The Financial Industry Regulatory Authority (Finra) announced today that it has levied the largest financial penalties ever against Robinhood Financial LLC, hitting the firm with a $57 million penalty and ordering the firm to pay about $12.6 million in restitution plus interest to millions of customers harmed by its “systemic failures.”

Finra cited numerous examples of failings by the commission-free trading platform in its complaint, including one incident in which an investor was driven to commit suicide.

The penalties are part of a settlement that resolves other charges against Robinhood, including the firm’s failure to have a reasonably designed customer identification program and its failure to display complete market data information, Finra said.

In settling the  matter, Robinhood did not admit nor deny charges but consented to the entry of Finra's findings.

The sanctions represent the biggest financial penalty in history ordered by Finra, the regulator said in a statement that underscored “the widespread and significant harm suffered by customers, including millions of customers who received false or misleading information from the firm, millions of customers affected by the firm’s systems outages in March 2020, and thousands of customers the firm approved to trade options even when it was not appropriate for the customers to do so.”

“This action sends a clear message—all Finra member firms, regardless of their size or business model, must comply with the rules that govern the brokerage industry, rules which are designed to protect investors and the integrity of our markets,” jessica Hopper, Finra’s executive vice president and head of enforcement, said in a prepared statement. “Compliance with these rules is not optional and cannot be sacrificed for the sake of innovation or a willingness to ‘break things’ and fix them later.”

Finra found in its investigation “that despite Robinhood’s self-described mission to ‘de-mystify finance for all,’ during certain periods since September 2016, the firm has negligently communicated false and misleading information to its customers,” the regulator said.

According to Finra, the false and misleading information included whether customers could place trades on margin, how much cash was in customers’ accounts, how much buying power or “negative buying power” customers had, the risk of loss customers faced in certain options transactions and whether customers faced margin calls.

One Robinhood customer “tragically took his own life in June 2020 after realizing he had unwittingly borrowed money on margin to make investments,” Finra said. In a note found after his death “he expressed confusion as to how he could have used margin to purchase securities because, he believed, he had not ‘turned on' margin in his account.”

Robinhood “also displayed to this individual (and certain other customers) inaccurate negative cash balances,” according to the settlement.

A call placed to Robinhood for comment was not immediately returned.

In a blog posting on Robinhood's website today, the company said it has made a number of changes in its customer service opperations. "Here at Robinhood, we take our responsibilities to our customers very seriously," the company said. "We want to bring you up to speed on what’s been happening recently. We’ve made investments in expanding customer support - and are now offering phone support for several areas, including options and equities trading, account security, and other use cases. We’ve enhanced our options offering, education about options, and how information is displayed in the app."

Finra said that due to Robinhood’s inaccurate statements, “thousands of other customers suffered more than $7 million in total losses.” To settle the matter, Robinhood is required to pay more than $7 million in restitution to these customers.

Finra also found that since Robinhood began offering options trading to customers in December 2017, the firm has failed to exercise due diligence before approving customers to place options trades. As a result, “Robinhood approved thousands of customers for options trading who either did not satisfy the firm’s eligibility criteria or whose accounts contained red flags indicating that options trading may not have been appropriate for them,” the regulator said.

The firm relied on algorithms—known at Robinhood as “option account approval bots”—to approve customers for options trading, with only limited oversight by firm principals, Finra said. “Those bots often approved customers to trade options based on inconsistent or illogical information. As a result, Robinhood approved thousands of customers for options trading who either did not satisfy the firm’s eligibility criteria or whose accounts contained red flags indicating that options trading may not have been appropriate for them.”

Finra also ordered Robinhood to pay $5 million in restitution to customers who suffered losses when the firm’s technology and mobile app shut down trading during high market volatility for two days in March.

“From January 2018 to February 2021, Robinhood failed to reasonably supervise the technology that it relied upon to provide core broker-dealer services, such as accepting and executing customer orders," Finra said. "As a result, Robinhood experienced a series of outages and critical systems failures. The most serious outage occurred on March 2 and 3, 2020, when Robinhood’s website and mobile applications shut down, preventing Robinhood’s customers from accessing their accounts during a time of historic market volatility. Although the firm had a business continuity plan at the time of the March 2-3 outage, it did not apply it because the plan was unreasonably limited to events that impacted the firm’s physical location.”

The firm’s “inability to accept or execute customer orders during these outages resulted in individual customers losing tens of thousands of dollars,” the regulator said.

Finra also said that between January 2018 and December 2020, Robinhood failed to report to regulators “tens of thousands of written customer complaints that it was required to report.” Customers charged in complaints that “Robinhood provided customers with false and misleadin”g information, and that customers suffered losses as a result of the firm’s outages and systems failures,” the regulator said.

Robinhood’s failure to report customer complaints was “primarily the result of a firm-wide policy that exempted certain broad categories of complaints from reporting, even though those categories fell within the scope of Finra's reporting requirements,” Finra said.