The $57 Million Warning: What Robinhood's FINRA Fine Means for Your BCP

What Actually Happened at Robinhood

On March 2 and March 3, 2020, financial markets experienced historic swings as COVID-19 fears collided with economic uncertainty. The Dow posted its largest single-day point gain ever. Millions of retail investors wanted in on the action. But Robinhood's platform went dark for nearly two full trading days. Customers could not buy, sell, or even log in to check their positions. The company blamed stress on infrastructure and unprecedented load, but the real problem ran deeper.

FINRA's investigation revealed that Robinhood had a business continuity plan on paper. The problem? It only covered events affecting the firm's physical location. Technology-related disruptions were not addressed. So when their systems failed under load, there was no playbook for getting customers back online. No escalation procedures. No pre-tested recovery steps. The plan that existed was useless for the crisis that actually hit.

The Five BCP Failures FINRA Cited

FINRA Rule 4370 requires broker-dealers to create, maintain, and annually review business continuity plans addressing specific scenarios. The rule mandates procedures for data backup and recovery, mission-critical system identification, customer and employee communication methods, and regulatory reporting during emergencies. Robinhood's plan failed on multiple fronts that regulators had been flagging across the industry for years.

First, the plan did not identify all mission-critical systems. If you do not know what systems keep your business running, you cannot protect them. Second, capacity planning was inadequate. The firm could not handle increased call volumes or online activity during disruption. Third, the BCP was not updated after significant operational changes. Fourth, emergency contact information was outdated. And fifth, backup documents were stored on local drives of office computers, inaccessible during a company-wide crisis.

Why This Matters Beyond Brokerage Firms

The patterns FINRA identified at Robinhood show up in examinations across financial services. Their 2019 Report on Examination Findings specifically called out BCPs that failed to identify mission-critical systems, plans not updated for operational changes, insufficient capacity for crisis call volumes, outdated contact information, and documents stored only on local machines. These are not broker-dealer-specific problems. They are organizational blind spots.

Credit unions face similar scrutiny from NCUA examiners, who have identified business continuity and disaster recovery as a major weakness in 2024 examinations. The agency's 2025 supervisory priorities continue to emphasize incident response capabilities. Banks operating under FFIEC guidelines face comparable requirements. The lesson from Robinhood applies anywhere regulators expect you to keep operating when systems fail.

Compliance as Risk Mitigation, Not Checkbox Exercise

Here is where many organizations get it wrong. They treat BCP compliance as a documentation exercise. Create the plan, file it, show it to examiners when they ask. But a plan that has not been tested does not tell you anything useful. A Disaster Recovery Preparedness Council study found that 20% of organizations have never tested their business continuity plans. Another 23% have no plans at all. When the crisis hits, these organizations discover their gaps in real time.

Robinhood had multiple technology outages starting in January 2018. Each one was a warning sign. Each one was a chance to update the BCP, stress-test the systems, and build better response procedures. Instead, the same vulnerabilities persisted until March 2020 turned a system failure into a regulatory catastrophe. The cost of fixing those gaps beforehand would have been a rounding error compared to the eventual $70 million bill.

Building a BCP That Actually Protects You

Start with a realistic inventory of what could go wrong. Physical disasters matter, but so do technology failures, vendor outages, cyberattacks, and staffing crises. Map your mission-critical systems honestly. That means the tools your customers actually use, not just the ones that appear in org charts. For every system, document who owns recovery, what the backup procedures are, and how long you can afford to be down.

Test the plan before you need it. Annual tabletop exercises help, but they are not enough. Run actual failover drills. Simulate the scenarios that keep you up at night. When you find gaps during testing, fix them immediately. Update the plan every time something significant changes in your operations, whether that is a new vendor, a relocated data center, or a surge in customer volume. Keep contact information current. Store critical documents somewhere accessible when your primary systems are down.

Document. Test. Update.

The three-word formula that could have saved Robinhood $70 million

The Regulatory Landscape Is Getting Stricter

FINRA's record fine against Robinhood signaled a shift in enforcement posture. Regulators across financial services are paying closer attention to whether BCPs exist on paper or function in practice. The 72-hour cyber incident reporting rules now in effect for credit unions add another layer of accountability. Organizations that cannot demonstrate tested, updated, comprehensive continuity plans face increasing examination scrutiny and enforcement risk.

The $57 million headline grabbed attention, but the underlying message is what matters. Your business continuity plan is not a compliance artifact. It is your organization's promise to customers, members, and regulators that you can handle adversity. When that promise fails, the consequences extend far beyond fines. They damage the trust that took years to build.