On Monday, the Securities and Exchange Commission said that two affiliated Robinhood broker-dealers had reached an agreement to pay a total of $45 million in fines to resolve administrative accusations that they had broken over ten different securities law requirements pertaining to their brokerage business.
According to the SEC, the infractions committed by Robinhood Securities LLC and Robinhood Financial LLC include failing to promptly report suspicious trading, failing to put in place sufficient safeguards against identity theft, and failing to appropriately handle unauthorized access to Robinhood computer systems.
According to the agency, the two Robinhood organizations also had a history of failing to preserve and maintain electronic communications, save copies of operational databases, and maintain certain customer communications as required by law between 2020 and 2021.
The SEC claimed that for over five years, Robinhood Securities alone was unable to give the agency accurate and comprehensive securities trading information, or “blue sheet data.”
In response to requests from the Commission, Robinhood Securities submitted at least 11,849 EBSs to the Commission during the [Electronic Blue Sheets] Relevant Period that contained unreliable information or omissions, resulting from eleven different types of errors, according to an SEC order made public on Monday.
According to the order, those mistakes caused at least 392 million transactions’ worth of EBS data to be misreported.
In a statement, Sanjay Wadhwa, the acting director of the SEC’s Division of Enforcement, stated that broker-dealers’ compliance with their legal duties in the course of their various market functions is crucial to the Commission’s larger initiatives to safeguard investors and advance the integrity and fairness of our markets.
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According to today’s order, two Robinhood companies violated a number of important regulatory requirements, such as failing to maintain books and records, accurately report trading activity, adhere to short sale regulations, submit timely suspicious activity reports, and protect customer information, Wadhwa said.
In a statement, Lukas Moskowitz, general counsel for Robinhood Markets, stated, “We are happy to resolve these matters.” The majority of these are past issues that our broker-dealers have already resolved, as the SEC’s order recognizes.
According to Moskowitz, we are in a strong position to keep driving the industry’s development of the cutting-edge goods and services that our clients require and desire in order to engage in the domestic and international financial markets. Working with the SEC under a new administration is something we are looking forward to.