RRobinhood Settles with SEC for $45 Million Over Multiple Securities Violations

The United States Securities and Exchange Commission (SEC) has announced a $45 million settlement with Robinhood, following multiple securities law violations by the company’s broker-dealer entities. An SEC order, made public on January 13, outlines the numerous infractions committed by Robinhood Securities LLC and Robinhood Financial LLC between 2018 and April 2024.

Violations and Penalties

According to the SEC, the two firms admitted to certain findings in the order and agreed to be censured. As part of the settlement, Robinhood Securities will pay a $33.5 million penalty, while Robinhood Financial will pay $11.5 million, totaling $45 million.

Specific Infractions

Some key violations include:

  • Failure to promptly investigate and report suspicious activity between January 2020 and March 2022, undermining anti-money laundering laws.
  • Insufficient identity theft protection policies from April 2019 to July 2022, exposing customers to increased risks of fraud.
  • Cybersecurity vulnerabilities, including a failure to address known risks related to remote system access between June and November 2021, resulting in a third-party data breach affecting millions of users.
  • Failure to maintain and preserve off-channel communications and some customer communications between 2020 and 2021, violating federal securities laws.
  • Non-compliance with Regulation SHO, governing short-selling practices, in fractional share trading and stock lending programs from May 2019 to December 2023.

Additionally, Robinhood Securities admitted to errors in over 11,800 Electronic Blue Sheets submitted to the SEC, resulting in inaccurate reporting of at least 392 million transactions.

Statement from the SEC

“Broker-dealers have a critical role in maintaining the integrity and fairness of our financial markets,” said Sanjay Wadhwa, Acting Director of the SEC’s Division of Enforcement. “Meeting their legal obligations is essential to the Commission’s broader efforts to protect investors and promote the integrity and fairness of our markets.”

Implications for Robinhood’s Crypto Business

Although Robinhood’s crypto businesses were not mentioned in the order, the company is not entirely out of the water. Last year, Robinhood received a Wells notice from the SEC, indicating potential enforcement action over its cryptocurrency listings, custody practices, and platform operations.

The SEC currently has ongoing civil enforcement cases against several prominent crypto firms, including Binance, Coinbase, and Ripple Labs.

Stay informed about the latest developments in the cryptocurrency and finance world. For more news and updates, visit Global Crypto News.

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