Robinhood settles SEC charges for $45 million related to multiple violations, including cybersecurity, reporting, and recordkeeping failures.
Robinhood settles SEC charges for $45 million related to multiple violations, including cybersecurity, reporting, and recordkeeping failures.
Robinhood settles SEC charges by agreeing to pay $45 million in penalties, resolving multiple regulatory violations. The settlement resolves a series of charges related to various lapses in Robinhood’s operations, spanning several years. The SEC’s order outlines many violations, beginning with Robinhood’s failure to investigate suspicious transactions promptly.
From January 2020 through March 2022, Robinhood did not adequately file Suspicious Activity Reports (SARs), potentially allowing undetected fraudulent or illegal trading activities. The SEC also found that Robinhood failed to protect customers from identity theft between April 2019 and July 2022. The firm’s policies were deemed insufficient to mitigate the risk of identity theft for its users during this period.
Between June and November 2021, Robinhood failed to address cybersecurity vulnerabilities, leading to a breach where an unauthorized third party accessed sensitive customer information.
Other infractions included Robinhood’s failure to preserve electronic communications under federal securities law and its mishandling of brokerage data. The firm failed to maintain certain customer communications between 2020 and 2021 adequately and could not protect core operational databases from alteration or deletion.
In addition to these broader failures, Robinhood Securities faced additional charges, including neglecting to provide accurate trading data to the SEC for more than five years. This data, known as “blue sheet” filings, is crucial for the SEC’s surveillance of the markets. Robinhood Securities also violated Regulation SHO, which governs short-selling practices, particularly regarding fractional share trading and stock lending programs.
The SEC’s order requires both firms to conduct internal audits to address compliance gaps, especially concerning off-channel communications. Robinhood Securities has committed to certifying its corrective actions for the violations related to Regulation SHO. As part of the settlement, Robinhood Securities will pay a $33.5 million penalty, while Robinhood Financial will pay $11.5 million. Both firms have admitted the SEC’s findings and agreed to accept censure for their actions.
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