel Lucas Moskowitz said: “As the SEC’s order acknowledges, most of these are historical matters that our broker-dealers have previously addressed.”
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