Robinhood has agreed to pay $45 million in civil penalties to settle charges of securities law violations.
According to a January 13 statement, this settlement follows an investigation by the U.S. Securities and Exchange Commission (SEC) into the activities of its subsidiaries, Robinhood Securities LLC and Robinhood Financial LLC.
The fines include $33.5 million from Robinhood Securities and $11.5 million from Robinhood Financial.
The infringements
According to Sanjay Wadhwa, acting director of the SEC’s Division of Enforcement, Robinhood’s failures include several critical areas, including inaccurate reporting, poor cybersecurity measures and inadequate fraud prevention.
Wadhwa stated:
“Today’s decision finds that two Robinhood companies failed to comply with a wide range of important regulatory requirements, including failing to accurately report trading activity, failing to comply with short sales rules, filing timely suspicious activity reports, maintaining books and records and protecting customer information.”
The SEC found that these companies failed to comply with several regulatory requirements between 2019 and 2022. Among the violations were delays in investigating and reporting suspicious transactions between January 2020 and March 2022.
Additional breaches included failure to implement sufficient identity theft protections between April 2019 and July 2022. A cybersecurity weakness, which lasted from June to November 2021, also led to unauthorized access to users’ data.
The companies were further accused of failing to properly maintain electronic communications, an important legal requirement.
Robinhood Securities received additional attention for issues related to fractional share trading, stock lending practices and regulatory reporting deficiencies. To address these issues, the company agreed to state that it has implemented measures to prevent similar violations.
Both entities admitted the SEC’s findings and agreed to be reprimanded. They also pledged to conduct an internal review to strengthen electronic communications compliance.
Robinhood crypto
While the recent SEC order does not address Robinhood’s crypto business, the company is facing regulatory challenges. The company announced last year received a Wells notice from the financial regulator, indicating potential enforcement actions.
Robinhood’s 2024 report reveals substantial activity in its crypto segment. As of November 2024, the platform recorded $119 billion in crypto trading volume and managed $38 billion in digital assets under custody.
The company also revealed that it has expanded its crypto offering in the US with tokens like Solana and Cardano, bringing the total number of digital assets available in the region to 20.
