Robinhood has agreed to a $45 million settlement with the U.S. Securities and Exchange Commission (SEC) following allegations of violating multiple securities laws.
Robinhood has agreed to a $45 million settlement with the U.S. Securities and Exchange Commission (SEC) following allegations of violating multiple securities laws. The SEC's order found that Robinhood Securities LLC and Robinhood Financial LLC breached over 10 provisions related to regulatory compliance.
The SEC stated that the two Robinhood entities failed to report trading activity accurately, comply with short sale regulations, and submit timely suspicious activity reports.
Additionally, they did not maintain proper books and records or adequately safeguard customer information. The investigation revealed that between 2020 and 2021, Robinhood failed to preserve electronic communications from customers.
The SEC also noted that Robinhood submitted at least 11,849 Electronic Blue Sheets, which are formal requests for information, that contained inaccuracies or omissions, affecting reporting for at least 392 million transactions.
Issues concerning timely reporting of suspicious activity were identified between January 2020 and March 2022. Furthermore, Robinhood did not implement adequate identity theft protection measures from April 2019 to July 2022.
The regulatory body highlighted failures in adhering to "Regulation SHO," aimed at regulating abusive short-selling practices, from December 2019 to May 2022. A cybersecurity vulnerability in 2021 allowed unauthorized access to customer information, impacting millions of users.
As part of the settlement, Robinhood Securities will pay a penalty of $33.5 million, while Robinhood Financial will pay $11.5 million.
Both penalties are due by Jan. 27. Following the announcement, Robinhood's stock price saw a minor decline of 1.22%, closing at $39.59, before recovering slightly in after-hours trading.
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