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FINRA Orders Record Financial Penalties Against Robinhood
- throwaway81523 5y agotldr: total $70M. Nobody ever goes to jail in these stories.
- EccentricBunny 5y agoIf their customers are being refunded, it's better than expected.
- eganist 5y ago> tldr: total $70M. Nobody ever goes to jail in these stories. FINRA isn't government.
- chaostheory 5y agoMaybe the SEC needs to be more proactive?
- refurb 5y agoI thought we had too many people in jail already. You want to add more?
- JackFr 5y agoPeople don’t go to jail to make people feel good. You can’t deprive people of their liberty without having a specific person, specific actions and a specific law being broken, and allow them to mount a defense of the charges. On the other hand it’s it’s easy to fine a firm for patterns of behavior.
- salawat 5y agoSometimes I wonder if there's secretly a FINRA fine high score amongst fintechs. Sure seems like all that it's good for at times.
- deleted 5y ago[deleted]
- HNfriend234 5y agoRobinhood is expected to go public (IPO) soon. What does everyone think of the company now? I was going to invest but now I'm having second thoughts on it. Seems like the brand has been permanently tarnished by this situation overall.
- freshhawk 5y agoSo these new /r/wallstreetbets and related manaics are obviously going to burn piles of money going to war with the IPO. Do you think the size of those piles of money is priced in? The size of the fear of the size of those piles of money? The PR related stuff seems easier to figure out. It's either a great idea or a terrible idea, and I can't tell.
- zhdc1 5y agoI guess this is timed to get it out of the way before the IPO. I don't know whether Robinhood as a stock would be worth investing in (probably, but that's your decision to make). As far as adverse press and reputation are concerned, these sorts of things only have a negative effect if they represent some kind of underlying/fundamental issue with the company. Unless if you think that Robinhood will repeatedly be hit by regulatory fines, and that the fines or other actions are large enough to strongly impact their bottom line, the FINRA action probably isn't much of a factor.
- quickthrowman 5y agoI’m planning on selling put spreads to wallstreetbets once the options chain opens up
- secondcoming 5y agoNothing about robinhood disabling the buyside players but not the sellside?
- MattGaiser 5y agoDidn't a bunch of brokers do that?
- real-dino 5y agoA bunch did, a bunch didn't. T212 did in the UK and they have been closed to new accounts since the incident. https://www.reddit.com/r/Superstonk/comments/mowzjk/the_broker_preparation_guide/ https://www.reddit.com/r/Superstonk/comments/mowzjk/the_brok... has a list of brokers, who restricted trades and their clearing houses.
- Sander_Marechal 5y agoI think that's a separate complaint that's being looked in to
- paulgb 5y agoI maintain that that was the right thing to do, given the situation they were in (and not excusing them for not avoiding getting into that situation) The way I see it, if I own a stock and want to sell it, my broker’s duty in that situation should be exclusively to me. Even if they don’t have the ability to let other customers enter a position, they shouldn’t block the exit gates for me in a naive attempt to maintain balance of buy and sell orders. If it could be shown that they did this intentionally to manipulate the market, of course they should be fined for it. But if the truth is in line with the official statement at the time, I don’t see wrongdoing.
- McDyver 5y agoYou should be able to sell it, yes. But who are you selling it to, if Robinhood is preventing you (and your peers) from buying?
- eruleman 5y agoIt's important to note that Finra is not a government regulator — it's a self-regulating organization (SRO). JP Morgan, Goldman Sach etc are part of Finra. [1] By handing out the biggest fine in Finra history, they are telling the government that government regulation isn't needed — they can regulate themselves. [1] https://youtu.be/hNImocKCMvE?t=1879 https://youtu.be/hNImocKCMvE?t=1879
- vl 5y agoBut if it’s not government, why would anyone ever pay fines to them then?
- StopHammoTime 5y agoQuite simple. The government legislates that membership in a non-government entity is required to do business in a sector. If you’re fined and don’t pay the fine to the entity, they revoke the membership and you are now breaking the law.
- rubatuga 5y agoIs this real or are you joking?
