6 ms·

I know this might come across as cold, but I don't like the idea of Robinhood being liable for their users' misfortune. The new set of direct brokerage platform

by belval 6y ago

I know this might come across as cold, but I don't like the idea of Robinhood being liable for their users' misfortune. The new set of direct brokerage platforms allow people like me to manage their account directly, while my father and his father before him had to rely on someone from the bank. It effectively democratized portfolio management and I see it as a net positive for most people. Maybe there could be a bit of a higher bar of entry with a basic 10 questions forms to ensure that investors know the terminology. Akin to how you need to fill a questionnaire to determine your investor profile when investing through a mutual fund.

lfuller 6y ago
I don’t believe being “liable for users’ misfortune” is the issue here. While Robinhood showed the user being down hundreds of thousands of dollars, this was actually a UI issue and the user actually had a profit.
- deleted 6y ago
  [deleted]
- sunir 6y ago
  The dispute as I understand it was he did not “actually” (literally speaking) have a profit because the clearing and settlement hadn’t finished. A lot of the anger with Robinhood comes down to the mistaken belief by many people that money moves instantly, trades happen instantly. Robinhood UI is struggling to convey actual current value vs accrued unsettled value vs unrealized value. These are non-trivial concepts. The time component of money confuses a lot of situations. Eg Most people treat retainers as revenue before it is earned; even SaaS companies treat MRR as earned before the time period elapsed and service is rendered. However this isn’t strictly correct or legal.
  - okprod 6y ago
    I thought the issue was he thought he had a $700K loss, tried to contact Robinhood customer service for clarification because he didn't think he should have a loss, Rh gave him a boilerplate automated message, and he killed himself before getting a clarification from Rh. With a lot of these new Web services like Rh, GoPuff, Yelp, etc. it can be hard to get a hold of a real person in a timely manner.
    - ethbr0 6y ago
      I hate to sound calloused here, but maybe if you don't understand transaction settlement time, don't trade that volume of options? Robinhood has similar moral liability of a payday lender: it's not wholly their fault if people choose to make bad choices for themselves, but they are partially responsible for enabling them and/or obsfuscating terms. But in this instance, we're talking about pretty standard industry processes and practices. If you hand someone a gun with the expectation they know how to use it, and the first thing they do is blow their brains out... not sure how that's on you?
      - Rooster61 6y ago
        Robinhood is specifically targeting young, inexperienced investors as their market. Not having enough information as to how options work, not having an actual line to get support, sending out a flaming email demanding $170,000 erroneously... So many places where this could have been avoided, and should be expected considering the targeted clientele. They had this coming
      - okprod 6y ago
        It's not standard for a broker to not have live customer service. When/after I make a trade I can call Fidelity and talk to somebody. This kid tried to contact customer support and got an automated message. Try calling Uber or GoPuff customer support when your delivery doesn't come.
    - fatnoah 6y ago
      https://www.cbsnews.com/news/alex-kearns-robinhood-trader-suicide-wrongful-death-suit/ https://www.cbsnews.com/news/alex-kearns-robinhood-trader-su... The article in the top post is missing details. Robinhood actually demanded $170k from him to settle his account. It wasn't a UI issue.
      - ethbr0 6y ago
        From that article, "the company sent an automated email demanding Alex take "immediate action," requesting a payment of more than $170,000 in just a few days..."
- klmadfejno 6y ago
  "Issue" sounds like a bug though. It was an accurate number, the user just didn't understand the context of it. The question is whether it was illegal to get the user into that position without them understanding what they were doing. > Monday’s lawsuit said Robinhood had an obligation to know its customers and ensure its trading strategies were appropriate, but instead the broker preyed on inexperienced investors. Does robinhood actually have this obligation? Not knowing anything, I would assume they don't actually have to do this. Appropriate is subjective and nonsensical imo. Did the guy do something inappropriate? On one hand I think no, it wasn't especially crazy as a financial move. On the other hand, should a 20 year old who doesn't know anything be able to get involved in 100k margins? Idk. I do think robinhood preys on inexperienced investors. I'm interested to see how it can be argued as illegal.
