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I agree that they are unlikely to go after them, but I think if you read the fine print of the margin product, the customer agrees that the borrowed money is a
by eigenvalue 7y ago
I agree that they are unlikely to go after them, but I think if you read the fine print of the margin product, the customer agrees that the borrowed money is a debt and must be repaid. Also RH could argue that the customer acted in bad faith, being fully cognizant that what they were doing was against the rules.
- toomuchtodo 7y agoRobinhood extended margin it was not legally permitted to extend (Reg T is federal statute, btw). I am very interested in sitting in any court room as an observer where their counsel attempts to collect.
- SpicyLemonZest 7y agoBut they didn’t intend to, right? If I steal money from a broker’s desk drawer and use it to do dumb futures trades, surelt that’s not a regulatory violation on the broker’s part.
- toomuchtodo 7y agoGreat case to make that you are so incompetent as a broker-dealer that someone was able to extend themselves 250x leverage on the margin you extended. That's how you lose your broker-dealer license, which means your business dies if you're Robinhood (unless they're only going to offer a cash management account, which I guess might be a thing? even Credit Karma and Personal Capital are offering one now). As a broker, risk management is your job.
- SpicyLemonZest 7y agoI guess that makes sense.
- Aperocky 7y agoThis, laws will overrule fine print or service agreement at any single time.