Robinhood agrees to $45M settlement with SEC: What went wrong?
What's the story
Robinhood Markets Inc. has reached a $45 million settlement with the US Securities and Exchange Commission (SEC).
The settlement involves two of its subsidiaries, Robinhood Securities LLC and Robinhood Financial LLC.
The SEC had accused the entities of multiple securities law violations, including failure to promptly report suspicious activity and improper preservation of electronic communications records.
Robinhood allows users to buy and sell stocks, ETFs, and cryptocurrency without paying a commission.
Regulatory breaches
SEC highlights Robinhood's regulatory shortcomings
Sanjay Wadhwa, the SEC's acting enforcement director, said the two Robinhood firms failed to meet several significant regulatory requirements.
These include accurately reporting trading activity, complying with short sale rules, timely submission of suspicious activity reports, maintaining books and records, and protecting customer information.
Despite these allegations by the SEC, Robinhood has neither confirmed nor denied them.
Company statement
Robinhood's response to SEC allegations
In response to the SEC's claims, Robinhood said it was happy to resolve the issues.
Robinhood's general counsel Lucas Moskowitz said that most of these are historical matters that our broker-dealers have previously addressed.
He also added that they look forward to working with the SEC under a new administration.
The statement shows Robinhood's willingness to cooperate with regulatory authorities going forward.
Past settlements
Robinhood's history with SEC and future concerns
Notably, this isn't the first time Robinhood has been under the SEC's regulatory microscope.
In December 2020, ahead of its IPO, the company settled for $65 million over claims of failing to properly inform clients about selling their stock orders to high-frequency traders and other firms.
In May 2024, Robinhood warned investors of a potential SEC enforcement action over its cryptocurrency business.