SEC ends Robinhood investigation without consequences
The US Securities and Exchange Commission (SEC) has completed an investigation into Robinhood. It was examined whether Robinhood had misled its customers regarding the business model. No consequences will arise from this.
The summer of 2020 was uncomfortable for Robinhood as scandals gathered like dark clouds. Several events cast doubt on the trustworthiness of the brokerage app. This included extremely questionable communication about margin trading, which possibly led to a young trader committing suicide. In this context, allegations arose that Robinhood had not transparently informed investors about its practice of forwarding transactions to high-frequency traders and earning money from it.
The SEC subsequently announced an investigation with the official goal of determining whether Robinhood’s communication about its business model was “accurate.” However, the proceedings have now been concluded without any consequences for Robinhood. The company is off the hook regarding this matter, as confirmed by the most recent quarterly report that also mentions the SEC investigation.
The development is noteworthy as investors and observers are currently reviewing their overall picture of Robinhood. The decision to keep clients’ crypto balances backed by assets caused criticism and confusion. Additionally, in the spring, the launch of the Robinhood Wallet aimed at crypto was delayed. The number of active users decreased by about 1 million from the first to the second quarter.
The crypto business at Robinhood has stagnated in terms of trading volume. In June, the company announced it would cease support for more than ten altcoins shortly after the SEC classified them as unregistered securities. Nevertheless, Robinhood has a solid cash buffer and recorded rising net sales and profits in the second quarter. It remains to be seen whether the SEC’s completion without consequences will continue or boost confidence among Robinhood users.
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