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The U.S. Securities and Exchange Commission (SEC) announced that Robinhood Securities LLC and Robinhood Financial LLC will pay a total of $45 million in civil penalties to resolve charges related to their brokerage practices.
The charges stem from a series of regulatory failures by the two companies, including violations of reporting and recordkeeping requirements, cybersecurity failures and other compliance issues.
SEC Warns Robinhood of Multiple Trading and Compliance Violations
According to declare SEC on January 13, Robinhood’s violations spanned multiple sectors.
“Today’s order concludes that two Robinhood companies failed to comply with a series of important regulatory requirements, including failing to properly report trading activity, failing to comply with short selling regulations, failing to file reported suspicious activity promptly, failed to maintain records and books as required, and failed to protect customer information,” said SEC official Sanjay Wadhwa.
From January 2020 to March 2022, the company failed to file suspicious activity reports in a timely manner, leading to delays in investigations of suspicious transactions. Additionally, from April 2019 to July 2022, Robinhood did not implement an adequate policy to protect customers from identity theft.
The SEC said a cybersecurity vulnerability exposed user data from June to November 2021, when a third-party hacker illegally accessed information related to millions of users.
The SEC also found that Robinhood violated rules on storing electronic communications and protecting operational data. The Company did not maintain material customer communications from 2020 to 2021, and did not maintain material brokerage records as required by federal law.
Robinhood was also cited for failing to provide accurate securities trading information for more than five years, which is essential for the SEC’s oversight of market activity.
In addition to these matters, the SEC found that Robinhood Securities violated Regulation SHO, which regulates short selling activities. From May 2019 through December 2023, Robinhood Securities failed to meet regulatory requirements related to closing, marking orders, and locating stocks for short sales transactions.
Both Robinhood Financial and Robinhood Securities have acknowledged the SEC’s findings. These brokerage firms have agreed to implement internal audits and remediation plans to address these issues.
Robinhood Securities will pay a fine of $33.5 million, while Robinhood Financial will pay a fine of $11.5 million. As part of the settlement, Robinhood agreed to improve its compliance efforts.
Recently, Robinhood was fined $3.5 million for denying customers access to crypto assets and fraudulent practices. The investigation was conducted by the California Department of Justice.
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