7 ms·

If the SEC has gone through and has accounted for the 34 million in cost to consumers, why are they not having robinhood reimburse the customers for their lost

If the SEC has gone through and has accounted for the 34 million in cost to consumers, why are they not having robinhood reimburse the customers for their lost money on the trades and then charging the additional 30 million on top for lying? Why does the SEC take all the money?

deleted 6y ago
[deleted]
Areading314 6y ago
I believe they could still be sued for these damages
nojito 6y ago
SEC can't provide retribution to customers. That's a job for the courts.
- Technically 6y ago
  Courts don't do much good here either. Realistically, the US does not have a way to hold powerful entities to account for every day americans.
- colejohnson66 6y ago
  But who would bring the suit to the courts? Just some random law firm starting a class action? We all know how that turns out (in terms of retribution[a]). There has to be a better way. [a]: Because class actions technically aren’t about retribution, but discouragement
jnmandal 6y ago
The sad truth of this is that this is just three letter agencies doing as three letter agencies does. I don't think anyone at the SEC was looking after consumers here. If they were, they would similarly investigate other brokerages with the same practices (which is many).
- VWWHFSfQ 6y ago
  The SEC doesn't have infinite resources to investigate every possible case like this. As with most prosecutions, they just go after the most obvious/high-profile/egregious cases that have the highest probability of success.
  - colejohnson66 6y ago
    That’s mostly because Congress writes the budget, and the President “spends” what is allocated to the SEC on the SEC (no surprise). So the SEC (and IRS) is/are kneecapped because Congress doesn’t give them enough money (either because they don’t want to, or the President doesn’t ask for enough). The cynical take is that Congress profits from insider trading, tax evasion, etc. and want to prevent themselves from being investigated. Whether that’s true or not would be hard to prove.
asdfasgasdgasdg 6y ago
I don't know the answer in this specific case, but often in the case of small rewards like this, it's because administering the return of the money would consume a large fraction of it.
- Technically 6y ago
  Still, better than going to the SEC.
- willcipriano 6y ago
  Why cant Robinhood cover those costs as well?
  - asdfasgasdgasdg 6y ago
    Presumably there are laws or regulations that dictate how much they can be fined for given behaviors by the SEC, and those laws and regulations do not cover the distribution of monies to injured parties.
lwigo 6y ago
They don't actually care about the little people. It's more about keeping the company in check so it doesn't become a monopoly for retail thumb traders faster than the next closest competitors in that category can catch up (which would be Webull I guess?). It's also a reminder that, hey, there's a shitton of (old) money in this field, better not get cocky. Possibly too cynical of a take, but I'll reiterate the SEC doesn't care about the people browsing WSB.
- whimsicalism 6y ago
  The SEC has regulatory capture issues. Way too close of ties with the people it is supposed to be regulating. Take the example of this SEC investigator [0] whose boss got a call from one of those Wall Street hedge funds under investigation and suddenly he's fired! Mysteriously, that boss gets a job with the same firm a few months later. Oh, the kicker? The person who made that call from the hedge fund? Appointed to be the SEC chair in 2013 (she rejoined the hedge fund's counsel at the end of Obama's term in 2016). [0]: https://en.wikipedia.org/wiki/Gary_J._Aguirre https://en.wikipedia.org/wiki/Gary_J._Aguirre e: for those downvoting, I'd love to hear your thoughts - I think it is an interesting issue.
  - bfdm 6y ago
    There really need to be rules about this kind of crap. It's nasty business.
    - eru 6y ago
      There are already lots and lots of rules.
      - whimsicalism 6y ago
        They're not really teethed though. I grew up in DC and new plenty of parents who were ex-chief of staffs or whatever and they literally would tell me that they were working for a lobbying firm as a "consultant" because that was a loophole for getting around the "can't join a lobbying firm rules."
VWWHFSfQ 6y ago
SEC doesn't work on behalf of consumers, it works on behalf of the federal government. Robinhood customers are still free to bring lawsuits against the company and those would be heard in courts.
- ISL 6y ago
  Moreover, the SEC charges and investigation are likely to have material impact on any such civil cases.
- gamerDude 6y ago
  Got it, so, in theory this sets the groundwork for a class action lawsuit?
  - sagarm 6y ago
    Robinhood probably has a binding arbitration clause in their contract that prohibits users from joining a class action lawsuit, no?
    - hansvm 6y ago
      Yes, and the extent that matters depends how much people care. Uber was nickel and dimed by a billion dollars in arbitration fees (significantly more than an expected class action valuation) -- the binding arbitration clause cuts both ways.
      - giobox 6y ago
        It’s about more than just the cash cost though. In many jurisdictions court cases decisions can create legally binding precedent. Arbitration typically does not, a critical advantage when Uber was very busy trying to make sure courts the world over never decided drivers are employees etc. Arbitration could never really make that distinction binding, risk a court might.
        hansvm 6y ago
andylynch 6y ago
