Robinhood has reached a $45 million settlement with the U.S. SEC due to over 10 violations of securities laws.
The settlement affects its broker-dealer subsidiaries, Robinhood Securities LLC and Robinhood Financial LLC.
On January 13, the SEC released a statement revealing that two entities associated with Robinhood failed to comply with several critical regulatory requirements. These violations included inaccuracies in reporting trading activity, neglecting short sale rules, delaying suspicious activity reports, failing to maintain proper books and records, and inadequately safeguarding customer information.
The SEC’s order noted that Robinhood admitted to specific findings, such as failing to preserve customer electronic communications between 2020 and 2021. It also highlighted inaccuracies in at least 11,849 Electronic Blue Sheets (EBS), which led to misreporting data for over 392 million transactions.
Additionally, the SEC found that Robinhood did not report suspicious activities promptly between January 2020 and March 2022. The company also failed to implement adequate identity theft protection measures from April 2019 to July 2022. Violations of Regulation SHO, which regulates short-selling practices, were identified from December 2019 to May 2022. In 2021, Robinhood failed to address a cybersecurity vulnerability that allowed unauthorized access to the sensitive information of millions of customers.
As part of the settlement, Robinhood Securities will pay a fine of $33.5 million, while Robinhood Financial will pay $11.5 million. Both penalties must be paid by January 27, and both firms will be censured.
Despite the settlement, Robinhood’s stock (HOOD) showed limited impact, closing at $39.59 on January 13, down 1.22%, before recovering 0.48% in after-hours trading, according to Google Finance data.
In another development, Coinbase Global Inc. achieved an important milestone in its ongoing legal battle with the SEC. A federal court, overseen by Judge Catherine Polk Failla, granted Coinbase’s request for an interlocutory appeal. This marked a notable legal victory for the cryptocurrency exchange as it seeks clarity in its dispute with the regulator.
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