Robinhood is to pay $45 million to settle a range of SEC charges against its brokerage operations.
According to the SEC’s order, the violations by Robinhood Securities and Robinhood Financial related to failures to timely investigate suspicious transactions and to put in place adequate procedures to protect customers from identity theft.
A third charge covers a long-standing failure to address known risks from a cybersecurity vulnerability that led to the illegal download of millions of remote access customer accounts.
Further charges include a failures to maintain and preserve electronic communications in violation of the recordkeeping provisions of the federal securities laws.
In addition, the broker-dealers failed to maintain copies of core operational databases in a manner that ensured legally required records were protected from deletion or modification for the required length of time.
“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,” say Sanjay Wadhwa, acting director of the SEC’s Division of Enforcement. “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.”
Robinhood Securities was also found to have failed to provide acccurate bluesheet trading data to the regulator and also fell foul of laws relating to fractional share trading leading to abusive short selling practices.
Nor is this the end of the regulatory woes facing the firm. In May last year, Robinhood also received a Wells notice from SEC staff indicating that they would recommend that the commission take enforcement action against the company over its cryptocurrency business.