Reading the SEC order it anticipates that Robinhood will be sued by clients (I think this is already happening, which may explain why there is no disgorgment ordered here). Disappointing since they were already fined by FINRA for Best Ex. this time last year although on further reading this seems to relate to the same time period. Interesting that Massachusettis also announced an enforcement action against them this week.
underseacables 6y ago
Possibly because Robinhood doesn’t have the money. It’s gone.
paxys 6y ago
More like - you are free to get into arbitration as you agreed to in their TOS.
- whimsicalism 6y ago
  Very chill and very non-plutocratic.
  - eru 6y ago
    Nobody forced you to sign up with them.
    - whimsicalism 6y ago
      I haven't. But there are obvious power dynamics when large market actors can get people to waive their right to sue. There's a reason they're called "inalienable." They're not supposed to be self-alienable either.
      - eru 6y ago
        I don't think the right to sue is inalienable.
        mindslight 6y ago
        Without the ability to sue for a breach, there is no reason to have a contract in the first place. The terms might as well say "each party can do whatever they want at any time."
      - _jal 6y ago
        One of many good reasons to worry about the composition of the SCOTUS - important cases effecting this very right are headed there, and this is the most "business-friendly" (as the euphemism goes) court in quite some time. Too bad it is probably too late on these issues; we're approaching a situation where an increasing amount of "little people" law will be handled in arbitration. Justice in the US has always provided the best justice money can buy. They're just starting to implement a sort of buyers-club.
eru 6y ago
What's perhaps a bit weirder is that the SEC is allowed to settle, instead of having to go through the judicial system.
- EvanKelly 6y ago
  Why is that weird? Attorneys in this are working on behalf of the US Government. If they feel like settling gets the best deal for the government, then they do that.
  - eru 6y ago
    Going before a proper judge would ensure proper procedures are followed and proper precedent is set. What they do reminds me way too much of https://digitalcommons.law.yale.edu/fss_papers/543/ https://digitalcommons.law.yale.edu/fss_papers/543/
  - LanceH 6y ago
    It can give the feel of extortion. Settle or else. There is quite a window where settling -- even when provably innocent -- is easier/cheaper than facing an agitated prosecutor. Settling has nothing to do with a finding of truth.
    - rchaud 6y ago
      Do you have any evidence to base this on? Robinhood could easily afford to go to court if they felt the evidence was on their side. $65 million is probably more than what they've ever made in profits, so if they can pay it off without blinking, chances are a court case would result in an even larger fine. On the same token, it's doubtful that the SEC would proceed to charge Robinhood if they knew they couldn't make the case stick in court.
      - eru 6y ago
        The SEC threatens to sue for a much larger fine, so they can offer to settle for $65 million.
revel 6y ago
I think this is just a practical consideration. Execution fees are typically less than a few cents per share and are often fractional. It's impractical to offer up dozens of single cent refunds for current and previous customers.
- backtoyoujim 6y ago
  practical for whom ?
- revel 6y ago
  Also, just adding onto my own post, I worked on a trading desk for a large bank. Shortly before I arrived there was an issue with order marking (the details of which aren't as significant and were caused by a genuine mistake). The SEC made us go through every trade the desk had ever handled and identify which orders were marked incorrectly. It was so tedious and painful that the bank wanted to settle and pay a bigger fine if it meant not having to deal with all that nonsense. The SEC were unyielding. The moral of the story is that there is no negotiating with the SEC once they decide they've had enough of you. I'm not sure to what extent RH have institutional customers but institutions have a fiduciary duty to seek best execution. RH are on a real legal ledge here. I wouldn't be surprised if this is just the start of a very challenging era for Robinhood.
duxup 6y ago
It would be nice if they hadn't gutted the Consumer Financial Protection Bureau and if they had the power to require them to reimburse customers. There absolutely should be a department whose job isn't corporate financial games, but focused on the cost to the consumer and can require restitution for the consumer.
Shivetya 6y ago
What would be a really good law. Anytime a company is fined by the SEC it has to post that at the top of their home page similar to how restaurants have t display health scores. Of course it would need to have a plain English requirement. Bonus points for having web browsers flag such sites as well similar to how they can flag sites for being breached
- andylynch 6y ago
  Kind of done by brokercheck, eg https://brokercheck.finra.org/firm/summary/165998 https://brokercheck.finra.org/firm/summary/165998 Most SEC and similar sanctions are well covered in the media and especially financial press, as we see here.
baq 6y ago
this is a fine. SEC takes it because it has to. SEC is a regulator and fines are a way to regulate.
kolbe 6y ago
This is a great question, and one that SCOTUS ruled on [1] earlier this year. I had hoped that the decision would result in the people who were wronged getting their money back, but it would seem not. [1] https://www.scotusblog.com/2020/06/opinion-analysis-justices-accept-but-cabin-secs-right-to-disgorgement-in-securities-litigation/ https://www.scotusblog.com/2020/06/opinion-analysis-justices...
LatteLazy 6y ago
It would be (at best) pennies per client. Also, the SEC needs the funding for future investigations.

