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You are here: Home / News / $45M Fine: Robinhood Settles SEC Charges on Securities Missteps
January 15, 2025 by Usman Zafar
- Robinhood agrees to pay $45 million in civil penalties for SEC violations.
- Violations span cybersecurity, identity theft, and recordkeeping failures.
- Settlement includes internal audits and remediation commitments.
Robinhood, the popular trading platform, has agreed to pay $45 million in civil penalties to resolve a series of charges brought by the U.S. Securities and Exchange Commission (SEC).
The penalties relate to alleged securities laws violations by Robinhood Securities, LLC, and Robinhood Financial, LLC. This settlement underlines major regulatory shortcomings on cybersecurity, the prevention of identity theft, and following federal recordkeeping rules.
According to the SEC, the firm failed to detect and report suspicious activity between 2020 and 2022. Also, it failed to have proper cybersecurity controls that would have prevented a third-party data breach exposing sensitive customer information in 2021.
It had failed to take proper policies and procedures that could effectively guard its customers against the continuous identity theft of its customers. Additionally, the firm was in failure towards preserving electronic communications and brokerage records, which was against the important provisions of recordkeeping, vital for the integrity and transparency of financial markets.
Robinhood’s Five-Year Failure in Providing Trading Data
The detailed order from the SEC outlined a list of infractions, including Robinhood Securities’ failure to provide accurate trading information, otherwise known as electronic blue sheet data, for more than five years of shortfall that had weakened regulatory oversight of securities transactions.
It also violated Regulation SHO, a rule aimed at preventing abusive short-selling practices via its fractional share trading and stock lending programs. The failures of Robinhood ran over to unrecorded communications off-channel when it failed to keep records of conversations with customers required under the law. This again raised a question about the compliance culture and operational transparency of the firm.
Commitment to Compliance and Future Oversight
As part of the settlement, Robinhood acknowledged the findings and agreed to the censure. Both firms will be conducting internal audits regarding off-channel communications and attest in writing to taking corrective action to remedy their Regulation SHO violations. Of the fines, the larger fine levied of $33.5 million goes to Robinhood Securities and the smaller at $11.5 million goes to Robinhood Financial.
This settlement is important to the extent that it shows how steadfastly serious the Commission is regarding financial intermediaries. Acting Director of Enforcement Sanjay Wadhwa said that broker-dealers are under an obligation to ensure regulatory requirements in protecting the integrity of the markets and interests of investors.
English (US) ·