Robinhood Financial must pay nearly $70 million in fines and customer restitution after the brokerage industry’s self-regulator found that the fast-growing trading platform misled millions of customers, failed to supervise critical technology and approved thousands of people for options trading without adequate review.

The Financial Industry Regulatory Authority imposed a $57 million fine and ordered approximately $12.6 million in restitution, plus interest, making the action the largest financial penalty FINRA has ever ordered. FINRA’s contemporaneous disciplinary record describes a case reaching across customer communications, technology outages, options approvals and complaint reporting.

The sanction lands at a pivotal moment for Robinhood, which has transformed retail brokerage by offering commission-free smartphone trading and is preparing for an initial public offering. Its growth accelerated during the pandemic as millions of new investors opened accounts, but the same expansion has drawn repeated scrutiny from regulators and lawmakers over whether the company’s systems, disclosures and controls kept pace.

Misleading information reached millions of customers

FINRA found that Robinhood negligently communicated false or misleading information on issues that could directly affect investment decisions. The regulator said customers received inaccurate information about whether they could place trades on margin, how much cash or buying power was available in their accounts, the risk of loss in options transactions and whether they faced margin calls.

Contemporaneous reporting from UPI described the $57 million fine and $12.6 million restitution order as the largest penalty FINRA had imposed, reflecting the breadth of customer harm rather than a single isolated violation.

The findings add to a regulatory record that already included a December Securities and Exchange Commission order alleging Robinhood failed to disclose important information about how it made money and whether customers were receiving best execution. Robinhood agreed in that separate matter to pay $65 million without admitting or denying the SEC’s findings.

Automated options approvals become a central issue

FINRA also found that Robinhood’s options-account approval process relied heavily on automated systems that did not adequately evaluate whether complex and potentially risky strategies were appropriate for particular customers. The regulator said some customers were approved despite inconsistent information, limited investment experience or risk tolerances that should have triggered closer review.

The issue has become politically salient because Robinhood’s interface made options trading accessible to a generation of first-time investors. Congress examined the broader implications during the House Financial Services Committee’s February 18 hearing on the GameStop trading episode, where Chief Executive Vlad Tenev faced questions about the firm’s business model, risk controls and restrictions on purchases of heavily traded stocks.

Rep. Sean Casten of Illinois later pressed regulators to update investor-protection rules for app-based brokerages. In a May 6 statement, Casten argued that new trading technology and behavioral design were exposing gaps in regulations written for a different brokerage environment.

Technology failures carried financial consequences

Robinhood’s technology is another major element of the case. FINRA found that the firm failed to reasonably supervise systems used for core broker-dealer functions, including accepting and executing customer orders. The regulator cited outages in March 2020, when sharp market moves and unusually high volume left customers unable to access the platform during critical trading periods.

The outages were not merely an inconvenience. Customers who could not enter or cancel orders were exposed to market movements they could not respond to, and the regulator’s restitution order covers thousands of harmed customers. Contemporary coverage from Axios emphasized that FINRA’s action centered on widespread customer harm arising from both inaccurate information and failures in the systems on which the brokerage depended.

Robinhood has said it has invested heavily in platform stability, expanded customer support and strengthened legal and compliance staffing. The company also says it has improved options supervision and its technology-management processes. But FINRA’s record makes clear that regulators expect those controls to function at the same scale as the company’s customer growth.

A penalty aimed at the model, not just the company

The enforcement action is likely to reverberate across the rapidly expanding market for app-based investing. Robinhood’s success has pushed established brokers to eliminate commissions and redesign mobile products, while new platforms increasingly compete for younger and less experienced customers.

That has created a regulatory challenge: financial technology can reduce costs and broaden access, but simplified interfaces do not simplify the products being traded. Options can create losses that exceed the intuitive expectations of inexperienced investors, margin can amplify risk, and outages can become consequential when customers rely on a phone application as their primary gateway to volatile markets.

Ars Technica’s June 30 account highlighted FINRA’s conclusion that Robinhood’s systems and supervisory practices had not kept pace with the scale of its user base. Fortune likewise reported that the settlement came as Robinhood prepared for an IPO and had more than doubled the amount it previously expected might be needed to resolve the regulator’s inquiry.

The settlement does not resolve every question surrounding Robinhood. It does not determine the legality of the company’s January restrictions on purchases of GameStop and other meme stocks, and separate litigation and regulatory reviews continue. Nor does the company admit or deny FINRA’s findings.

But the record penalty establishes a clear principle for the next phase of retail trading: a brokerage can automate customer acquisition and execution, but it cannot automate away the duty to provide accurate information, maintain resilient systems and determine whether complex products are appropriate for the people using them.