The stock trading app firm Robinhood has agreed to pay $65 million to settle charges from the Securities and Exchange Commission that it misled customers about its business model and failed to deliver on best execution of trades.

“Between 2015 and late 2018, Robinhood made misleading statements and omissions in customer communications, including in FAQ pages on its website, about its largest revenue source when describing how it made money — namely, payments from trading firms in exchange for Robinhood sending its customer orders to those firms for execution, also known as ‘payment for order flow,’” the SEC said.

Robinhood advertised itself as a commission-free trading service, but “due in large part to its unusually high payment for order flow rates, Robinhood customers’ orders were executed at prices that were inferior to other brokers’ prices,” the SEC said.

The SEC said increased trading prices cost customers more than $34 million, even accounting for the zero commission fees.

“The settlement relates to historical practices that do not reflect Robinhood today,” Dan Gallagher, Robinhood’s chief legal officer, said. “We recognize the responsibility that comes with having helped millions of investors make their first investments, and we’re committed to continuing to evolve Robinhood as we grow to meet our customers’ needs.”

On Wednesday, the Commonwealth of Massachusetts filed a complaint against Robinhood alleging it used “aggressive tactics to attract inexperienced investors” and “gamification strategies to manipulate customers.”

Robinhood reported revenue of $180 million off of trades in the second quarter, nearly double the previous quarter, with the majority coming from options trades.

The Massachusetts regulator said 68% of the company’s customers were approved for options trading despite reporting limited or no investing experience.

A Robinhood spokesperson said the company disagreed with those allegations and planned to defend itself vigorously.

“Over the past several months, we’ve worked diligently to ensure our systems scale and are available when people need them. We’ve also made significant improvements to our options offering, adding safeguards and enhanced educational materials,” the spokesperson said.

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