A broker-dealer settled FINRA charges for failing to supervise the executing broker-dealers to which it sent orders to determine that they provided best execution, as required FINRA Rule 5310 ("Best Execution and Interpositioning") for the broker-dealer's customers.
According to the Letter of Acceptance, Robinhood Financial, LLC ("Robinhood") promised its customers commission-free trade execution. Robinhood received payment for order flow from the various firms to which it sent trades for execution. FINRA alleged that Robinhood failed to supervise adequately those firms to ensure they were actually providing quality executions for Robinhood's customers.
To settle the charges, Robinhood agreed to (i) a censure, (ii) a $1,250,000 fine and (iii) hire an independent consultant to conduct a review of the firm's supervisory systems.