The Robinhood app is shown on a screen of this photo illustration on January 29, 2021. REUTERS / Brendan McDermid / Illustration
Massachusetts regulators on Thursday called for the revocation of the license of Robinhood brokers and brokers after they were accused of encouraging inexperienced investors to conduct risky operations without limits, while the online brokerage demanded the invalidation of a new one. rule underlying the case.
Massachusetts Secretary of State Bill Galvin filed for revocation in a revised administrative case announced shortly after Robinhood sued Boston State Court to challenge a fiduciary rule of conduct that he took office last year.
“We don’t think our clients are as naive as the Massachusetts Division of Securities thinks they are,” Robinhood said in a statement.
Galvin announced the case against Robinlo, based in Menlo Park, California, in December, before social media-driven concentration on stocks like GameStop, driven by retail investors using Robinhood and other apps, raised consumer prices. their actions.
Galvin, the state’s top securities regulator, accused Robinhood of using aggressive tactics to lure inexperienced investors and not to avoid stoppages on its platform. Read more
He alleged that the application-based service used strategies that treated commerce as a game to attract young and inexperienced customers, even dropping confetti for each transaction performed on their application.
The case is the first enforcement action filed under a state fiduciary rule that went into effect in September and raised the standard for investment advice for brokers.
Robinhood in its lawsuit argued that Galvin had no authority to overturn a long-standing finding by the Massachusetts Supreme Court that brokerage firms like itself do not consider themselves trustees of their clients.
He said the state legislature has done nothing to change the court’s determination and that it had no authority to adopt its rule.
Robinhood said the rule also creates an obstacle to federal regulation, and said the U.S. Securities and Exchange Commission adopted in 2019 its own rule governing brokerage firms that explicitly rejected the rule that was applying Galvin.
Galvin, considered nationally as an aggressive state securities regulator, in a statement called the lawsuit “another example of Robinhood’s total rejection of responsibility to its customers.”
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