  - Person5478 6y ago
    This is an area where the law needs to catch up. Current law limits what many people can do in terms of the stock market specifically to protect unsavvy investors. What Robinhood is doing is no different than a 3rd party acting as a go between the stock market and an unsavvy investor but telling the unsavvy investor they went 700k+ in the hole. The internet is slowly moving away from being the wild west, and things like this is a part of it.
    - PeterisP 6y ago
      I feel that the current law would have worked just fine if it was enforced properly - current law (at least in EU where I live - as far as I understand, SEC guidelines in USA are similar, but I may be mistaken) expects that unsavvy investors should be prohibited to make such trades, partly because we know well from historical experience that often it leads to sad consequences such as this case. As the circumstances show, this young man did not have a proper understanding of what his trades (including the not-yet-settled part) meant and what the actual financial consequences and risks were at that point of time when he (mistakenly) felt that they are horrific enough to take his life. Robinhood should have tested for that capability and, given the absence of it, ensured that he can not trade options on their platform and be limited to simpler, more understandable investment products. If they intentionally make this verification superficial so that they can get more unsophisticated investors trading tricky products on their platform, that is praying on investors and should be prohibited.
- deleted 6y ago
  [deleted]
throw1234651234 6y ago
I strongly agree - a lot of the "protections" have become a privilege for the rich and educated, and I say that as someone who doesn't eat organic locally-sourced Kale, drink lattes, read Marx at a hipster coffee shop, etc. For example - brokerages keep you from trading on margin unless you have x money and y experience trading on margin and/or options. You CANNOT invest into SpaceX (not pioneering SpaceX here, just an example) unless you are an accredited investor, that is, if you aren't RICH. Google does though. These are serious disadvantages. The real question is whether you want to be babied and coddled by people in power. Edit: Deleted "controversial" topic sentence.
- adambatkin 6y ago
  I don't think this is any way similar to gun legislation. If you lose a bunch of money investing in a scam startup, you might lose your money and be sad. If you buy a gun, you can use that to kill me and my family. Believing that the government should restrict access to guns has nothing to do with being "babied and coddled by people in power" and everything to do with not wanting to be shot by someone else.
  - deleted 6y ago
    [deleted]
  - quxpar 6y ago
    Came here to say this. I have no idea how an insane person with a gun is equivalent to voluntarily trading. Should I accept that gun-toting idiots are an inherent risk in my life, even if I never purchase a gun?
  - leetcrew 6y ago
    yes, let's not argue one controversial topic by introducing another. we all know HN has a deep disagreement over gun regulations. I do feel that a lot of the restrictions on amateur trader have the effect of barring "normal" people from making some of the best investments. I ought to be allowed to fail like the best of them. the catch here is that I don't bear all the risk if I fail. if I lose everything on a stupid trade, I am entitled to lean on my fellow taxpayers for support. some balance needs to be struck between allowing me to fail and requiring other people to pick me back up if I do.
mountainb 6y ago
The family is not likely to prevail, although they might bully a settlement out of Robinhood. You can sue people for any reason at all, including word salad 'reasons,' but it doesn't mean that the suit will survive a motion to dismiss.
Cthulhu_ 6y ago
Robinhood isn't liable for this, as long as they abide(d) by SEC or European laws. Re: your second paragraph, consumers / retail traders in Europe have to prove basic understanding of the stock market and the risks involved before they are allowed to trade stock (MIFID II [1]). I've been involved in building a stock trading platform for a bank, both before this was a thing and while it was being implemented. I'm a customer there nowadays, and with my knowledge level I'm not allowed to trade in stock options. Probably for the best. I'm doing well enough with a low risk index tracker on the one hand, and 'play money' on the other that I can risk losing. [1] https://en.wikipedia.org/wiki/Directive_2014/65/EU https://en.wikipedia.org/wiki/Directive_2014/65/EU
titzer 6y ago
Their systems set him an email demanding an immediate $170,000 payment. He couldn't find any actual person to talk to. Then he killed himself. The next day, their systems emailed him saying everything is fine. Incredible.

