Securities Lawyers Blog
The law offices of Gana Weinstein LLP represent investors in disputes with their financial advisors or brokerage firms, such as Robinhood Financial, LLC. Many investors do not recognize financial advisor misconduct when it happens, but there are steps that can be taken to recover investment losses. There are many different types of broker misconduct, including breach of fiduciary duty, failure to supervise, misrepresentation, and churning. The attorneys at Gana Weinstein LLP can analyze your investments to determine if there was actionable misconduct by the broker or brokerage firm.
Robinhood Financial is the introducing broker-dealer behind the Robinhood app, offering commission-free online trading in stocks, exchange-traded funds, options, and other securities along with securities lending, with customer accounts cleared through its affiliate Robinhood Securities. Formed in Delaware in 2012, the firm is a wholly owned subsidiary of Robinhood Markets, the Menlo Park, California, financial technology company, and operates from a main office in Lake Mary, Florida.
Robinhood Financial, LLC – By the Numbers:
- CRD #: 165998
- Regulatory Events: 56
- Arbitration Events: 9
- Broker Employees: 601
Robinhood Financial, LLC – In the News:
FINRA v. Robinhood Financial, LLC (Case #2019060756501) – From May 2014 through September 2023, RHF, and from at least November 2018 through July 2022, RHS, failed to establish and maintain supervisory systems that were reasonably designed for the firms’ brokerage businesses, resulting in numerous violations of securities laws and FINRA rules. From July 2016 to October 2021, RHF did not accurately and completely disclose to customers its practice of “collaring” market orders by converting them to limit orders, and, from May 2014 to December 2021, RHF’s supervisory system was not reasonably designed to achieve compliance with RHF’s obligations under FINRA Rules 2210 and 2010 to communicate to customers accurate and fair and balanced information about its order handling practices. As a result, RHF violated FINRA Rules 2210, 3110, and 2010 (both independently and by virtue of the foregoing rule violations), and NASD Rule 3010. From January 2017 through November 2021, RHF, and from November 2018 to November 2021, RHS failed to establish and implement reasonable anti-money laundering (AML) programs, which caused the firms to fail to detect, investigate, or report a wide variety of suspicious activity, including manipulative trading, suspicious money movements, and account takeovers by third-party hackers. From November 2018 through August 2020, RHF also failed to establish a reasonable customer identification program (CIP). As a result, Robinhood violated FINRA Rules 3310 and 2010.
FINRA v. Robinhood Financial, LLC (Case #2020066971201) – Robinhood is an introducing broker-dealer that provides commission-free trading to retail customers through its website and mobile applications. The firm’s stated mission is to “democratize and de-mystify finance for all,” and to “make investing friendly, approachable, and understandable for newcomers and experts alike.” Since launching its online trading platforms in December 2014, Robinhood has quickly attracted customers—many of whom are relatively young and new to investing—including through offerings such as no-minimum, commission-free trading and a user interface “designed to appeal to a new generation of investors who are more comfortable trading on smartphones.” Through these and other initiatives, Robinhood has experienced dramatic growth—from fewer than 500,000 customers in 2015 to over 31 million today. Despite Robinhood’s mission to “de-mystify finance for all” and to make investing “understandable for newcomers and experts alike,” during certain periods since September 2016, the firm has negligently communicated a wide array of false and misleading information to its customers. Among others: Robinhood falsely told “Robinhood Instant” customers that they had to upgrade to “Robinhood Gold” to trade on margin when, in fact, Robinhood allowed “Instant” customers to place options trades that could trigger the use of margin. Robinhood falsely told “Robinhood Gold” customers that they could “disable” margin in their accounts when, in fact, Robinhood allowed “Gold” customers to place options trades that could trigger the use of margin even after they had “disabled” margin. Robinhood displayed inaccurate cash balances to certain customers. Some inaccuracies were significant. For example, Robinhood displayed to many customers negative cash balances that were twice as large as they actually were. Robinhood provided false information to customers about the risks associated with certain options transactions. For example, Robinhood falsely told customers that they would “never lose more than the premium paid to enter [a] debit spread” when customers could, and many did, lose vastly more than the premiums they paid. Robinhood issued to certain customers erroneous margin calls and margin call warnings, telling them that they were in “danger of a margin call” when they were not. As a result of these and other false and misleading statements, Robinhood violated FINRA Rule 2010, which prohibits FINRA member firms from making misrepresentations to customers. Robinhood’s negligent dissemination of false and misleading information to its customers separately violated FINRA Rules 2210 and 2220, which set forth content standards for firms’ communications with customers.
FINRA v. Robinhood Financial, LLC (Case #2017056224001) – From October 1, 2016 through November 9, 2017 (the “Review Period”), Robinhood offered its customers the ability to trade in equity securities without being charged commissions. Prior to mid-September 2016, Robinhood routed all of its customers’ non-directed equity orders to its clearing broker. By October 2016, Robinhood transitioned away from routing to its clearing broker and began primarily routing to three other large broker-dealers that provide execution services. Thus, during the Review Period, Robinhood routed its customers’ non-directed equity orders to four broker-dealers, including its clearing broker, for execution, all of which paid Robinhood for that order flow. Robinhood, however, did not exercise reasonable diligence to ascertain whether these four broker-dealers provided the best market for the subject securities to ensure its customers received the best execution quality from these as compared to other execution venues. In addition, the Firm did not systematically review certain order types, and it failed to establish and maintain a supervisory system, including written supervisory procedures, reasonably designed to achieve compliance with its best execution obligations under FINRA’s rules. By virtue of the foregoing, Robinhood violated FINRA Rules 5310(a), 5310.09, 3110(a) and (b) and 2010.
Our investment fraud lawyers have recovered losses for hundreds of investors through FINRA arbitration awards and settlements. If you have concerns about a broker at Robinhood Financial, LLC, contact Gana Weinstein LLP for a free consultation.