Robinhood Faces Securities Violations Charges and Will Pay a $45 Million Penalty

• The Securities and Exchange Commission announced that two related Robinhood broker-dealers would pay a combined total of $45 million in penalties to settle administrative charges.
• The SEC said Robinhood violated more than 10 separate securities law provisions.

On Monday, the Securities and Exchange Commission announced that two related broker-dealers had agreed to pay $45 million in combined penalties to settle administrative charges for violating over 10 securities law provisions in their brokerage operations.

The SEC accused Robinhood Securities LLC and Robinhood Financial LLC of violations related to delayed reporting of suspicious trading, inadequate identity theft protections, and unauthorized access to computer systems.

According to the agency, the two Robinhood entities experienced long-standing issues in maintaining and preserving electronic communications, retaining copies of operational databases, and maintaining customer communications as required by law between 2020 and 2021.

The agency stated that Robinhood Securities failed to provide complete and accurate securities trading information, known as blue sheet data, for more than five years.

The SEC has announced that Robinhood Securities made at least 11,849 inaccurate or incomplete submissions to the Commission during the Electronic Blue Sheets Relevant Period, due to eleven different types of errors.

At least 392 million EBS data transactions were incorrectly reported due to the errors.

The acting director of the SEC's Division of Enforcement, Sanjay Wadhwa, stated that it is crucial for broker-dealers to fulfill their legal obligations while performing their market functions in order to support the Commission's broader efforts to safeguard investors and maintain the integrity and fairness of our financial markets.

According to Wadhwa, two Robinhood firms did not adhere to numerous significant regulatory requirements, such as accurately reporting trading activity, complying with short sale rules, submitting timely suspicious activity reports, maintaining accurate books and records, and protecting customer information.

Lukas Moskowitz, General Counsel of Robinhood Markets, stated, "We are pleased to resolve these matters. The SEC's order acknowledges that most of these issues are historical and have already been addressed by our broker-dealers."

"Moskowitz stated that we are well-positioned to continue leading the industry in developing innovative products and services that our customers need to participate in U.S. and global financial markets. He added, "We look forward to working with the SEC under a new administration.""

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