Robinhood has prevented Securities and Exchange Commission (“SEC”) charges from progressing by paying the commission $65 million. The SEC charged that the company had misled app users by claiming to be commission free while actually charging extra on execution prices that it received back from market makers. The trading app is known for creating a platform that makes investing accessible for everyone. The SEC charges noted that between 2015 and 2018 Robinhood had deceived app users about where its money was actually coming from, specifically misrepresenting its “receipt of payments from certain principal trading firms, also known as electronic market makers, for routing Robinhood customer orders to them, and relating to certain statements about the execution quality Robinhood achieved for its customers’ orders.” While SEC guidelines don’t restrict broker-dealers such as Robinhood from receiving funds by directing orders through principal trading firms, the commission does require that those broker-dealers work to identify the best deal for their customers. The SEC charges states that “one of Robinhood’s primary selling points was that it did not charge its customers trading commissions. In reality, however, ‘commission free’ trading at Robinhood came with a catch: Robinhood’s customers received inferior execution prices compared to what they would have received from Robinhood’s competitors.”
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About Robinhood
Headquartered in California, Robinhood is dedicated to democratize finance for all. The company creates products that enable users to start investing at their own pace and on their own terms. The company offers a mobile app and website that gives people the ability to invest in stocks, ETFs and options through Robinhood Financial and crypto trading through Robinhood Crypto. For more information about the company, visit www.Robinhood.com.
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