South Carolina Attorney General Alan Wilson has joined a multi-state settlement with Robinhood Financial LLC, which will pay up to $10.2 million in penalties for operational and technical failures that harmed investors. The settlement stems from an investigation spearheaded by state securities regulators in Alabama, Colorado, California, Delaware, New Jersey, South Dakota, and Texas coordinated through the North American Securities Administrators Association (NASAA) regarding Robinhood’s operational failures with respect to the retail market.
The investigation was sparked by Robinhood platform outages in March 2020, a time when hundreds of thousands of investors were relying on the Robinhood app to make trades. In addition, prior to March 2021, there were deficiencies at Robinhood in its review and approval process for options and margin accounts, weaknesses in the firm’s monitoring and reporting tools, and insufficient customer service and escalation protocols that in some cases left Robinhood users unable to process trades even as the value of certain stocks was dropping.
The settlement will pay up to $10.2 million in penalties for operational and technical failures that harmed investors. South Carolina’s Consent Order settlement sets out the following violations: negligent dissemination of inaccurate information to customers, failure to have a reasonably designed customer identification program, failure to supervise technology critical to providing customers with core broker-dealer services, failure to have a reasonably designed system for dealing with customer inquiries, failure to exercise due diligence before approving certain option accounts, and failure to report all customer complaints to the Financial Industry Regulatory Authority (“FINRA”) and state securities regulators, as may be required.
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“Today’s agreement reflects the ongoing efforts by state securities regulators to protect investors and make sure that they are treated fairly by financial services firms,” said Attorney General Wilson. “The Securities Division of the Attorney General’s Office is committed to enforcing the South Carolina Uniform Securities Act against those individuals and firms who have violated it to the detriment of South Carolina investors”.
The multistate agreement represents states working together for the benefit of Main Street investors. Robinhood must take its customer care obligations seriously and correct these deficiencies.
In conclusion, South Carolina Attorney General Alan Wilson has joined a multi-state settlement with Robinhood Financial LLC, which will pay up to $10.2 million in penalties for operational and technical failures that harmed investors. The settlement stems from an investigation spearheaded by state securities regulators in Alabama, Colorado, California, Delaware, New Jersey, South Dakota, and Texas coordinated through the North American Securities Administrators Association (NASAA) regarding Robinhood’s operational failures with respect to the retail market.
