South Carolina AG joins Texas in $10M Robinhood settlement

South Carolina Attorney General Alan Wilson stated Thursday that his state has joined a multi-state settlement with Robinhood Financial, LLC, a major victory for supporters of companies that obey securities standards.

The agreement follows an investigation conducted by state securities authorities in Alabama, Colorado, California, Delaware, New Jersey, South Dakota, and Texas. The probe was overseen by NASAA (North American Securities Administrators Association), not NASA.

The case revolved around charges that financial platform Robinhood had operational issues in the retail securities market.

According to the AG’s Office, investigators began looking into Robinhood after the company’s site went down in March 2022, preventing thousands of investors from making transactions.

The settlement includes fines of up to $10.2 million for operational and technical failings that harmed investors.

“Today’s agreement reflects the ongoing efforts by state securities regulators to protect investors and make sure that they are treated fairly by financial services firms,” Wilson said in a statement.

South Carolina AG joins Texas in $10M Robinhood settlement

The following infractions are included in South Carolina’s Consent Order settlement:

  • Negligent customer disclosure of false information, including margin and risk associated with multi-leg option spreads.
  • Failure to implement a reasonable client identification program.
  • Failure to supervise technology crucial to providing fundamental broker-dealer services to customers.
  • Inadequately developed mechanism for dealing with client inquiries.
  • Failure to conduct adequate due diligence prior to accepting some option accounts.
  • Failure to submit all client complaints, as required, to the Financial Industry Regulatory Authority (“FINRA”) and state securities regulators.

This is comparable to the Order in Texas, which may be found in its entirety here.

In the spirit of a settlement, Robinhood neither accepted nor contested the conclusions outlined in the Consent Order.

According to the Texas State Securities Board, there was no indication of deliberate or fraudulent conduct by Robinhood, and the company fully cooperated with the investigation.

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