Robinhood to pay $65 million to settle Securities and Exchange Commission charges

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. 

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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.

About Author

MK Manoylov has been a reporter for The Block since 2020 — joining just before bitcoin surpassed $20,000 for the first time. Since then, MK has written nearly 1,000 articles for the publication, covering any and all crypto news but with a penchant toward NFT, metaverse, web3 gaming, funding, crime, hack and crypto ecosystem stories. MK holds a graduate degree from New York University's Science, Health and Environmental Reporting Program (SHERP) and has also covered health topics for WebMD and Insider. You can follow MK on X @MManoylov and on LinkedIn.