Georgia is part of a multi-state settlement with financial services company Robinhood that will allow investors in the state to recoup losses suffered due to “operational and technical failures by the widely known securities trading platform.” Secretary of State Brad Raffensperger made the announcement Thursday, stating that the settlement with Robinhood Financial, LLC stems from a joint investigation spearheaded by multiple state securities regulators, coordinated through the North American Securities Administrators Association (NASAA).
“Georgians work hard to earn their paychecks and invest wisely,” said Raffensperger. “Platforms that operate in Georgia must have the highest safeguards in place. If they fail to protect the investments of hardworking Georgians, we’re going to make sure those losses are returned.”
According to Raffensperger, the investigation was a result of changes made to the Robinhood platform in March 2020 which left users unable to complete transactions – sometimes as the values of their assets were decreasing. It was discovered that prior to March 2021, numerous deficiencies existed in the review and approval process, the firm’s monitoring and reporting tools, and insufficient customer service and escalation protocols. As a result of these deficiencies, Raffensperger said, account holders suffered losses.
Apparently, Robinhood has not admitted to or denied the findings set out in the States’ orders, which sets out several violations including negligent dissemination of inaccurate information to customers regarding margin and risk associated with multi-leg option spreads, as well as a failure to have a reasonably designed customer identification program.
Other violations stated in the order are:
• Failure to supervise technology critical to providing customers with core broker-dealer services. • Failure to have a reasonably designed system for dealing with customer inquiries. • Failure to exercise due diligence before approving certain option accounts. • Failure to report all customer complaints to FINRA and state securities regulators, as may be required.
One year after the settlement date, Robinhood will attest to the lead state – Alabama – that it is in full compliance with the FINRA-ordered independent compliance consultant’s recommendations or has otherwise instituted measures that are more effective at addressing the recommendations.
“Today’s agreement reflects the ongoing effort by our office to protect the accounts of hardworking Georgians and make sure that they are treated fairly,” said Securities Division Director Noula Zaharis.
According to information from Raffensperger, the Securities Division found no evidence of willful or fraudulent conduct by Robinhood and that Robinhood fully cooperated with the investigation.
