South Carolina Attorney General joins $10 million multi-state settlement with Robinhood

COLUMBIA, S.C. (WOLO)– Attorney General Alan Wilson announced that South Carolina has joined a multi-state settlement with Robinhood Financial LLC. on Thursday.

The settlement comes from an investigation led by state securities regulators in Alabama, Colorado, California, Delaware, New Jersey, South Dakota, and Texas.

The investigation is coordinated through the North American Securities Administrators Association (NASAA) regarding Robinhood’s operational failures with respect to the retail market.

The investigation began because of platform outages the company had in March 2020 when hundreds of thousands of investors were relying on the Robinhood app to make trades, said the Attorney General’s Office.

The settlement will pay up to $10.2 million in penalties for operational and technical failures that hurt 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,” said Attorney General Wilson.

South Carolina’s Consent Order settlement includes 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 the Financial Industry Regulatory Authority (“FINRA”) and state securities regulators, as may be required.

Robinhood did not admit nor deny the findings as set out in the Consent Order, the Attorney General’s Office said.

Investors can submit a complaint or learn more about the Securities Division by visiting the Attorney General’s Office website at the link.