Robinhood Settles SEC Charges with $45 Million Penalty for Regulatory Violations

• Robinhood will pay $45 million to settle SEC charges for multiple securities law violations.
• SEC found Robinhood failed to report suspicious activities and protect customer data between 2019 and 2022.
• Robinhood agreed to an audit and corrective measures to address compliance issues highlighted by the SEC.

Robinhood Markets has been charged by US Securities and Exchange Commission for violating federal securities laws. Two affiliated broker-dealers, Robinhood Securities LLC and Robinhood Financial LLC, are accused in the charges. Robinhood agreed to pay $45 million in penalties to settle.

Robinhood Securities has agreed to pay $33.5 million while Robinhood Financial will pay $11.5 million. The entities admitted to certain findings and agreed to be censured as part of the settlement.

Robinhood Violations Spanning Multiple Areas

Robinhood has been fined for a number of violations by the SEC. From January 2020 to March 2022, Robinhood is guilty of not reporting suspicious activities in a timely manner. The company did not take adequate measures to combat identity theft from April 2019 to July 2022. 

From June to November 2021, customer information was compromised through unauthorized access, yielding cybersecurity issues. The SEC said these failures undermined protections for customer data.

Robinhood also failed to maintain electronic communications as required by law. The violations occurred between 2020 and 2021 and involved preserving off-channel communications. 

Operational databases were also poorly managed which left them at risk of deletion or unauthorized modifications. These deficiencies violated federal recordkeeping requirements and further undermined compliance.

Robinhood Securities committed additional violations related to Regulation SHO. From 2019 to 2023, it failed to meet close-out, order-marking, and locate requirements for short selling. 

The SEC also found inaccuracies in securities trading data submitted by Robinhood Securities for over five years. These errors affected the agency’s ability to monitor trading activities effectively.

Corrective Actions Required

Robinhood has agreed to conduct an internal audit to address compliance issues with off-channel communications. Robinhood Securities must also certify the resolution of deficiencies tied to Regulation SHO violations. 

These steps aim to prevent similar violations in the future. The SEC stated that broker-dealers must fulfill legal obligations to ensure market fairness and integrity. Robinhood’s operations will remain under scrutiny as the firm implements the agreed measures.