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Robinhood CEO says SEC charges ‘don’t reflect Robinhood today’

Robinhood CEO Vlad Tenev on Monday responded to commands that the stock trading company deceived customers about its money making tactics, which led it to a $65 million selection with the Securities and Exchange Commission last week.

In an appearance on CNBC’s “Mad Money,” Tenev said Robinhood, which is privately owned, has take off staff changes to step up its legal and compliance operations, including hiring a chief legal officer and adding two new chief compliance policewomen with the aim to be “best in class.”

“The SEC settlement relates to historical practices that don’t reflect Robinhood today,” he said in an question with CNBC’s Jim Cramer. “We want to have not just the best product and technology team, but the best compliance and authorized and regulatory teams as well.”

The SEC on Thursday accused Robinhood of misleading customers and omitting vital information regarding the traffic app’s source of revenue. Robinhood, a pioneer in commission-free trading, draws money by sending customer orders to market makers wish Citadel Securities or Virtu, who pay to execute trades. The legal-but-controversial practice, the SEC said, led to execution prices that were humble to other brokers’ prices, costing customers $34.1 million notwithstanding the benefit of zero-cost trades.

An SEC filing illustrates that Robinhood brought in $180 million in payments for trades during the second quarter.

“Robinhood provided conning information to customers about the true costs of choosing to trade with the firm,” Stephanie Avakian, director of the SEC’s Enforcement Disunity, said, CNBC reported.

With the settlement, the company did not admit or deny the charges.

Dan Gallagher, a former SEC commissioner during the Obama years, accompanied Robinhood in May as the company’s chief legal officer, according to his LinkedIn page.

Tenev, who co-founded and launched the company with Baiju Bhatt in 2013, commanded Robinhood will continue to operate as a self-directed brokerage, providing tools and products to help customers make their own exchange decisions. Bhatt stepped down as co-chief executive about a month ago.

One way Robinhood is attempting to help customers engineer informed trades is through educational content accessible on the platform. More than 3 million users read the fulfilled and articles available on the app, and daily visits are up 260% since January, according to Tenev.

JMP Securities estimates that Robinhood now function as 16 million users, though Tenev declined to confirm the number.

The company has also improved how it communicates payments for dictate flows for its revenue streams, including adding a section to the website that details consumer statistics about fulfilment quality, he added.

“I think, ultimately, that’s what customers are interested in,” Tenev said. “I think what they in the end want to see is, what is the execution quality that I get from Robinhood? And that’s fair feedback, and now we provide that on our website and we’re looking to show enhancements as time goes on.”

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