by belval 6y ago

lfuller 6y ago

I don’t believe being “liable for users’ misfortune” is the issue here. While Robinhood showed the user being down hundreds of thousands of dollars, this was actually a UI issue and the user actually had a profit.

deleted 6y ago
[deleted]
sunir 6y ago
The dispute as I understand it was he did not “actually” (literally speaking) have a profit because the clearing and settlement hadn’t finished. A lot of the anger with Robinhood comes down to the mistaken belief by many people that money moves instantly, trades happen instantly. Robinhood UI is struggling to convey actual current value vs accrued unsettled value vs unrealized value. These are non-trivial concepts. The time component of money confuses a lot of situations. Eg Most people treat retainers as revenue before it is earned; even SaaS companies treat MRR as earned before the time period elapsed and service is rendered. However this isn’t strictly correct or legal.
- okprod 6y ago
  I thought the issue was he thought he had a $700K loss, tried to contact Robinhood customer service for clarification because he didn't think he should have a loss, Rh gave him a boilerplate automated message, and he killed himself before getting a clarification from Rh. With a lot of these new Web services like Rh, GoPuff, Yelp, etc. it can be hard to get a hold of a real person in a timely manner.
  - ethbr0 6y ago
    I hate to sound calloused here, but maybe if you don't understand transaction settlement time, don't trade that volume of options? Robinhood has similar moral liability of a payday lender: it's not wholly their fault if people choose to make bad choices for themselves, but they are partially responsible for enabling them and/or obsfuscating terms. But in this instance, we're talking about pretty standard industry processes and practices. If you hand someone a gun with the expectation they know how to use it, and the first thing they do is blow their brains out... not sure how that's on you?
    - Rooster61 6y ago
      Robinhood is specifically targeting young, inexperienced investors as their market. Not having enough information as to how options work, not having an actual line to get support, sending out a flaming email demanding $170,000 erroneously... So many places where this could have been avoided, and should be expected considering the targeted clientele. They had this coming
    - okprod 6y ago
      It's not standard for a broker to not have live customer service. When/after I make a trade I can call Fidelity and talk to somebody. This kid tried to contact customer support and got an automated message. Try calling Uber or GoPuff customer support when your delivery doesn't come.
  - fatnoah 6y ago
    https://www.cbsnews.com/news/alex-kearns-robinhood-trader-suicide-wrongful-death-suit/ https://www.cbsnews.com/news/alex-kearns-robinhood-trader-su... The article in the top post is missing details. Robinhood actually demanded $170k from him to settle his account. It wasn't a UI issue.
    - ethbr0 6y ago
      From that article, "the company sent an automated email demanding Alex take "immediate action," requesting a payment of more than $170,000 in just a few days..."
klmadfejno 6y ago
"Issue" sounds like a bug though. It was an accurate number, the user just didn't understand the context of it. The question is whether it was illegal to get the user into that position without them understanding what they were doing. > Monday’s lawsuit said Robinhood had an obligation to know its customers and ensure its trading strategies were appropriate, but instead the broker preyed on inexperienced investors. Does robinhood actually have this obligation? Not knowing anything, I would assume they don't actually have to do this. Appropriate is subjective and nonsensical imo. Did the guy do something inappropriate? On one hand I think no, it wasn't especially crazy as a financial move. On the other hand, should a 20 year old who doesn't know anything be able to get involved in 100k margins? Idk. I do think robinhood preys on inexperienced investors. I'm interested to see how it can be argued as illegal.
- Person5478 6y ago
  This is an area where the law needs to catch up. Current law limits what many people can do in terms of the stock market specifically to protect unsavvy investors. What Robinhood is doing is no different than a 3rd party acting as a go between the stock market and an unsavvy investor but telling the unsavvy investor they went 700k+ in the hole. The internet is slowly moving away from being the wild west, and things like this is a part of it.
  - PeterisP 6y ago
    I feel that the current law would have worked just fine if it was enforced properly - current law (at least in EU where I live - as far as I understand, SEC guidelines in USA are similar, but I may be mistaken) expects that unsavvy investors should be prohibited to make such trades, partly because we know well from historical experience that often it leads to sad consequences such as this case. As the circumstances show, this young man did not have a proper understanding of what his trades (including the not-yet-settled part) meant and what the actual financial consequences and risks were at that point of time when he (mistakenly) felt that they are horrific enough to take his life. Robinhood should have tested for that capability and, given the absence of it, ensured that he can not trade options on their platform and be limited to simpler, more understandable investment products. If they intentionally make this verification superficial so that they can get more unsophisticated investors trading tricky products on their platform, that is praying on investors and should be prohibited.
deleted 6y ago
[deleted]

