Georgia Secretary of State Brad Raffensperger announced that a multi-state settlement with Robinhood Financial, LLC has been reached, recouping losses suffered by hard-working Georgians due to operational and technical failures by the widely-known securities trading platform. The settlement stems from a joint investigation spearheaded by multiple state securities regulators, coordinated through the North American Securities Administrators Association (NASAA).
“Georgians work hard to earn their paychecks and invest wisely. Platforms that operate in Georgia must have the highest safeguards in place,” said Secretary of State Brad Raffensperger. “If they fail to protect the investments of hardworking Georgians, we’re going to make sure those losses are returned.”
The investigation was a result of changes made to the Robinhood platform in March 2020 which left Robinhood users unable to complete transactions – sometimes as the values of their assets were decreasing. It was found that prior to March 2021, numerous deficiencies existed in the review and approval process, the firm’s monitoring and reporting tools, and insufficient customer service and escalation protocols. These deficiencies led account holders to suffer losses.
The order sets out the following violations:
• Negligent dissemination of inaccurate information to customers, including regarding margin and risk associated with multi-leg option spreads.
• Failure to have a reasonably designed customer identification program.
• Failure to supervise technology critical to providing customers with core broker-dealer services.
• Failure to have a reasonably designed system for dealing with customer inquiries.
• Failure to exercise due diligence before approving certain option accounts.
• Failure to report all customer complaints to FINRA and state securities regulators, as may be required.
Robinhood has not admitted to or denied the findings set out in the States’ orders.
Robinhood will provide access to a FINRA-ordered compliance implementation report to settling states. Robinhood retained an independent compliance consultant who made recommendations for remediation, which Robinhood has generally implemented. One year after the settlement date, Robinhood will attest to the lead state, Alabama, that it is in full compliance with the FINRA-ordered independent compliance consultant’s recommendations or has otherwise instituted measures that are more effective at addressing the recommendations.
“Today’s agreement reflects the ongoing effort by our office to protect the accounts of hardworking Georgians and make sure that they are treated fairly,” said Securities Division Director Noula Zaharis.
The Securities Division found no evidence of willful or fraudulent conduct by Robinhood and that Robinhood fully cooperated with the investigation.
If you have questions or concerns about your investments or financial professional, please contact the Securities Division at 470-312-2640 or registrations@sos.ga.gov.
