The financial service company, Robinhood, agreed to a $45 million fine following an examination by the U.S. Securities and Exchange Commission (SEC), which alleged that Robinhood breached over ten regulations within their securities laws.
The fine affects two of Robinhood’s brokerage firms: Robinhood Securities LLC and Robinhood Financial LLC.
According to a statement released on January 13th, the Securities and Exchange Commission (SEC) determined that two Robinhood companies violated numerous crucial regulatory standards. Among these breaches were inaccurate reporting of trading activities, non-compliance with short sale rules, late submission of suspicious activity reports, poor record keeping, and insufficient protection of customer data.
Based on an order issued on January 13, the Securities and Exchange Commission (SEC) found that two of Robinhood’s entities acknowledged certain findings and were unable to keep and save customer electronic communications from 2020 to 2021 as required.
According to the Securities and Exchange Commission (SEC), Robinhood submitted over 11,000 Electronic Blue Sheets (requests for information) containing incorrect details or missing information.
“Those errors resulted in the misreporting of EBS data for at least 392 million transactions.”
During the period from January 2020 to March 2022, it was found that suspicious activities were not reported promptly, and from April 2019 up until July 2022, adequate identity theft protection measures were lacking.
The statement can be rephrased as follows: From December 2019 to May 2022, it was found that Robinhood did not adhere to the regulations outlined in “Regulation SHO,” a rule designed to prevent abusive short-selling activities. Additionally, in 2021, they were unable to effectively address a cybersecurity flaw, which eventually allowed an unauthorized party to gain access to sensitive information related to numerous Robinhood customers.
Both firms admitted to certain findings in the order and agreed to be censured.
Robinhood Securities and Robinhood Financial have each been ordered to make payments totaling $33.5 million and $11.5 million respectively. These penalties are due by January 27th.
On January 13th, Robinhood’s (HOOD) shares experienced a decline of 1.22%, ending the day at $39.59, according to Google Finance data. However, following this dip, there was a recovery of 0.48% in after-hours trading. The settlement of $45 million didn’t seem to have a substantial effect on Robinhood’s share price.
It isn’t clear to what extent Robinhood’s crypto business contributed to those violations.
In September 2021, Robinhood’s cryptocurrency operations agreed to a $3.9 million settlement with California authorities due to allegations of blocking customers from withdrawing digital currencies between the years 2018 and 2022.
Robinhood did not admit or deny wrongdoing in its settlement.
During the third quarter, Robinhood’s cryptocurrency trading volume and income saw significant growth. The trading volume increased by 112% compared to the same period last year, reaching a total of $14.4 billion. Similarly, the revenue generated from crypto trading surged by 165%, amounting to $61 million. Additionally, the value of cryptocurrencies held in custody for customers rose by 32.3% from the previous quarter, standing at $19.5 billion.
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2025-01-14 07:56