Robinhood has agreed to pay a $10.2 million penalty to the California Department of Financial Protection and Innovation (DFPI) following an investigation by the North American Securities Administrators Association (NASAA). The company faced allegations of “operational and technical failures” that caused losses to its investors.

The NASAA looked into complaints about system outages and service unavailability that caused Robinhood users to miss out on trading opportunities. The investigation involved securities regulators from seven states, including California, Texas, and New Jersey. The multistate agreement marks a significant milestone in protecting Main Street investors.

The investigation revealed that Robinhood repeatedly failed to serve its clients and failed to establish an adequate customer identification program. The company also failed to supervise technology that was critical to providing core customer broker-dealer services.

Additionally, the stock-trading and crypto exchange-traded fund platform did not report customer grievances to the Financial Industry Regulatory Authority.

Robinhood did not admit wrongdoing or deny the allegations. Instead, the company fully cooperated with the investigation. The DFPI found no evidence of fraudulent conduct by the trading app. However, DFPI Commissioner Clothilde Hewlett emphasized that “Robinhood must comply with common-sense protections for investors and consumers as required by law.”

The settlement concludes a two-year investigative development into Robinhood’s operational and technical failures. In March 2020, Robinhood’s operations came under intense scrutiny after a system outage. Regulators accused the company of “negligent dissemination of inaccurate information to customers.”

Robinhood also faced a class-action lawsuit and a $70 million compensation fine from the Financial Industry Regulatory Authority (FINRA) following the system outage that affected thousands of users.

The fine imposed by FINRA is the highest ever levied by the regulatory body. The outage caused incorrect negative cash balances in users’ accounts, causing widespread and significant harm.