Robinhood, the popular investment platform, has reached a settlement with the US Securities and Exchange Commission (SEC) to pay $45 million in civil penalties for securities law violations. The charges were related to the activities of its subsidiaries, Robinhood Securities LLC and Robinhood Financial LLC.
The settlement, announced on January 13, includes $33.5 million from Robinhood Securities and $11.5 million from Robinhood Financial. The SEC’s investigation found that Robinhood had failed to comply with various regulatory requirements, including inaccurate reporting, poor cybersecurity measures, and inadequate fraud prevention.
Sanjay Wadhwa, Acting Director of the SEC’s Division of Enforcement, highlighted the extent of Robinhood’s failures, stating that the firm had neglected critical areas such as accurately reporting trading activity, complying with short sale rules, submitting timely suspicious activity reports, maintaining books and records, and safeguarding customer information.
The violations occurred between 2019 and 2022, with instances of delayed investigation and reporting of suspicious transactions, inadequate protections against identity theft, cybersecurity weaknesses leading to unauthorized data access, and failure to maintain proper records of electronic communications.
In addition to the civil penalties, Robinhood Securities faced scrutiny for issues related to fractional share trading, stock lending practices, and regulatory reporting failures. The firm has agreed to implement measures to prevent similar violations and conduct an internal review to strengthen compliance with electronic communications regulations.
While the recent SEC order did not implicate Robinhood’s crypto operations, the firm has faced regulatory challenges in that area. In 2024, Robinhood reported significant activity in its crypto segment, with $119 billion in crypto trading volume and $38 billion in digital assets under custody as of November 2024. The platform also expanded its crypto offerings in the US by adding tokens like Solana and Cardano.
Despite the settlement with the SEC, Robinhood continues to face regulatory scrutiny and challenges in its operations. The firm remains committed to addressing compliance issues and strengthening its regulatory practices to ensure the security and protection of its users’ assets.