Robinhood Will Settle SEC Charges With $45 Million

Robinhood, an online brokerage company, has been fined $45 million for non-compliance with regulations from 2019 to 2022.

Following an order dated Jan. 13, the US Securities and Exchange Commission (SEC) fined the firm $45 million for violating more than ten statutory laws. The breach descriptions pertain to the operations of Robinhood Securities LLC and Robinhood Financial LLC — two of its subsidiary firms.

SEC Cites Multiple Violations

According to the SEC, the firms disobeyed multiple regulations, such as failing to file suspicious trading activity properly on time and non-compliance with short-sale laws. The regulator added that the firms failed to report trading activities accurately and didn’t protect customer data effectively.

The SEC added that the broker failed to observe the ‘Regulatory SHO’ rule between December 2019 and May 2022. This rule aims to prevent abusive short-sale activities.

The regulatory body also said the firm failed to report suspicious activities promptly and didn’t effectively resolve a security issue affecting its users. This security issue was a breach in November 2021, with malicious actors accessing about five million email addresses of Robinhood users.

The SEC also accused the broker of submitting incomplete or inaccurate responses to 11,849 Electronic Blue Sheet (EBS) requests for data. This EBS mistake caused the misreporting of nearly 392 million transactions.

Robinhood Has Less Than 13 Days to Comply

The $45 million penalty was split among the two subsidiaries: $33.5 million from Robinhood Securities and $11.5 million from Robinhood Financial. The SEC further stated that the payment must be made before Jan. 27.

Meanwhile, this fine comes three months after a similar scenario with California regulators, when the firm’s crypto division was charged $3.5 million. The allegation was that the broker’s customers could not withdraw their crypto assets between 2018 and 2022.

Despite the regulatory issues, the firm’s latest report shows significant progress in its crypto business. In Q3 2024, the firm’s crypto earnings surged 165% to $61 million, while its trading volume increased by 123% year-on-year to $14.4 million.