SEC has yet to plan distribution of Robinhood’s $65M penalty
The recent stock trading frenzy and the restrictions introduced by Robinhood almost made us forget that, in December 2020, Robinhood agreed to pay a penalty of $65 million as a part of a settlement with the United States Securities and Exchange Commission (SEC).
The Commission found that, from 2015 through September 2018, Robinhood made material misrepresentations and omissions relating to its revenue sources, specifically its receipt of payments from certain principal trading firms, also known as electronic market makers, for routing Robinhood customer orders to them and relating to certain statements about the execution quality Robinhood achieved for its customers’ orders.
Among other things, the Commission ordered the Respondent to pay a $65,000,000 civil money penalty. The Commission also created a Fair Fund, pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002, so the penalty can be distributed to investors harmed by the Respondent’s conduct described in the Order.
It turns out that the Division of Enforcement of the SEC is not quite ready with the distribution plan. In fact, the Division has requested an extension of time until August 31, 2021 to submit a Proposed Plan of Distribution. In its request for an extension of time, the Division states that it needs time to solicit and evaluate fund administrator proposals, develop the distribution methodology, and develop the plan of distribution.
Accordingly, on February 11, 2021, the Division’s request for an extension of time until August 31, 2021 to submit a Proposed Plan of Distribution was granted.
This means that the parties affected by Robinhood’s rule violations will have to wait until the SEC figures out how to proceed with the penalty money.