Robinhood Pays Big for SEC Slip-Ups

Robinhood was fined US $45 million (AU $72 million) by the SEC for breaching over ten securities laws.
The SEC investigation revealed Robinhood’s failures in regulatory compliance, including incomplete transaction data and inadequate identity theft protection.
In 2021, a significant security breach exposed the private details of over seven million customers due to Robinhood’s failure to address a known vulnerability.

Global financial platform Robinhood has been hit with a US $45m (AU $72m) fine after breaching more than ten securities laws, according to the Securities and Exchange Commission.

The crypto and stock brokerage rose to fame in the mid-2010s thanks to its commission-free trading and small minimum deposits. The platform became a popular choice for crypto investors when the company added Bitcoin (among other digital assets) in 2018.

However, following an SEC investigation, it was found that Robinhood failed to abide by several regulations throughout this time.

And they’re going to pay handsomely for it.

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Robinhood’s two arms, including Robinhood Securities LLC and Robinhood Financial LLC were each handed down separate charges, with several significant breaches cited by the SEC.

In particular, Robinhood Securities filed incomplete transaction data for more than five years.

Those errors resulted in the misreporting of EBS data for at least 392 million transactions.

SEC Order

Additionally, Robinhood Securities failed to comply with the SEC’s fractional share regulations, which are targeted at preventing manipulative shorting of the market.

SEC Finds Serious Failures in Robinhood’s Historic Operations

As a collective, the two Robinhood entities drummed up a rap sheet of pretty serious violations.

The SEC found that Robinhood didn’t meet suspicious activity reporting requirements between January 2020 and March 2022, while the investigation also deemed the platform’s identity theft protection system lacking.

Perhaps the most damning failure came in 2021, when Robinhood failed to act on a bug that allowed remote access to the platform’s back end – despite being aware of the exploit.

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This ultimately culminated in a security breach where the private details of over seven million customers were shared.

Despite the problematic findings, a Robinhood spokesperson stressed they were historic and had been dealt with accordingly.

We are pleased to resolve these matters…We are well-positioned to continue leading the industry in developing the innovative products and services our customers want.