Robinhood Under Fire From Massachusetts Regulators

thebalancemoney.com:

Investment platform Robinhood Financial was charged by Massachusetts securities regulators Wednesday for luring inexperienced investors to open accounts and make trades, and not doing enough to protect them from outages and disruptions on its platform.

The Massachusetts Securities Division of the Secretary of the Commonwealth’s office accused Robinhood of aggressively marketing its trading platform to naive investors and gamifying its app “to encourage and entice continuous and repetitive use of its trading application.” 

Robinhood did not respond to an email requesting a comment Wednesday night.

As of May, Robinhood had about 13 million customer accounts. The median age of clients on the app is 31 years old.

“Confetti rains down on the screen of the app after each trade and customers are encouraged to interact with the app repeatedly to move up a waitlist for early access to new products,” regulators said in a statement. They are seeking an unspecified fine and ordering Robinhood to hire an independent compliance consultant to review its platform and infrastructure, as well as its policies and procedures. 

“Treating this like a game and luring young and inexperienced customers to make more and more trades is not only unethical, but also falls far short of the standards we require in Massachusetts,” Secretary of the Commonwealth William Galvin said in a press release. 

The complaint is the first under the new Massachusetts Fiduciary Rule which became enforceable in September and is meant to hold broker-dealers, which are in the business of buying and selling securities, accountable to their customers.

Robinhood, which earns money off each trade, provided customers with limited or no investment experience the ability