Robinhood broker-dealers to pay US$45M in penalties for violating securities law provisions
14 January 2025 US
Image: Alon/stock.adobe.com
Robinhood Securities and Robinhood Financial have agreed to pay US$45 million in combined civil penalties to settle charges arising from their brokerage operations, the US Securities and Exchange Commission (SEC) has reported.
Sanjay Wadhwa, acting director of the SEC’s Division of Enforcement, says: “[The] order finds that two Robinhood firms failed to observe a broad array of significant regulatory requirements, including failing to accurately report trading activity, comply with short sale rules, submit timely suspicious activity reports, maintain books and records, and safeguard customer information.”
For more than five years, Robinhood Securities failed to provide complete and accurate securities trading information — known as blue sheet data — to the SEC, which the broker-dealer admitted.
In connection with its stock lending and fractional share trading programmes, Robinhood Securities failed to comply with the Regulation of Short Sales (Reg SHO), designed to address abusive short-selling practices.
From May 2019 to December 2023, the firm violated the regulation’s close-out, order-marking, and locate requirements.
The order further finds that both Robinhood Securities and Robinhood Financial violated Rule 30(a) of Regulation S-P, Rule 201 of Regulation S-ID, as well as the broker-dealer recordkeeping and reporting provisions of the federal securities laws.
Both firms admitted certain findings in the order and agreed to be censured.
Additionally, both firms agreed to conduct an internal audit concerning off-channel communications compliance, and Robinhood Securities agreed to certify its remediation of the deficiencies that caused the Reg SHO violations.
Robinhood Securities and Robinhood Financial agreed to pay a penalty of US$33.5 million and US$11.5 million respectively.
Wadha adds: “It is essential to the commission’s broader efforts to protect investors and promote the integrity and fairness of our markets that broker-dealers satisfy their legal obligations when carrying out their various market functions.”
Sanjay Wadhwa, acting director of the SEC’s Division of Enforcement, says: “[The] order finds that two Robinhood firms failed to observe a broad array of significant regulatory requirements, including failing to accurately report trading activity, comply with short sale rules, submit timely suspicious activity reports, maintain books and records, and safeguard customer information.”
For more than five years, Robinhood Securities failed to provide complete and accurate securities trading information — known as blue sheet data — to the SEC, which the broker-dealer admitted.
In connection with its stock lending and fractional share trading programmes, Robinhood Securities failed to comply with the Regulation of Short Sales (Reg SHO), designed to address abusive short-selling practices.
From May 2019 to December 2023, the firm violated the regulation’s close-out, order-marking, and locate requirements.
The order further finds that both Robinhood Securities and Robinhood Financial violated Rule 30(a) of Regulation S-P, Rule 201 of Regulation S-ID, as well as the broker-dealer recordkeeping and reporting provisions of the federal securities laws.
Both firms admitted certain findings in the order and agreed to be censured.
Additionally, both firms agreed to conduct an internal audit concerning off-channel communications compliance, and Robinhood Securities agreed to certify its remediation of the deficiencies that caused the Reg SHO violations.
Robinhood Securities and Robinhood Financial agreed to pay a penalty of US$33.5 million and US$11.5 million respectively.
Wadha adds: “It is essential to the commission’s broader efforts to protect investors and promote the integrity and fairness of our markets that broker-dealers satisfy their legal obligations when carrying out their various market functions.”
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