Robinhood Fined $45 Million for Recordkeeping Failures, Short Sale Violations and More

Robinhood, an online brokerage firm, has agreed to pay $45 million in penalties to settle a range of charges brought by the US Securities and Exchange Commission (SEC), including alleged violations of recordkeeping, among other issues. The penalty has been imposed on two Robinhood entities: Robinhood Securities will pay $33.5 million, while Robinhood Financial will pay $11.5 million.

An Array of Violations

According to the US regulator, Robinhood failed to investigate suspicious transactions, implement policies and procedures to prevent customers’ identity theft, address risks of cybersecurity threats, maintain and preserve electronic communications, maintain copies of core operational databases, and retain some of its communications with brokerage customers.

Vlad Tenev, CEO at Robinhood; Photo: Wikimedia Commons

Furthermore, the Robinhood Securities entity allegedly committed two additional violations by failing to submit electronic blue sheets, which provide complete and accurate securities trading information, and failing to prevent market abuse when offering stock lending and fractional share trading programs.

“It is essential to the Commission’s broader efforts to protect investors and promote the integrity and fairness of our markets that broker-dealers satisfy their legal obligations when carrying out their various market functions,” said Sanjay Wadhwa, Acting Director of the SEC’s Division of Enforcement.

Following the settlement with the SEC, the two Robinhood entities agreed to conduct an internal audit concerning off-channel communications compliance. Robinhood Securities also agreed to certify its remediation of the deficiencies that caused the Reg SHO violations.

Robinhood’s Focus Is on Expansion

Founded in 2013, Robinhood transformed the American brokerage industry with its zero-commission model. Its impact prompted legacy giants like Vanguard, Charles Schwab, and Fidelity to adopt similar zero-fee trading options for retail investors.

The California-based brokerage had 11.8 million monthly active users and 1.98 million premium customers as of June 2024.

The brokerage is expanding its international presence and plans to open a regional headquarters in Singapore later this year. It entered the European Union in 2023 with crypto trading and introduced regular brokerage services in the UK last year.

Robinhood, an online brokerage firm, has agreed to pay $45 million in penalties to settle a range of charges brought by the US Securities and Exchange Commission (SEC), including alleged violations of recordkeeping, among other issues. The penalty has been imposed on two Robinhood entities: Robinhood Securities will pay $33.5 million, while Robinhood Financial will pay $11.5 million.

An Array of Violations

According to the US regulator, Robinhood failed to investigate suspicious transactions, implement policies and procedures to prevent customers’ identity theft, address risks of cybersecurity threats, maintain and preserve electronic communications, maintain copies of core operational databases, and retain some of its communications with brokerage customers.

Vlad Tenev, CEO at Robinhood; Photo: Wikimedia Commons

Furthermore, the Robinhood Securities entity allegedly committed two additional violations by failing to submit electronic blue sheets, which provide complete and accurate securities trading information, and failing to prevent market abuse when offering stock lending and fractional share trading programs.

“It is essential to the Commission’s broader efforts to protect investors and promote the integrity and fairness of our markets that broker-dealers satisfy their legal obligations when carrying out their various market functions,” said Sanjay Wadhwa, Acting Director of the SEC’s Division of Enforcement.

Following the settlement with the SEC, the two Robinhood entities agreed to conduct an internal audit concerning off-channel communications compliance. Robinhood Securities also agreed to certify its remediation of the deficiencies that caused the Reg SHO violations.

Robinhood’s Focus Is on Expansion

Founded in 2013, Robinhood transformed the American brokerage industry with its zero-commission model. Its impact prompted legacy giants like Vanguard, Charles Schwab, and Fidelity to adopt similar zero-fee trading options for retail investors.

The California-based brokerage had 11.8 million monthly active users and 1.98 million premium customers as of June 2024.

The brokerage is expanding its international presence and plans to open a regional headquarters in Singapore later this year. It entered the European Union in 2023 with crypto trading and introduced regular brokerage services in the UK last year.

This post is originally published on FINANCEMAGNATES.

  • Related Posts

    Pre-Hedging in FX: Balancing Risk and Transparency Without Any Standardization

    As the industry digests the findings of IOSCO’s review of the practice of hedging anticipated client trades, dealers are adamant that it is a procedure that benefits clients as well…

    Revolut Expands Security Features with In-App Calls for Personal Customers

    Revolut, a fintech company with over 50 million global customers, has introduced In-App calls for personal customers. According to the company, this new feature aims to improve security by reducing…

    Leave a Reply

    Your email address will not be published. Required fields are marked *

    You Missed

    Pre-Hedging in FX: Balancing Risk and Transparency Without Any Standardization

    • January 21, 2025
    Pre-Hedging in FX: Balancing Risk and Transparency Without Any Standardization

    Revolut Expands Security Features with In-App Calls for Personal Customers

    • January 21, 2025
    Revolut Expands Security Features with In-App Calls for Personal Customers

    World reacts to Trump withdrawing US from Paris climate pact

    • January 21, 2025
    World reacts to Trump withdrawing US from Paris climate pact

    Yemen vice-president says Trump return pivotal in fight against Iran backed-Houthis

    • January 21, 2025
    Yemen vice-president says Trump return pivotal in fight against Iran backed-Houthis