NorthStar Financial Services (Bermuda)Learn More Here. Se Habla Español.

Shepherd Smith Edwards and Kantas Investigates Investor Claims Involving Robinhood Financial

Investors Who Used or Currently Use Robinhood Financial May Have Grounds for a Claim

If you are someone who lost money while using Robinhood Financial to make investments, Shepherd Smith Edwards and Kantas (SSEK Law Firm) would like to speak with you to help you explore whether you have grounds for a claim.

Robinhood Financial offers commission-free trading of stocks, exchange-traded funds (ETFs), and other investments. Its website, along with its app, has executed tens of billions of dollars of trades since its inception in 2013.

However, the firm has come under scrutiny, with a hefty fine by the Financial Industry Regulatory Authority (FINRA) in December 2019 for certain violations, as well as a number of technical glitches that have affected investors.

Technical Glitches Cause Temporary Shutdowns

This week, it was reported that infrastructure issues resulted in major outages on Monday and Tuesday, making it temporarily impossible for customers to trade stocks.

According to Robinhood Financial co-CEOs and co-founders, Vlad Tenev and Baiju Bhatt, heavy market activity and an “unprecedented load” on the site are what caused Robinhood’s DNS system to fail. A company spokesperson said that the failure also led to the shutdown of the app and its help center.

This week’s glitch is not the first time investors on Robinhood have been affected. Late last year, a different technical snafu made it possible for users to use free money to trade stock. Then, back in July, the company acknowledged that some passwords had been stored incorrectly in a format that was readable.

FINRA Accuses Robinhood Financial of Best Execution Violations, Supervisory Failures

Then there was the $1.25M fine imposed on Robinhood Financial by FINRA over supervisory failures and best execution violations involving equity orders made by customers. The alleged violations were said to have occurred between October 2016 and November 2017. The firm settled but without denying or admitting to the allegations.

According to the self-regulatory organization (SRO), for over a year, Robinhood Financial sent non-directed equity orders to four brokerage firms, which then paid the company. This type of arrangement between Robinhood and the broker-dealers is what is called a “payment for order flow”.

FINRA, in its action, contends that by routing the orders to the designated firms, Robinhood violated Rule 5310, which mandates that broker-dealers employ due diligence to determine what the best market for a security is and to trade in that market so as to ensure the most favorable price.

Instead, the company purportedly concentrated on the “execution quality” of “pre-existing routing destinations.”

Robinhood was also accused by the SRO of not conducting “systematic best execution reviews” of a number of kinds of orders, including orders made outside of trading hours. As a result, said FINRA, each month, hundreds of thousands of orders did not fall within the scope of the firm’s “regular and rigorous” process for review.

As for the supervisory violations alleged, the SRO said that Robinhood’s supervisory system was not designed in a manner reasonable enough to be able to be in compliance with its best execution duties.

Robinhood Financial Investor Fraud Claims Attorneys

If you are concerned about losses you sustained while investing through Robinhood Financial and/or that it may have mishandled your investments, contact SSEK Law Firm today.

Over the years, we’ve successfully recovered against many firms for their failure to supervise trades and other types of negligence, as well as for stockbroker fraud. Let one of our Robinhood investor fraud lawyers help you explore your legal options with a free, no-obligation evaluation of your case.

Contact Information