Robinhood to Pay $45 Million for Multiple Securities Law Violations

Posted on January 29th, 2025 at 11:27 AM
Robinhood to Pay $45 Million for Multiple Securities Law Violations

From the desk of Jim Eccleston at Eccleston Law

Robinhood Securities LLC and Robinhood Financial LLC have agreed to pay $45 million to resolve allegations of widespread securities law violations. According to InvestmentNews, the settlement follows an SEC investigation that uncovered ten distinct regulatory failures spanning several years. Key violations include:

1. Suspicious Activity Reporting: Between January 2020 and March 2022, Robinhood failed to timely investigate suspicious transactions and file required suspicious activity reports.

2. Identity Theft Protection: From April 2019 to July 2022, Robinhood did not implement adequate policies to protect customers from identity theft risks.

3. Cybersecurity Lapses: Between June and November 2021, Robinhood failed to address known cybersecurity vulnerabilities related to remote access to its systems. This negligence allowed a third party to gain unauthorized access and download sensitive information on millions of individuals in November 2021.

4. Off-Channel Communications: Robinhood admitted to violating recordkeeping provisions of federal securities laws by failing to maintain and preserve electronic communications.

5. Brokerage Data Retention: The firms failed to secure copies of core operational databases, leaving records vulnerable to deletion or modification, contrary to legal requirements.

6. Customer Communications: Between 2020 and 2021, Robinhood failed to properly maintain some communications with its brokerage customers.

Additional violations, specific to Robinhood Securities, included issues with blue sheet data filings, fractional share trading, and stock lending.

Sanjay Wadhwa, acting director of the SEC’s Division of Enforcement, emphasized the significance of these violations. “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, maintain books and records, and safeguard customer information,” Wadhwa said.

 

Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.

Tags: eccleston, eccleston law

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