- bbarnett 5y agoIt's the same with many things. Lawyers, doctors, etc. This comes from a long line of trade houses, literally spanning back 1000s of years. Trades have regulated themselves since before governments existed.
- masklinn 5y ago> Trades have regulated themselves since before governments existed. Not even remotely. Guilds followed states, and were usually under the purview of and regulated by cities.
- davidgerard 5y agoI also recommend Robinhood's full 123-page Letter of Acceptance, Waiver and Consent. Very readable, and it's quite the catalogue of, at absolute best, less than competent behaviour. https://www.finra.org/sites/default/files/2021-06/robinhood-financial-awc-063021.pdf https://www.finra.org/sites/default/files/2021-06/robinhood-...
- lanbanger 5y agoThis is extremely good content, thanks for the link. Just the first few pages are enough to convince me that Robinhood is a very poorly run organisation. As a financial technologist with a couple of decades' experience, basic things such as only having a 'physical inaccessibility' BCP plan is appalling. I wouldn't touch this company with a penny of my money, whether as a customer or an investor.
- PascLeRasc 5y agoUnfortunately thanks to the S&P 500, we’ll have no choice but to invest in them and support running a business poorly.
- hckrnrd 5y agoHOOD won’t be part of the S&P 500 index. Not sure what you mean?
- chiph 5y ago> Robinhood’s BCP [Business Continuity Plan] was limited to events that physically prevented employees from working from the firm’s premises. As such, the firm did not consider applying its BCP to technology-related business disruptions, including the March 2-3 outage, which Robinhood considered an “existential” threat to its business They're a FinTech firm and they didn't plan for technology outages but did for stuff like weather events? That's just crazy and noob-level planning.
- llampx 5y agoRobin Hood takes the fall while the big players laugh all the way to their banks.
- hckrnrd 5y agoThis is my sense too. Disrupting the legacy financial industry took moxie. And no doubt ruffled quite a few feathers. The big guys would love if HOOD failed miserably as a public company, so I’m cautious to invest. But the economics of the service are brilliant. HOOD is a money printing machine run by psychopaths—sounds like a win to me.
- mola 5y agoSlap on the wrist. Robinhood will be identified as a way to milk common folks money by the big players. So the big players will invest anyway, then it'll have enough influence in FINRA to avoid any consequential punishment when they'll fuck up the public finances.
- freshhawk 5y agoYeah, those are very big fines but there has been so much attention on this that we all know that 70 million is a small dent in the profits from the play that caused all this.
- matwood 5y agoRH is looking at a 40B+ valuation when they go public. 70M is a laughable fine.
- vkou 5y ago'Common folk' engaging in day trading are signing themselves up to be milked, regardless of which exchange they use. If you're one of those common folk, my best advice for you is to stop. If you want to invest, buy an index fund. If you want to gamble, go to a casino. If you want to gamble, while fooling yourself that you're investing, day-trade options, preferably in a meme stock.
- ClumsyPilot 5y ago" If you want to gamble, go to a casino." Yeah, I wouldnt go that far, daytrading reputable shares is still better than casino
- toomanybeersies 5y agoI put day trading in the same category as betting on horse races. There's punters who make good money on the horses, just like there's investors who make good money day trading, but most casual punts are little better than random guesswork.
- leeoniya 5y ago> Robinhood neither admitted nor denied the charges this standard phrase is used so often it should be a meme. almost like having a defense attorney make a public statement to the news media, which is 100% of the time "my client is innocent, charges are frivolous, lawsuit is a witch hunt"
- broknbottle 5y agoWhile both statements are true, the defense attorney one has merit. In the US we are supposed to be presumed innocent until proven guilty. Unfortunately, these days it's more guilty until proven innocent.
- TeMPOraL 5y ago> these days it's more guilty until proven innocent. And not even that. Being proven innocent can protect you from legal problems, but social-wise not much happens, because the amount of people badmouthing you, who don't know - or pretend to not know - that you were found innocent, is too great.