deleted 6y ago

[deleted]

Areading314 6y ago

I believe they could still be sued for these damages

nojito 6y ago

SEC can't provide retribution to customers. That's a job for the courts.

Technically 6y ago
Courts don't do much good here either. Realistically, the US does not have a way to hold powerful entities to account for every day americans.
colejohnson66 6y ago
But who would bring the suit to the courts? Just some random law firm starting a class action? We all know how that turns out (in terms of retribution[a]). There has to be a better way. [a]: Because class actions technically aren’t about retribution, but discouragement

jnmandal 6y ago

The sad truth of this is that this is just three letter agencies doing as three letter agencies does. I don't think anyone at the SEC was looking after consumers here. If they were, they would similarly investigate other brokerages with the same practices (which is many).

VWWHFSfQ 6y ago
The SEC doesn't have infinite resources to investigate every possible case like this. As with most prosecutions, they just go after the most obvious/high-profile/egregious cases that have the highest probability of success.
- colejohnson66 6y ago
  That’s mostly because Congress writes the budget, and the President “spends” what is allocated to the SEC on the SEC (no surprise). So the SEC (and IRS) is/are kneecapped because Congress doesn’t give them enough money (either because they don’t want to, or the President doesn’t ask for enough). The cynical take is that Congress profits from insider trading, tax evasion, etc. and want to prevent themselves from being investigated. Whether that’s true or not would be hard to prove.

asdfasgasdgasdg 6y ago

I don't know the answer in this specific case, but often in the case of small rewards like this, it's because administering the return of the money would consume a large fraction of it.

