Robinhood to Settle SEC Charges of ‘Broad Array’ of Violations

The Securities and Exchange Commission (SEC) said Monday (Jan. 13) that two Robinhood broker-dealers have agreed to pay $45 million in combined civil penalties to settle charges that they failed to observe a “broad array” of regulatory requirements.

Robinhood Securities agreed to pay a $33.5 million penalty, while Robinhood Financial agreed to pay a $11.5 million penalty, the SEC said in a Monday press release.

In addition, both companies admitted certain findings in the order, agreed to be censured and agreed to conduct an internal audit concerning off-channel communications compliance, according to the release.

“It is essential to the Commission’s broader efforts to protect investors and promote the integrity and fairness of our markets that broker-dealers satisfy their legal obligations when carrying out their various market functions,” Sanjay Wadhwa, acting director of the SEC’s Division of Enforcement, said in the release.

The regulator’s order found that the two Robinhood firms “failed to observe a broad array of significant regulatory requirements,” Wadhwa said.

Reached by PYMNTS, Robinhood provided an emailed statement saying the company is “pleased to resolve these matters.”

“As the SEC’s order acknowledges, most of these are historical matters that our broker-dealers have previously addressed,” Robinhood Markets General Counsel Lucas Moskowitz said in the statement. “We are well-positioned to continue leading the industry in developing the innovative products and services our customers want and need to participate in U.S. and global financial markets. We look forward to working with the SEC under a new administration.”

The SEC said in its press release that the violations by Robinhood related to suspicious activity reporting, identity theft protection, unauthorized access to the company’s systems, off-channel communications, retention of brokerage data and retention of customer communications.

In addition, Robinhood Securities committed violations related to electronic blue sheets and to fractional share trading and stock lending, the release said.

When dates were specified for these violations, most were committed prior to 2023 and one ended in December 2023, per the release.

In an earlier case, Robinhood agreed to pay $65 million in December 2020 to settle SEC claims that the company deceived customers about how it makes money and failed to deliver the promised best execution of trades. Robinhood did not admit or deny the regulator’s findings.