Robinhood, the popular trading platform, has agreed to pay a hefty $45 million in civil penalties to settle charges of securities law violations. This settlement comes after an investigation by the US Securities and Exchange Commission (SEC) into the activities of Robinhood Securities LLC and Robinhood Financial LLC, subsidiaries of Robinhood.
The SEC found that Robinhood had failed to comply with various regulatory requirements from 2019 to 2022. The violations included inaccurate reporting, poor cybersecurity measures, inadequate fraud prevention, and delays in investigating and reporting suspicious transactions. Additionally, the firm failed to implement sufficient protections against identity theft and experienced a cybersecurity weakness that led to unauthorized access to users’ data.
Robinhood Securities faced additional scrutiny for issues related to fractional share trading, stock lending practices, and failures in regulatory reporting. As part of the settlement, both entities admitted to the SEC’s findings and agreed to be reprimanded. They also committed to conducting an internal review to strengthen electronic communications compliance.
While the recent SEC order does not implicate Robinhood’s crypto operations, the firm has faced regulatory challenges in that area as well. Last year, Robinhood disclosed receiving a Wells notice from the financial regulator, signaling potential enforcement action.
Despite these challenges, Robinhood’s crypto segment has seen significant activity. As of November 2024, the platform recorded $119 billion in crypto trading volume and managed $38 billion in digital assets under custody. The company has also expanded its crypto offerings in the US, adding tokens like Solana and Cardano, bringing the total number of available digital assets in the region to 20.
Overall, Robinhood’s settlement with the SEC highlights the importance of regulatory compliance in the financial industry. By addressing the issues raised by the SEC and implementing stronger compliance measures, Robinhood aims to ensure the security and protection of its users’ assets.