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Robinhood to pay $65m to settle SEC claims

18 December 2020
1692
1 min.
3
Robinhood to pay $65m to settle SEC claims

Securities dispute

Robinhood agreed to settle the dispute with the Securities and Exchange Commission (SEC) out of court, paying $65m. The regulator accused the cryptocurrency-friendly platform of misleading users by claiming that it did not charge trading fees.

The SEC said that Robinhood customers were transacting at prices that included commissions, which the platform subsequently received from market makers. The regulator believes that Robinhood thus misinformed users about its revenue sources from 2015 to 2018.

The Exchange Act does not prohibit broker-dealers such as Robinhood from generating income from directing market orders through so-called electronic market makers. At the same time, they are required by law to ensure that clients' trades are made at the best possible prices.

"Robinhood's claimed 'commission-free' trading was just a ruse: customers received worse execution prices than they could have expected from the platform's competitors," the regulator said in a statement.

The SEC estimated that Robinhood generated up to 80% of its revenues in this way in 2015.

The Commission's claims were once again a reminder of Robinhood's controversial reputation. Earlier, it was reported that the Massachusetts regulator intended to file a lawsuit against the platform.

Robinhood's operations had previously drawn the interest of the SEC and the Financial Services Industry Regulatory Authority (FINRA) due to app glitches in March.

As a reminder, Robinhood's capitalisation reached $11.7bn following the successful closing of its Series G funding round.

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