A Wall Street regulator ordered Robinhood to pay about $70 million for “systemic supervisory failures” and hurting investors by giving them “false or misleading information.”
That’s big. In fact, it’s the largest penalty ever imposed by Wall Street’s self-regulating body, the Financial Industrial Regulatory Authority, or FINRA.
Robinhood’s less than a decade old, but its “no-fee” model has fundamentally disrupted the investing world.
But the bigger it gets, the bigger its headaches.
- OUTAGES: Robinhood experienced a series of outages and system failures between 2018 and 2020. A March 2020 outage caused individual customers to lose tens of thousands of dollars, FINRA said.
- HIGH-RISK TRADES: Its popularity among young, often inexperienced investors has also landed Robinhood in trouble. FINRA specifically pointed to Alexander Kearns, the 20-year-old trader who died by suicide last June after he saw a negative balance of $730,000 in his trading account and mistakenly believed he owed that sum. The tragedy drew attention to the gamified nature of the Robinhood platform and its customer service shortfalls.
- OY, GAMESTOP: Robinhood set off a firestorm in January when it temporarily banned users from buying shares of GameStop and other stocks driven up by an army of traders on Reddit. Congress even hauled Robinhood’s CEO, Vlad Tenev, in to testify about the scandal, which he blamed on a demand from its clearinghouse to put up as much as $3 billion.
In total, FINRA said, customers suffered more than $7 million in losses “due to Robinhood’s misstatements.”
WHAT’S NEXT?
NUMBER OF THE DAY
$150 million
STATE OF STOCKS
The Biden-era stock market is well ahead of expectations. (Remember when President Trump said the stock market would “crash” if Joe won? Lol, good times.)
We’re just half-way through the year, and the S&P 500 has already reached the target some analysts set for the entire year, my colleague Anneken Tappe writes. Check it out:
- The S&P 500, the broadest measure of the US stock market, is up more than 14% in 2021, and just a few points below the 4,300 mark — a target Goldman Sachs had set for the end of the year.
- Both the S&P 500 and the Nasdaq (up 13%) are at or near record highs.
- The Dow is the relative laggard of the three: up more than 12% and inching toward the 35,000 mark, also a new all-time high.
- The Scrappy Doo of indexes, the small-cap Russell 2000, is doing even better, up 17%.
That’s all despite serious concerns about inflation (which investors dislike because it saps corporate profits), tax hikes, and the increasingly worrying Delta variant of Covid-19.
WILL IT LAST?
QUOTE OF THE DAY
“Overdraft fees disproportionately harm lower-income residents, often minorities. If you want to address inequality, cutting out unfair, deceptive and abusive fees is a fair thing to do.”
WHAT ELSE IS GOING ON?
- Didi, China’s massive ride-hailing service, went public Wednesday in the biggest US share offering by a Chinese company since Alibaba debuted in 2014. At its closing price, Didi is valued at nearly $70 billion.
- Amazon has formally requested that newly appointed Federal Trade Commission chair Lina Khan be recused from all Amazon-related antitrust cases before the agency. The company claims that Khan — an outspoken tech critic who has played a key role in driving antitrust scrutiny of the industry and Amazon in particular — lacks objectivity.
- China is in the middle of a huge power crunch as extreme weather, surging demand for energy and strict limits on coal usage deliver a triple blow to the nation’s electricity grid. It could last for months, and it has huge implications for global trade.
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