- nabla9 5y agoSummary: "break things and fix them later" does not work in finance. - No attention to the quality of core infrastructure. - misleading information about customer ability to trade on margin ,cash in customers accounts, risk, and margin calls. - failed to exercise due diligence before approving customers to place options trades. - policy to not report certain failures and complaints to to FINRA. - several other issues like bad customer identification. Robinhood is designed to be cheap, easy and addictive. It's all that. The cost is quality.
- Annatar 5y ago"Designed" is taking it too far.
- real-dino 5y agoAlso with Robin Hood, much like Facebook and other free products, you are the product. They get trade information of general customer sentiment, and that data is worth more money than anything they could make on commission. This was the heart of the congress hearings... Payment for Order Flow, where Robin Hood took this information, gave the customer worse execution and benefited.
- Annatar 5y ago"Compliance with these rules is not optional and cannot be sacrificed for the sake of innovation or a willingness to ‘break things’ and fix them later,” Good, finally some of these crooks are getting busted, and in this particular instance busted for having hacked-up things. Can't do that in a professional business, or else one gets busted, as one should.
- Keyframe 5y agoFor instance, one Robinhood customer who had turned margin “off,” tragically took his own life in June 2020. In a note found after his death, he expressed confusion as to how he could have used margin to purchase securities because, he believed, he had not “turned on” margin in his account. As noted in the settlement, Robinhood also displayed to this individual (and certain other customers) inaccurate negative cash balances. Additionally, due to Robinhood’s misstatements, thousands of other customers suffered more than $7 million in total losses. As part of this settlement, Robinhood is required to pay more than $7 million in restitution to these customers. wow
- jw1224 5y agoThe customer who took his own life over the margin bug had repeatedly tried to call Robinhood's customer support, for several days, but nobody ever picked up the phone.
- MobileVet 5y agoDeplorable. If you are a photo sharing site using an ad supported business model, your ‘support’ can be some silly chat not. If you are taking people’s money for banking or investment, you provide 24/7 phone support. Period.
- Scoundreller 5y agoMy broker is one of the biggest banks in Canada and the US (TD) and it doesn’t have 24/7 support anymore. Monday-Friday 7am-6pm. I’d usually call outside of market hours when I could to avoid market-hour demand/wait times, but not anymore. And they charge me $10 for trades! https://www.td.com/ca/en/investing/direct-investing/services/ https://www.td.com/ca/en/investing/direct-investing/services...
- MobileVet 5y agoThey likely have a considerable amount of your net worth. You might want to reconsider that. Schwab provides this and they don’t charge for trades. I am sure they have warts, but I can always talk with someone. https://www.schwab.com/contact-us https://www.schwab.com/contact-us
- mbilal 5y ago70 doesn't sound much for a financial institution.
- poorjohnmacafee 5y agoRobinhood recently closed out an options position "automatically", selling it for 1/5th the amount I was seeking. They deemed it was "risky" yet the position was moving in my favor the whole week. I don't know how common that is on other platforms, but I'm feeling these fines probably are justified.
- betterunix2 5y agoIt is common to do such things. Remember that you are not the only one who takes on risk; your brokerage is also on the hook if you pile up losses that you cannot cover. Brokerages would rather piss off their customers by forcing them to close positions that, according to the brokerage's analysis, are too risky. Last year a bunch of brokerages raised their margin maintenance requirements on various symbols that were deemed risky in some way (low liquidity, wide bid/ask spreads, etc.), which likely worsened the market crash as even more selling pressure was applied.
- thoughtstheseus 5y agoThis is terrible. A fine this small incentivizes this behavior.
- roselan 5y agoWhere does this amount go? Back to Finra members?
- anonu 5y agoIt's a gambling company. Their S1 claims they are a "safety first" company. It's laughable that this even needs to be said. They've gamified trading at the expense of the little guy and the benefit of wall street. They claim they've returned $1.7bn in price improvement over less than 2 years but this masks the real effect that HFT is probably making multiples of this on their flow. I myself have filed a FINRA complaint against them 3 years ago for sending an order that was supposed to trade at the open but instead traded in the pre market session. In their attempt to make trading "easy" they removed basic long standing assumptions around how you trade. I lost money because my order was executed early. FINRA requested the complaint be addressed by RH. Guess what... They never responded. Great way to treat your customers...