The US Securities and Exchange Commission (SEC) has accused the Robinhood trading platform of hiding information from users. Robinhood will pay a $ 65 million fine.
According to the prosecution, Robinhood Financial LLC did not tell traders that it was charging them trading fees. The regulator claims that the platform did not fulfill its obligations to find optimal conditions for the execution of client orders.
The SEC said that between 2015 and the end of 2018, the platform deliberately misled users by hiding its sources of income. The Robinhood management stated that the platform trades without commissions, while the site’s clients carried out transactions at worse prices than other brokers.
Joseph Sansone, the head of the SEC’s market fraud investigation department, claims that due to such actions of the site, its clients lost about $ 34.1 million, even if we do not take into account the payment of the commission. In turn, the head of the SEC’s enforcement department Stephanie Avakian said that brokerage firms cannot mislead clients about the quality of order execution, so the agency will not allow brokers to ignore their obligations to clients.
According to Erin Schneider, director of the SEC’s regional office in San Francisco, if Robinhood works with digital assets, providing people with alternative ways to invest, it does not invalidate compliance with federal securities laws. Robinhood management did not admit their guilt, but did not dispute the charges either. The company will pay a fine of $ 65 million, and will also hire an independent consultant to review its business processes and procedures related to interaction with customers.
As a reminder, last year users reported a bug in the Robinhood trading app allowing clients to borrow huge amounts with over 800x leverage.
