The US Financial Industry Regulatory Authority (FINRA) has slammed a $70 million fine on trading platform Robinhood.

According to the statement released, Robinhood was authorized to pay the penalty for misleading customers, systemwide outages, and trading practices.

The $70m fine is the highest penalty FINRA has imposed on any firm. This emphasizes the seriousness of the matter, as stated by Jessica Hopper, head of FINRA’s department of enforcement. Hopper noted in the release,

“The fine imposed in this matter, the highest ever levied by FINRA, reflects the scope and seriousness of Robinhood’s violations, including FINRA’s finding that Robinhood communicated false and misleading information to millions of its customers.”

FINRA explained that the online broker caused widespread and significant harm to thousands of users, including millions of customers who received false or misleading information from the firm.

The false information includes allegations that Robinhood misrepresented margin trades, customer’s cash holdings in the app accounts, the risk of loss in options transactions, the extent of the buying power users had, and information regarding margin calls.

FINRA further stated that millions of customers were also affected by Robinhood’s systems outages in March 2020.

According to the self-regulatory body, the $70 million fine would be split. Robinhood had been ordered to pay $57 million in fines; almost $13 million would be paid in restitution to customers.

These customers include those who reported seeing inaccurate negative cash balances in their accounts and those affected by Robinhood’s outages.

Many customers had reportedly lost thousands of dollars in trades during these outages as they were unable to trade equities, options, or cryptocurrency at that time. Robinhood was offline during some of the highest volume trading days with significant volatility.

According to the agency, Robinhood neither admitted nor denied the charges but instead consented to the entry of FINRA’s findings.

Responding to FINRA’s investigations, Robinhood said it had invested heavily in improving its platform stability while also building out its customer support and legal and compliance teams.

This is the second time FINRA would penalize Robinhood for trading violations. In December 2019, the regulatory body fined the online broker $1.25 million for violating best execution rules.

FINRA’s rule of best execution stipulates firms to use reasonable diligence in ascertaining the best market for their clients. Basically, the law states that brokers must put clients' interests first in all dealings.

The penalty slammed on Robinhood comes as the firm plans to go public. The online broker still hasn't confirmed the exact date for its listing, but according to CNBC, the firm has chosen Nasdaq as its preferred exchange.

The popular trading app initially wanted to launch its IPO in June but has now postponed the offering to July, which is still uncertain. This is due to the scrutiny and delayed review from the U.S Securities and Exchange Commission (SEC).

A Bloomberg report says the SEC has been delaying Robinhood’s review in recent weeks as it scrutinizes the broker’s growing cryptocurrency arm.

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