Robinhood Settles Regulatory Action and Agrees to Overhaul Gamification Practices
From the desk of Jim Eccleston at Eccleston Law
After a prolonged legal battle with the Massachusetts Securities Division, Robinhood has agreed to pay $7.5 million and revamp its digital engagement practices, according to Secretary of the Commonwealth William Galvin.
The settlement follows accusations that Robinhood violated state law by employing aggressive tactics to attract inexperienced investors and using gamification to encourage continuous use of its mobile app. The consent order resolves administrative complaints filed by Galvin's Securities Division in 2020 and 2021.
As reported by ThinkAdvisor, the consent order also addresses cybersecurity issues related to a November 2021 data security breach affecting approximately 117,000 customers in Massachusetts. The breach occurred when an unauthorized third party accessed customer information through a voice phishing scam, convincing an agent to download third party remote access software on a Robinhood-issued laptop.
The consent order reveals deficiencies in Robinhood's internal cybersecurity policies and procedures, including the absence of safeguards to protect investor information and inadequate procedures for employees to report data breaches promptly. As part of the consent order, Robinhood has admitted to these shortcomings and agreed to undergo an independent review of its cybersecurity policies.
Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.
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