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Robinhood to Pay $64M for Misleading Customers

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Robinhood to Pay $64M

Robinhood to Pay $64M for Misleading Customers

Robinhood has agreed to pay a $65 million civil penalty after the Securities and Exchange Commission charged the company with deceiving customers about the way it operates. The SEC says that Robinhood has not been transparent with the way it makes money and has failed to deliver the promised best execution of trades.

According to the SEC’s order, between 2015 and late 2018, Robinhood made misleading statements and omissions in customer communications, including in FAQ pages on its website, about its largest revenue source when describing how it made money – namely, payments from trading firms in exchange for Robinhood sending its customer orders to those firms for execution, also known as “payment for order flow.”

The SEC says that one of Robinhood’s selling points to customers was that trading was “commission free,” but due in large part to its unusually high payment for order flow rates, Robinhood customers’ orders were executed at prices that were inferior to other brokers’ prices. Despite this, Robinhood falsely claimed in a website FAQ between October 2018 and June 2019 that its execution quality matched or beat that of its competitors.

The order finds that Robinhood provided inferior trade prices that in aggregate deprived customers of $34.1 million even after taking into account the savings from not paying a commission.

Without admitting or denying the SEC’s findings, Robinhood agreed to a cease-and-desist order prohibiting it from violating the antifraud provisions of the Securities Act of 1933 and the recordkeeping provisions of the Securities Exchange Act of 1934, censuring it, and requiring it to pay a $65 million civil penalty.

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DDG
DDGhttp://dannydealguru.com
Based in NYC. Points/miles enthusiast for years and actively writing about it for the last 6+ years at Danny the Deal Guru. I'm always looking out for deals. Making a few bucks is always nice, but the traveling is by far the best part of this business.

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6 COMMENTS

    • What do you expect with a company named “Robinhood”. The money here goes to the government who will give it out in welfare to the poor. Since the whole idea of Robinhood is to steal from the rich and give to the poor.

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