Burr & Forman

03.1.2021   |   Blog Articles, FINRA, SEC, Securities Litigation

Robinhood to Settle Options-Related Investigations?

In an SEC filing Friday, February 26, Robinhood Financial and Robinhood Securities disclosed they are negotiating with FINRA, the SEC, and state regulators, attempting to settle investigations into options-trading and outages from March, 2020.

The investigations focus on Robinhood’s options-trading approval processes and how the app displays cash and buying power to customers.  Similar issues were involved in the GameStop (“GME”) imbroglio earlier this year.  Congress and various regulators continue to examine the GME situation.

The Companies disclosed they have accrued $26.6 million as a minimum for resolving the matter:

RHF and RHS are currently engaged in discussions with FINRA staff regarding a possible negotiated resolution of certain FINRA matters, including the March 2020 Outages and options trading and related customer communications and displays noted above. While these discussions are ongoing, RHF and RHS anticipate that any resolution, if reached, would involve charges of violations of FINRA rules, a fine, customer restitution, a censure, and a compliance consultant. We have accrued in our statement of financial condition for the year ended December 31, 2020  $26.6 million representing the bottom of the range of our probable losses. We cannot predict, however, whether these discussions will result in a resolution of these matters.

Robinhood made the disclosure in an SEC filing on Friday, February 26, here.

I wrote about the GameStop situation here and about a wrongful death suit against Robinhood, touching upon its options-trade communications, here.

Thomas K. Potter, III (tpotter@burr.com) is a partner in the Securities Litigation Practice Group at Burr & Forman, LLP. Tom is licensed in Tennessee, Texas, and Louisiana. He has over 34 years of experience representing financial institutions in litigation, regulatory, and compliance matters. See attorney profile.

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