Online trading firm Robinhood Markets has agreed to pay $45 million to settle charges from the US Securities and Exchange Commission (SEC) stemming from a series of regulatory violations concerning recordkeeping, trade reporting, and other rule breaches. The SEC’s investigation revealed that Robinhood Securities LLC and Robinhood Financial LLC failed to meet numerous crucial requirements, including accurately reporting trading activity, filing timely reports of suspicious activity, maintaining proper records, and adhering to short sale rules, according to a statement from acting enforcement director Sanjay Wadhwa. Extensive violations revealed in SEC investigation The SEC’s findings exposed not only deficiencies in Robinhood’s trading operations, but also revealed that the company failed to properly retain work-related communications when employees used messaging apps and other “off-channel” communication platforms. These failures, along with the company’s flawed trading data reporting (known as blue sheets), and its inability to adequately address cybersecurity risks, underscores serious lapses in regulatory compliance at the popular trading platform. Robinhood acknowledges past issues While Robinhood did not admit or deny the SEC’s allegations, the firm acknowledged its failures and said that it was pleased to resolve the matters. In a statement, Robinhood General Counsel Lucas Moskowitz emphasized that “As the SEC’s order acknowledges, most of these are historical matters that our broker-dealers have previously addressed.” He added that the company is “well-positioned to continue leading the industry in developing the innovative products and services our customers want and need,” and stated that they look forward to working with the SEC under a new administration. “Two Robinhood firms failed to observe a broad array of significant regulatory requirements, including failing to accurately report trading activity, comply with short sale rules, submit timely suspicious activity reports, maintain books and records, and safeguard customer information,” said Sanjay Wadhwa, the SEC’s acting enforcement director, in a statement, emphasizing the wide scope of Robinhood’s violations. Robinhood’s history of regulatory issues Robinhood, best known for its commission-free trading, debuted as a public company in 2021 and quickly found itself at the center of the “meme stock” craze that shook the retail trading market. The firm has since expanded its suite of consumer products, including credit cards and retirement accounts. The company also has a history of regulatory troubles. In December 2020, prior to its initial public offering, Robinhood agreed to pay the SEC $65 million to settle allegations of failing to properly disclose that it was selling its customers’ stock orders to high-frequency traders and other firms. In May 2024, Robinhood warned investors that it could face an SEC enforcement action regarding its cryptocurrency business, after the agency’s enforcement staff sent the company a Wells notice. Monday’s settlement with the SEC does not cover any crypto-related issues. A Robinhood spokesperson said that the company did not have an update on the situation. The post Robinhood settles SEC charges with $45M payment over regulatory violations appeared first on Invezz
