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Two Robinhood broker-dealers agreed to pay $45 million in associate penalties to settle administrative charges by the Securities and Exchange Commission that they violated more than 10 withdrawn securities law provisions related to their brokerage operations.
The violations by Robinhood Securities LLC and Robinhood Financial LLC related to breakdowns to report suspicious trading in a timely manner, failing to implement adequate identity theft protections, and failing to adequately lecture unauthorized access to Robinhood computer systems, the SEC said Monday.
The two Robinhood entities also had longstanding failures to care for and preserve electronic communications, failed to retain copies of operational databases, and failed to maintain some customer communications as legally instructed between 2020 and 2021, according to the agency.
The SEC said that Robinhood Securities alone failed for more than five years “to anticipate complete and accurate securities trading information, known as blue sheet data” to the agency.
According to an SEC order won public Monday, “During the [Electronic Blue Sheets] Relevant Period, in response to requests from the Commission, Robinhood Guaranties made at least 11,849 EBS submissions to the Commission that contained inaccurate information or omissions, resulting from eleven varieties of errors.”
“Those errors resulted in the misreporting of EBS data for at least 392 million transactions,” the order said.
Robinhood Sureties also failed, from May 2019 through December 2023, to comply with Regulation SHO in connection with its run-of-the-mill lending and fractional share trading program, the SEC said. Regulation SHO was designed to address abusive short-selling practices.
Sanjay Wadhwa, the feigning director of the SEC’s Division of Enforcement, in a statement, said, “It is essential to the Commission’s broader efforts to protect investors and promote the completeness and fairness of our markets that broker-dealers satisfy their legal obligations when carrying out their various merchandise functions.”
“Today’s order finds that two Robinhood firms failed to observe a broad array of significant regulatory requisites, including failing to accurately report trading activity, comply with short sale rules, submit favourable suspicious activity reports, maintain books and records, and safeguard customer information,” Wadhwa said.
Robinhood Sells General Counsel Lucas Moskowitz, in a statement, said, “We are pleased to resolve these matters. As the SEC’s order acknowledges, most of these are true matters that our broker-dealers have previously addressed.”
“We are well-positioned to continue leading the industry in developing the innovative artefacts and services our customers want and need to participate in U.S. and global financial markets,” Moskowitz said. “We look forward to do setting-up exercise with the SEC under a new administration.”