throw1234651234 6y ago

I strongly agree - a lot of the "protections" have become a privilege for the rich and educated, and I say that as someone who doesn't eat organic locally-sourced Kale, drink lattes, read Marx at a hipster coffee shop, etc. For example - brokerages keep you from trading on margin unless you have x money and y experience trading on margin and/or options. You CANNOT invest into SpaceX (not pioneering SpaceX here, just an example) unless you are an accredited investor, that is, if you aren't RICH. Google does though. These are serious disadvantages. The real question is whether you want to be babied and coddled by people in power. Edit: Deleted "controversial" topic sentence.

adambatkin 6y ago
I don't think this is any way similar to gun legislation. If you lose a bunch of money investing in a scam startup, you might lose your money and be sad. If you buy a gun, you can use that to kill me and my family. Believing that the government should restrict access to guns has nothing to do with being "babied and coddled by people in power" and everything to do with not wanting to be shot by someone else.
- deleted 6y ago
  [deleted]
- quxpar 6y ago
  Came here to say this. I have no idea how an insane person with a gun is equivalent to voluntarily trading. Should I accept that gun-toting idiots are an inherent risk in my life, even if I never purchase a gun?
- leetcrew 6y ago
  yes, let's not argue one controversial topic by introducing another. we all know HN has a deep disagreement over gun regulations. I do feel that a lot of the restrictions on amateur trader have the effect of barring "normal" people from making some of the best investments. I ought to be allowed to fail like the best of them. the catch here is that I don't bear all the risk if I fail. if I lose everything on a stupid trade, I am entitled to lean on my fellow taxpayers for support. some balance needs to be struck between allowing me to fail and requiring other people to pick me back up if I do.

mountainb 6y ago

The family is not likely to prevail, although they might bully a settlement out of Robinhood. You can sue people for any reason at all, including word salad 'reasons,' but it doesn't mean that the suit will survive a motion to dismiss.

Cthulhu_ 6y ago

Robinhood isn't liable for this, as long as they abide(d) by SEC or European laws. Re: your second paragraph, consumers / retail traders in Europe have to prove basic understanding of the stock market and the risks involved before they are allowed to trade stock (MIFID II [1]). I've been involved in building a stock trading platform for a bank, both before this was a thing and while it was being implemented. I'm a customer there nowadays, and with my knowledge level I'm not allowed to trade in stock options. Probably for the best. I'm doing well enough with a low risk index tracker on the one hand, and 'play money' on the other that I can risk losing. [1] https://en.wikipedia.org/wiki/Directive_2014/65/EU https://en.wikipedia.org/wiki/Directive_2014/65/EU

titzer 6y ago

Their systems set him an email demanding an immediate $170,000 payment. He couldn't find any actual person to talk to. Then he killed himself. The next day, their systems emailed him saying everything is fine. Incredible.