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When the "fine" is minuscule relative to profits and the bulk of it goes to a private company / self-regulatory organization (FINRA: [1]), it might be more accu
by beambot 5y ago
When the "fine" is minuscule relative to profits and the bulk of it goes to a private company / self-regulatory organization (FINRA: [1]), it might be more accurate to label this a "bribe" for plausible deniability...
[1] https://en.wikipedia.org/wiki/Financial_Industry_Regulatory_Authority https://en.wikipedia.org/wiki/Financial_Industry_Regulatory_...
- asteroidbelt 5y agoIn 2020 RH revenue (not profits) was $682M, so $70M fine is definitely not "minuscule".
- z3ncyberpunk 5y agoNope, still pretty paultry.
- beambot 5y agoGross profits, not net. Their net profit is probably negative, like most growth stage pre-IPO or recently-IPO tech companies. They were looking at IPOing at a $30B valuation. The fine is 0.2% of their anticipated market cap.
- asteroidbelt 5y ago0.2% of cap also looks significant for the first offense. What do you think would be an appropriate fine?
- beambot 5y agoThis isn't the first offense. They were fined $65M in Dec 2020 for similar infractions [1]. Clearly that wasn't enough to deter bad behavior. I'm a fan of exponential backoff. Pick an exponent. 3x-10x the last infraction seems reasonable (assuming similar levels of harm to users). [1] https://www.cbsnews.com/news/robinhood-sec-fine-65-million/ https://www.cbsnews.com/news/robinhood-sec-fine-65-million/
- asteroidbelt 5y ago3x exponential sounds right. Thank you for the context!
- elliekelly 5y agoFINRA is the industry equivalent of a firm’s Chief Compliance Officer. They’re supposed to identify and correct issues at the expense of the industry rather than wasting the government’s limited resources. FINRA conducts regular exams of all members the way a Compliance Officer will regularly examine all department functions. Whereas the SEC conducts random periodic exams (like an auditor), targeted exams (like an investigator) and occasionally “sweep” exams relating to the topic du jour (usually in preparing to issue to a new rule).