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The SEC has charged Robinhood with misleading investors on how it made money and also for failing to get the best price for customer orders.
The popular online trading firm has agreed to pay $65 million, while neither admitting nor denying wrongdoing. Robinhood provided misleading information to customers about the true costs of choosing to trade with the firm,” said Stephanie Avakian, director of the SEC’s Enforcement Division. “Brokerage firms cannot mislead customers about order execution quality.
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Robinhood to pay US$65m to settle SEC claims it mishandled trades
17 Dec, 2020 05:39 PM
3 minutes to read
The Robinhood platform has been very popular among investors. Photo / Getty Images
Financial Times
The trading app Robinhood has agreed to pay US$65m (NZ$90m) to settle charges from US securities regulators that it failed to provide its customers with the best prices for trades on its platform. The Securities and Exchange Commission said that while Robinhood had promoted its services as commission free , its customers orders were processed at prices inferior to other brokers.
The commission also said the company failed to disclose payments it received from high-speed trading houses that process its orders, payments that may have influenced decisions over how Robinhood trades are executed.
Robinhood pays $65M to settle SEC charges for past ‘inferior’ pricing execution, misleading customers
Today, American securities watchdog the SEC announced that Robinhood, a free-to-trade broker that has grown rapidly in recent years, has paid a $65 million fine to settle charges relating to some of its historical business practices. The actions at issue occurred between 2015 and 2018, with the SEC alleging that the company “made misleading statements and omissions in customer communications” about how it generated “its largest revenue source” specifically, payment for order flow.
The SEC also said that the well-funded unicorn “falsely claimed in a website FAQ between October 2018 and June 2019 that its execution quality matched or beat that of its competitors,” when it reality it was executing customer trades at “inferior trade prices that in aggregate deprived customers of $34.1 million even after taking into account the savings from not paying a commission.
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