Technically 6y ago
Still, better than going to the SEC.
willcipriano 6y ago
Why cant Robinhood cover those costs as well?
- asdfasgasdgasdg 6y ago
  Presumably there are laws or regulations that dictate how much they can be fined for given behaviors by the SEC, and those laws and regulations do not cover the distribution of monies to injured parties.

lwigo 6y ago

They don't actually care about the little people. It's more about keeping the company in check so it doesn't become a monopoly for retail thumb traders faster than the next closest competitors in that category can catch up (which would be Webull I guess?). It's also a reminder that, hey, there's a shitton of (old) money in this field, better not get cocky. Possibly too cynical of a take, but I'll reiterate the SEC doesn't care about the people browsing WSB.

whimsicalism 6y ago
The SEC has regulatory capture issues. Way too close of ties with the people it is supposed to be regulating. Take the example of this SEC investigator [0] whose boss got a call from one of those Wall Street hedge funds under investigation and suddenly he's fired! Mysteriously, that boss gets a job with the same firm a few months later. Oh, the kicker? The person who made that call from the hedge fund? Appointed to be the SEC chair in 2013 (she rejoined the hedge fund's counsel at the end of Obama's term in 2016). [0]: https://en.wikipedia.org/wiki/Gary_J._Aguirre https://en.wikipedia.org/wiki/Gary_J._Aguirre e: for those downvoting, I'd love to hear your thoughts - I think it is an interesting issue.
- bfdm 6y ago
  There really need to be rules about this kind of crap. It's nasty business.
  - eru 6y ago
    There are already lots and lots of rules.
    - whimsicalism 6y ago
      They're not really teethed though. I grew up in DC and new plenty of parents who were ex-chief of staffs or whatever and they literally would tell me that they were working for a lobbying firm as a "consultant" because that was a loophole for getting around the "can't join a lobbying firm rules."

VWWHFSfQ 6y ago

SEC doesn't work on behalf of consumers, it works on behalf of the federal government. Robinhood customers are still free to bring lawsuits against the company and those would be heard in courts.

ISL 6y ago
Moreover, the SEC charges and investigation are likely to have material impact on any such civil cases.
gamerDude 6y ago
Got it, so, in theory this sets the groundwork for a class action lawsuit?
- sagarm 6y ago
  Robinhood probably has a binding arbitration clause in their contract that prohibits users from joining a class action lawsuit, no?
  - hansvm 6y ago
    Yes, and the extent that matters depends how much people care. Uber was nickel and dimed by a billion dollars in arbitration fees (significantly more than an expected class action valuation) -- the binding arbitration clause cuts both ways.
    - giobox 6y ago
      It’s about more than just the cash cost though. In many jurisdictions court cases decisions can create legally binding precedent. Arbitration typically does not, a critical advantage when Uber was very busy trying to make sure courts the world over never decided drivers are employees etc. Arbitration could never really make that distinction binding, risk a court might.
      - hansvm 6y ago

andylynch 6y ago

Reading the SEC order it anticipates that Robinhood will be sued by clients (I think this is already happening, which may explain why there is no disgorgment ordered here). Disappointing since they were already fined by FINRA for Best Ex. this time last year although on further reading this seems to relate to the same time period. Interesting that Massachusettis also announced an enforcement action against them this week.

underseacables 6y ago

Possibly because Robinhood doesn’t have the money. It’s gone.

paxys 6y ago

More like - you are free to get into arbitration as you agreed to in their TOS.

whimsicalism 6y ago
Very chill and very non-plutocratic.
- eru 6y ago
  Nobody forced you to sign up with them.
  - whimsicalism 6y ago
    I haven't. But there are obvious power dynamics when large market actors can get people to waive their right to sue. There's a reason they're called "inalienable." They're not supposed to be self-alienable either.
    - eru 6y ago
      I don't think the right to sue is inalienable.
      - mindslight 6y ago
        Without the ability to sue for a breach, there is no reason to have a contract in the first place. The terms might as well say "each party can do whatever they want at any time."
    - _jal 6y ago
      One of many good reasons to worry about the composition of the SCOTUS - important cases effecting this very right are headed there, and this is the most "business-friendly" (as the euphemism goes) court in quite some time. Too bad it is probably too late on these issues; we're approaching a situation where an increasing amount of "little people" law will be handled in arbitration. Justice in the US has always provided the best justice money can buy. They're just starting to implement a sort of buyers-club.

eru 6y ago

What's perhaps a bit weirder is that the SEC is allowed to settle, instead of having to go through the judicial system.

