According to a Monday Forbes article by Kelly Anne Smith, Robinhood Markets, Inc. is reportedly under investigation by two regulators, the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) for its March outage. Though details about the investigations are largely unknown, the probes are thought to center on how the company handled and responded to the major service disruption.
Robinhood is a financial services company that offers clients mobile access to invest in stocks, ETFs, and options through Robinhood Financial and cryptocurrency trading through Robinhood Crypto. The fintech company is based in Menlo Park, Calif.
During the March outage, customers were reportedly locked out of their accounts for 17 hours, rendering them unable to “execute trades while stocks were surging higher after a period of downturn due to the coronavirus,” according to the Forbes article. During that time, the stock exchange platform’s customer service center was also unreachable. The company reportedly suffered two additional outages of shorter duration in March. Problems with the service have reportedly continued since.
Following the March service disruption, a bevy of complaints flooded in from consumer protection agencies regarding the company’s allegedly slow response. Robinhood subsequently disclosed that many of the complaints were regarding the March outage and how Robinhood’s failure to provide a swift resolution resulted in some investors losing thousands of dollars after “‘stress on the app’s infrastructure,’ a high volume in trading due to market volatility and a record number of sign-ups,” as reported by Forbes.
The two investigations come at a time when the company’s popularity is soaring. It reportedly recorded 4.31 million new accounts in June and is valued at over $11.2 billion. Forbes also noted that this is not the company’s first regulatory inquiry. In 2019, Robinhood faced another FINRA investigation related to securities pricing for which it paid a $1.25 million penalty.
According to a Reuters article published earlier this week, a Robinhood spokeswoman stated that “the company strives to cooperate fully with its regulators but does not discuss or comment on its communications with them,” and the SEC declined to comment.