Robinhood Agrees to Compensate Customers for Halting Trades During Pandemic
Robinhood, a leading stock trading platform, has agreed to pay $65 million in compensations to the clients affected by a prolonged halt in trading earlier this year. The halt came as the prices of some of the stocks in its portfolio skyrocketed and crashed due to unexpected market swings caused by the coronavirus pandemic.
The payment would compensate customers who received a negative margin balance due to unusual price volatility between Jan. 28 and Feb. 5, 2021. Several stocks listed on Robinhood’s platform saw dramatic swings in prices as retail investors sought to capitalize on GameStop Corp’s stock surge.
The Securities and Exchange Commission (SEC) announced Monday that it has approved a settlement with Robinhood Financial LLC that resolves allegations that it failed to provide accurate information about its order routing practices.
"We are pleased with the SEC's action that ensures customers were treated fairly," said Vlad Tenev, CEO of Robinhood. "We acknowledge our responsibility to provide accurate information about our order-execution practices and how customer orders are routed for execution."
In addition to providing customer compensation, Robinhood has also agreed to enhance its disclosures related to order routing and execution quality. The company must also evaluate other policies and procedures related to market volatility events.