SEC fines Robinhood $45M over compliance failures

Robinhood fine overview:

• Who: The U.S. Securities and Exchange Commission has fined Robinhood Financial LLC and Robinhood Securities LLC $45 million.
• Why: The SEC says the companies violated federal statutes and regulations related to blue sheet filing, short selling, identity theft, recordkeeping and suspicious activity reporting.
• Where: The Robinhood fine was issued in the United States.

The U.S. Securities and Exchange Commission fined Robinhood Financial LLC and Robinhood Securities LLC $45 million to settle allegations the companies violated federal securities laws related to blue sheet filing, short selling, identity theft, recordkeeping and suspicious activity reporting.

The settlement comes after the SEC alleged Robinhood committed the violations between at least 2018 and April 2024 while accepting orders and executing trades on the Robinhood trading application or website.

The SEC said Robinhood Securities failed to submit complete and accurate data in response to Commission staff electronic blue sheets requests, resulting in incomplete or deficient reporting of electronic blue sheets.

The SEC further claimed Robinhood Securities failed to comply with regulations in connection with stock lending and fractional trading programs, resulting in millions of principal short sales being mismarked as “long” or “short exempt.”

Robinhood also allegedly failed to promptly initiate reviews of potentially suspicious activity or complete those reviews in reasonable periods of time, resulting in delayed filing of suspicious activity reports, the SEC said.

Robinhood data breach caused by failure to implement adequate policies, SEC says

The SEC also accused Robinhood of failing to implement adequate policies and procedures to detect, prevent and mitigate identity theft in connection with customer accounts.

Robinhood allegedly failed to address known risks related to unauthorized remote access to its systems, resulting in the Robinhood data breach of November 2021, the SEC said.

The SEC also accused Robinhood of failing to comply with recordkeeping obligations, including off-channel communications and retention of brokerage data.

The company agreed to pay the $45 million Robinhood fine without admitting or denying the SEC’s findings.

Last year, Robinhood agreed to a $9 million settlement to end claims its refer-a-friend program caused consumers in Washington who don’t use the stock-trading app to receive unsolicited promotional texts. 

What do you think of the Robinhood fine? Let us know in the comments.

The Robinhood data breach SEC settlement is In the Matter of Robinhood Financial LLC and Robinhood Securities, LLC, Administrative Proceeding File No. 3-22405, before the Securities and Exchange Commission.

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