Robinhood to pay $65 million to settle Securities and Exchange Commission charges
December 17, 2020, 1:39PM EST
1 min read
Robinhood has agreed to settle charges with the Securities and Exchange Commission, according to a Thursday statement.
Per the SEC, Robinhood's settlement focuses on two fronts: "for repeated misstatements that failed to disclose the firm’s receipt of payments from trading firms for routing customer orders to them, and with failing to satisfy its duty to seek the best reasonably available terms to execute customer orders."
The company allegedly misrepresented how it made money in its FAQ page regarding its “payment for order flow.” Robinhood told customers that trading was commission-free, but its high payment for order flow rates made the company execute orders at prices that were inferior to competitor broker prices.
Robinhood still claimed its prices beat that of its competitors, according to an SEC statement. Its orders lost about $34.1 million in price improvements compared to what competing retail broker-dealers would have collected between October 2016 and June 2019.
“Robinhood provided misleading information to customers about the true costs of choosing to trade with the firm,” Stephanie Avakian, Director of the SEC’s Enforcement Division, said in a statement. “Brokerage firms cannot mislead customers about order execution quality.”
Reports surfaced in September that Robinhood was the subject of an SEC investigation.
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