Robinhood has agreed to pay $45 million in civil penalties to settle charges of securities law violations.
According to a Jan. 13 statement, this settlement follows an investigation by the US Securities and Exchange Commission (SEC) into the activities of its subsidiaries, Robinhood Securities LLC and Robinhood Financial LLC.
The penalties include $33.5 million from Robinhood Securities and $11.5 million from Robinhood Financial.
The breaches
According to Sanjay Wadhwa, Acting Director of the SEC’s Division of Enforcement, Robinhood’s failures spanned several critical areas, including inaccurate reporting, poor cybersecurity measures, and inadequate fraud prevention.
Wadhwa stated:
“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.”
The SEC found that these firms failed to comply with various regulatory requirements from 2019 to 2022. Among the violations were delays in investigating and reporting suspicious transactions between January 2020 and March 2022.
Additional breaches included failing to implement sufficient protections against identity theft from April 2019 to July 2022. A cybersecurity weakness, which persisted from June to November 2021, also led to unauthorized access to users’ data.
The firms were further accused of not maintaining proper records of electronic communications, a key regulatory requirement.
Robinhood Securities faced additional scrutiny for issues related to fractional share trading, stock lending practices, and failures in regulatory reporting. To address these problems, the firm agreed to certify that it has implemented measures to prevent similar violations.
Both entities admitted to the SEC’s findings and agreed to be reprimanded. They also committed to conducting an internal review to strengthen electronic communications compliance.
Robinhood crypto
Although the recent SEC order does not implicate Robinhood’s crypto operations, the firm faces regulatory challenges. Last year, the firm disclosed receiving a Wells notice from the financial regulator, signaling potential enforcement action.
Robinhood’s 2024 report reveals substantial activity in its crypto segment. As of November 2024, the platform recorded $119 billion in crypto trading volume and managed $38 billion in digital assets under custody.
The company also revealed that it expanded its crypto offerings in the US, adding tokens like Solana and Cardano, which pushed the total number of available digital assets in the region to 20.
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