Massachusetts regulator seeks to revoke Robinhood’s broker-dealer license

Massachusetts’ securities regulator is in search of to revoke the broker-dealer license of cryptocurrency-friendly inventory buying and selling app Robinhood within the state.

William Galvin, the pinnacle of the state’s securities division, stated in a brand new administrative grievance that Robinhood has “continued a pattern of aggressively inducing and enticing trading among its customers — including Massachusetts customers with little or no investment experience,” Bloomberg reports Thursday.

The new submitting is a follow-up to a grievance filed by Galvin’s workplace in December 2020, alleging that Robinhood’s advertising and marketing illegally targeted inexperienced investors.

The state pointed to Robinhood’s latest exercise, together with a promotion that gives clients with money rewards based mostly on new deposits, as proof of a “firm culture which has not changed.” 

Robinhood responded to the brand new grievance, arguing that the motion may forestall “millions of Bay Staters” from accessing their platform. In December, the corporate stated that its platform had practically 500,000 clients in Massachusetts.

The agency has filed a lawsuit in search of to invalidate a just lately adopted fiduciary rule in Massachusetts that state regulators have accused it of violating. Adopted in 2020, the rule requires broker-dealers to act of their shoppers’ greatest curiosity.

“The Massachusetts Securities Division’s new Fiduciary Rule exceeds its authority under both Massachusetts state law and federal law,” Robinhood stated. “Robinhood is a ‘self-directed’ brokerage firm that does not make investment recommendations or provide investment advice. By its own terms, the new rule does not apply to self-directed firms,” the agency famous within the lawsuit.
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Robinhood has confronted mounting stress from regulators and customers alike after it became involved in the controversial GameStop cease short-squeeze. Robinhood halted buying for GameStop stock in January 2021, drawing the ire of the buying and selling group. 

Last yr, 20-year-old Robinhood consumer Alex Kearns committed suicide after seeing a $730,000 unfavorable stability on his Robinhood app. A notice on his laptop reportedly posed the query, “How was a 20 year old with no income able to get assigned almost a million dollars worth of leverage?” In February 2021, Kearns’ mother and father filed a lawsuit in opposition to Robinhood over his loss of life.

Robinhood has been additionally experiencing a variety of technical points, reportedly inflicting main losses for merchants and triggering further legal action in opposition to the corporate.

The most up-to-date such occasion occurred on Thursday when Robinhood’s crypto buying and selling platform bumped into technical points as Dogecoin (DOGE) hit a brand new all-time excessive of $0.27.