Online brokerage platform Robinhood has reached a $45 million settlement with the US Securities and Exchange Commission after an investigation accused the company of violating more than 10 securities law provisions.
The penalty impacts two of Robinhood’s broker-dealers, Robinhood Securities LLC and Robinhood Financial LLC.
“Today’s 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,” the SEC said in a Jan. 13 statement.
According to the Jan. 13 order — which says Robinhood entities “admitted to certain findings” — the SEC determined that two Robinhood entities failed to maintain and preserve electronic communications from customers between 2020 and 2021.
Robinhood also made at least 11,849 Electronic Blue Sheets — formal requests for information from the SEC — that contained inaccurate information or omissions, according to the SEC.
“Those errors resulted in the misreporting of EBS data for at least 392 million transactions.”
Excerpt of the SEC’s administrative and cease-and-desist proceeding with Robinhood. Source: SEC
The regulator also said suspicious activity wasn’t reported in a timely manner between January 2020 and March 2022, while sufficient identity theft protection measures weren’t put in place between April 2019 and July 2022.
It also said Robinhood failed to comply with “Regulation SHO” — a rule aimed at regulating abusive short-selling practices — from December 2019 to May 2022 and failed to adequately address a cybersecurity vulnerability in 2021, which led to an unauthorized third party accessing information related to “millions” of Robinhood customers.
Both firms admitted to certain findings in the order and agreed to be censured.
Robinhood Securities agreed to pay a $33.5 million penalty, while Robinhood Financial agreed to pay $11.5 million. Both penalties must be paid by Jan. 27.
Related: Appellate court grants partial win for Coinbase over SEC rules
Robinhood (HOOD) shares weren’t significantly impacted by the $45 million settlement, falling 1.22% to $39.59 on Jan. 13 and then recovering 0.48% in after-hours, Google Finance data shows.
It isn’t clear to what extent Robinhood’s crypto business contributed to those violations.
However, Robinhood’s crypto business reached a $3.9 million settlement with California last September, following claims that it prevented customers from withdrawing crypto between 2018 and 2022.
Robinhood did not admit or deny wrongdoing in its settlement.
Meanwhile, Robinhood’s crypto trading volume and revenue increased 112% and 165% year-on-year to $14.4 billion and $61 million in the third quarter, while its crypto assets under custody rose 32.3% to $19.5 billion from Q2.
Magazine: I became an Ordinals RBF sniper to get rich… but I lost most of my Bitcoin