Robinhood confirms probes by SEC and FINRA over options trading
Robinhood has filed its annual report for 2020 with the Securities and Exchange Commission (SEC), with the document revealing that several regulators are looking into the restrictions on options trading the company introduced during a stock market volatility spike in late January 2021.
In its annual report, Robinhood states that the SEC staff is conducting an examination, and FINRA and certain state regulatory authorities are conducting investigations, regarding Robinhood’s options trading and related customer communications and displays.
The SEC staff, FINRA staff and staff of such state regulatory authorities are reviewing, among other things, how Robinhood displays cash and buying power to customers and its options trading approval processes. The company says it is cooperating with the regulators’ requests.
Robinhood says it is currently engaged in discussions with FINRA staff regarding a possible negotiated resolution of certain FINRA matters, including the March 2020 Outages and options trading and related customer communications and displays. While these discussions are ongoing, Robinhood anticipates that any resolution, if reached, would involve charges of violations of FINRA rules, a fine, customer restitution, a censure, and a compliance consultant.
The company has accrued in its statement of financial condition for the year ended December 31, 2020 of $26.6 million representing the bottom of the range of its probable losses. However, it says it cannot predict whether these discussions will result in a resolution of these matters.
Finally, Robinhood confirms that FINRA and state and federal regulators, including the SEC, the New York State Department of Financial Services and the New York Attorney General’s Office, are conducting various inquiries concerning account takeovers, or circumstances under which an unauthorized actor successfully logs into a customer account.
Let’s also note that Robinhood is a defendant in more than a hundred of lawsuits in US Courts. Most of these actions are brought by traders and concern the company’s restrictions on trading during the latest market volatility spike.