Robinhood is an introducing broker-dealer that provides commission-free trading to retail customers through its website and mobile applications. The firm's stated mission is to "democratize and de-mystify finance for all," and to "make investing friendly, approachable, and understandable for newcomers and experts alike." Since launching its online trading platforms in December 2014, Robinhood has quickly attracted customers-many of whom are relatively young and new to investing -including through offerings such as no-minimum, commission-free trading and a user interface "designed to . . . appeal to a new generation of investors who are more comfortable trading on smartphones." Through these and other initiatives, Robinhood has experienced dramatic growth-from fewer than 500,000 customers in 2015 to over 31 million today.

False and misleading information distributed to customers - Despite Robinhood's mission to "de-mystify finance for all" and to make investing "understandable for newcomers and experts alike," during certain periods since September 2016, the firm has negligently communicated a wide array of false and misleading information to its customers. Among others: 

• Robinhood falsely told "Robinhood Instant" customers that they had to upgrade to "Robinhood Gold" to trade on margin when, in fact, Robinhood allowed "Instant" customers to place options trades that could trigger the use of margin. 
  
  
• Robinhood falsely told "Robinhood Gold" customers that they could "disable" margin in their accounts when, in fact, Robinhood allowed "Gold" customers to place options trades that could trigger the use of margin even after they had "disabled" margin.
  
  
• Robinhood displayed inaccurate cash balances to certain customers. Some inaccuracies were significant. For example, Robinhood displayed to many customers negative cash balances that were twice as large as they actually were. 
  
  
• Robinhood provided false information to customers about the risks associated with certain options transactions. For example, Robinhood falsely told customers that they would "never lose more than the premium paid to enter [a] debit spread" when customers could, and many did, lose vastly more than the premiums they paid. 
  
  
• Robinhood issued to certain customers erroneous margin calls and margin call warnings, telling them that they were in "danger of a margin call" when they were not. 

As a result of these and other false and misleading statements, Robinhood violated FINRA Rule 2010, which prohibits FINRA member firms from making misrepresentations to customers. Robinhood's negligent dissemination of false and misleading information to its customers separately violated FINRA Rules 2210 and 2220, which set forth content standards for firms' communications with customers. Because Robinhood failed to have a reasonably designed supervisory system and procedures to achieve compliance with FINRA rules and applicable securities laws requiring that communications with customers be truthful and not misleading, it also violated FINRA Rules 3110 and 2010. 

Failure to exercise due diligence before approving options accounts - Since Robinhood began offering options trading to customers in December 2017, the firm has failed to exercise due diligence before approving customers to trade options. Although the firm's written supervisory procedures assign registered options principals the responsibility of approving accounts for options trading, the firm, in practice, has relied on computer algorithms-known at Robinhood as "option account approval bots"-with only limited oversight by firm principals. This system suffers from a number of flaws, including the following: 

• The bots were programmed to approve options trading based on inconsistent or illogical information, including for customers who were younger than 21 years old but who claimed to have had more than three years' experience trading options. 
  
  
• The bots approved certain customers with low risk tolerance for options trading, even though the firm's written procedures prohibited the firm from approving those customers from trading options.
  
  
• The bots were programmed only to take into account the most recent information provided by customers, meaning that the firm approved for options trading customers whom it had previously rejected for options trading-often only minutes earlier. 

As a result of these flaws and Robinhood's overall failure to exercise due diligence before approving customers for options trading, the firm has approved thousands of customers who did not satisfy the firm's eligibility criteria or whose accounts contained red flags that options trading may not be appropriate for them, in violation of FINRA Rules 3110, 2360, and 2010. 

Failure to supervise technology critical to providing customers with core broker-dealer services - From January 2018 to February 2021, Robinhood failed to reasonably supervise the operation and maintenance of its technology, which, as a FinTech firm, Robinhood relies upon to deliver core functions, including accepting and executing customer orders. Instead, Robinhood outsourced the operation and maintenance of its technology to its parent company, Robinhood Markets, Inc. (RHM)-which is not a FINRA member firm-without broker-dealer oversight. Robinhood experienced a series of outages and critical systems failures between 2018 and late 2020, which, in turn, prevented Robinhood from providing its customers with basic broker-dealer services, such as order entry and execution. The most serious outage, which occurred on March 2- 3, 2020, rendered the website and mobile applications inoperable. During the March outage, all of Robinhood's customers were unable to trade. These outages persisted despite two warnings from FINRA that the firm was not reasonably supervising its technology. 

Because Robinhood failed to reasonably supervise the operation and maintenance of the technology it relied upon to provide core broker-dealer services, Robinhood violated FINRA Rules 3110 and 2010. 

Failure to create a reasonably designed business continuity plan - At the time of the March 2-3 outage, Robinhood's business continuity plan (BCP) was not reasonably designed to allow the firm to meet its obligations to customers in the event of a significant business disruption, as required by FINRA Rule 4370. Robinhood's BCP was limited to events that physically prevented employees from working from the firm's premises. As such, the firm did not consider applying its BCP to technology-related business disruptions, including the March 2-3 outage, which Robinhood considered an "existential" threat to its business. In addition, the firm's BCP was not reasonably 5 tailored to the firm's tailored to the firm's business model. For example, the BCP referenced backup methods for accepting and executing customer orders that the firm did not have. As a result, Robinhood violated FINRA Rules 4370 and 2010. 

Failure to report customer complaints to FINRA - Between January 2018 and December 2020, Robinhood failed to report to FINRA tens of thousands of customer complaints that it was required to report under FINRA Rule 4530, including complaints that Robinhood provided customers with false or misleading information and that customers suffered losses as a result of the firm's outages and systems failures. As a result of its failure to report these, and other, customer complaints, Robinhood violated FINRA Rules 4530(d) and 2010. 

Failure to have a reasonably designed customer identification program - From June 2016 to November 2018, Robinhood failed to establish or maintain a customer identification program that was appropriate for the firm's size and business. The firm approved more than 5.5 million new customer accounts during that period, relying on a customer identification system that was largely automated and suffered from flaws. For example, even though Robinhood received alerts flagging certain applications as potentially fraudulent-including applications where the customer's purported Social Security number belonged to a person who was deceased-Robinhood's customer identification system "overrode" those alerts and approved the applications without any review. In all, Robinhood approved more than 90,000 accounts from June 2016 to November 2018 that had been flagged for potential fraud without further manual review. As a result of its failure to have a reasonably designed customer identification program, Robinhood opened thousands of accounts despite red flags of potential fraud or identity theft, in violation of FINRA Rules 3310 and 2010. 

Failure to display complete market data information - Between January 2018 and November 2019, Robinhood failed to display complete market data information on its website and mobile applications, as required by Rule 603(c) of Regulation NMS of the Exchange Act. As a result, Robinhood violated Rule 603(c) and FINRA Rule 2010.