EvanKelly 6y ago
Why is that weird? Attorneys in this are working on behalf of the US Government. If they feel like settling gets the best deal for the government, then they do that.
- eru 6y ago
  Going before a proper judge would ensure proper procedures are followed and proper precedent is set. What they do reminds me way too much of https://digitalcommons.law.yale.edu/fss_papers/543/ https://digitalcommons.law.yale.edu/fss_papers/543/
- LanceH 6y ago
  It can give the feel of extortion. Settle or else. There is quite a window where settling -- even when provably innocent -- is easier/cheaper than facing an agitated prosecutor. Settling has nothing to do with a finding of truth.
  - rchaud 6y ago
    Do you have any evidence to base this on? Robinhood could easily afford to go to court if they felt the evidence was on their side. $65 million is probably more than what they've ever made in profits, so if they can pay it off without blinking, chances are a court case would result in an even larger fine. On the same token, it's doubtful that the SEC would proceed to charge Robinhood if they knew they couldn't make the case stick in court.
    - eru 6y ago
      The SEC threatens to sue for a much larger fine, so they can offer to settle for $65 million.

revel 6y ago

I think this is just a practical consideration. Execution fees are typically less than a few cents per share and are often fractional. It's impractical to offer up dozens of single cent refunds for current and previous customers.

backtoyoujim 6y ago
practical for whom ?
revel 6y ago
Also, just adding onto my own post, I worked on a trading desk for a large bank. Shortly before I arrived there was an issue with order marking (the details of which aren't as significant and were caused by a genuine mistake). The SEC made us go through every trade the desk had ever handled and identify which orders were marked incorrectly. It was so tedious and painful that the bank wanted to settle and pay a bigger fine if it meant not having to deal with all that nonsense. The SEC were unyielding. The moral of the story is that there is no negotiating with the SEC once they decide they've had enough of you. I'm not sure to what extent RH have institutional customers but institutions have a fiduciary duty to seek best execution. RH are on a real legal ledge here. I wouldn't be surprised if this is just the start of a very challenging era for Robinhood.

duxup 6y ago

It would be nice if they hadn't gutted the Consumer Financial Protection Bureau and if they had the power to require them to reimburse customers. There absolutely should be a department whose job isn't corporate financial games, but focused on the cost to the consumer and can require restitution for the consumer.

Shivetya 6y ago

What would be a really good law. Anytime a company is fined by the SEC it has to post that at the top of their home page similar to how restaurants have t display health scores. Of course it would need to have a plain English requirement. Bonus points for having web browsers flag such sites as well similar to how they can flag sites for being breached

andylynch 6y ago
Kind of done by brokercheck, eg https://brokercheck.finra.org/firm/summary/165998 https://brokercheck.finra.org/firm/summary/165998 Most SEC and similar sanctions are well covered in the media and especially financial press, as we see here.

baq 6y ago

this is a fine. SEC takes it because it has to. SEC is a regulator and fines are a way to regulate.

kolbe 6y ago

This is a great question, and one that SCOTUS ruled on [1] earlier this year. I had hoped that the decision would result in the people who were wronged getting their money back, but it would seem not. [1] https://www.scotusblog.com/2020/06/opinion-analysis-justices-accept-but-cabin-secs-right-to-disgorgement-in-securities-litigation/ https://www.scotusblog.com/2020/06/opinion-analysis-justices...

LatteLazy 6y ago

It would be (at best) pennies per client. Also, the SEC needs the funding for future investigations.