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The Securities and Exchange Commission is investigating Robinhood’s stock practices and its decision to restrict trading in certain stocks to match
GameStop
mania last month, Robinhood said at a stock presentation Friday.
The trading platform, which is kept private but is expected to be made public this year, made the disclosures in an annual audit required of brokers under the Securities Exchange Act of 1934.
Robinhood has taken the wrath of investors and some members of Congress for its decision from January 28 to restrict the purchase of certain shares, including GameStop (ticker: GME), BlackBerry (BB),
AMC Entertainment Holdings
(AMC) and Bed Bath & Beyond (BBBY). The company has said it was forced to curb trade due to rising financial demands from its clearing center.
Robinhood also faces other lawsuits and customer lawsuits that the company says could result in financial penalties.
State regulators and the financial industry regulatory authority, or Finra, are also studying options trading on Robinhood and the disruptions that investment app users experienced in March 2020. Robinhood is negotiating a deal. with Finra that could cost the company at least $ 26.6 million, the filing said.
The company’s options practices have been under the microscope since a 20-year-old named Alex Kearns committed suicide last year after expressing distress over an options trade on his Robinhood account. Kearns’ family has filed a lawsuit for illegal death against the company. Robinhood has said it was “devastated” by Kearns’ death last June and was “committed to making Robinhood a place to learn and invest responsibly.”
The company is also dealing with a class action lawsuit for “account acquisitions,” where it appears someone had access to Robinhood’s accounts.
The trade restrictions that Robinhood imposed in January have sparked 46 lawsuits, the company said. And there is a long list of agencies studying the subject, including “the U.S. Attorney’s Office for the Northern District of California, the SEC Examination Division, Finra, the New York Attorney General’s Office, other U.S. state prosecutors and a number of state securities regulators, ”the company said.
“Due to the preliminary nature of all these proceedings, at this time we cannot estimate the likelihood or magnitude of possible losses related to these matters,” Robinhood said.
Write to Avi Salzman at [email protected]