A pair of broker-dealers that operate under the Robinhood name are being sanctioned by the U.S. Securities and Exchange Commission (SEC) for a series of regulatory violations, including alleged breaches of short-selling, trade reporting and recordkeeping requirements.
The firms — Robinhood Securities LLC and Robinhood Financial LLC — agreed to pay a combined US$45 million to settle the SEC’s allegations, the regulator announced on Monday.
Between 2018 and 2024, the firms failed to file suspicious transaction reports on time, didn’t adequately guard against identity theft and failed to prevent unauthorized access to their systems, the SEC alleged. The regulator also outlined various recordkeeping failures, including failing to retain brokerage data and communications with clients, and allowing off-channel communications.
In addition, the SEC’s order alleged that Robinhood Securities failed to file complete trading data (known as blue sheet data) with regulators, and that between 2019 and 2023, it didn’t comply with certain provisions of the SEC’s short-selling rules, including the close-out, order-marking, and locate requirements.
To resolve the allegations, the firms both admitted to certain findings and agreed to be censured. Robinhood Securities agreed to pay a US$33.5-million penalty, while Robinhood Financial is to pay US$11.5 million. They also pledged to fix the deficiencies.
“Today’s order finds that two Robinhood firms failed to observe a broad array of significant regulatory requirements, including failing to accurately report trading activity, comply with short sale rules, submit timely suspicious activity reports, maintain books and records, and safeguard customer information,” said Sanjay Wadhwa, acting director of the SEC’s enforcement division, in a release on Monday.
“It is essential to the commission’s broader efforts to protect investors and promote the integrity and fairness of our markets that broker-dealers satisfy their legal obligations when carrying out their various market functions,” he added.