Robinhood really showed its philosophy of being for the people when it made unprompted trade restrictions that allowed the poor, vulnerable hedge funds to be protected from the “Gamestonks” incident. As one would imagine, these actions didn’t go unnoticed, and the exchange is facing a number of regulatory investigations as a result of this.
Setting Aside $26 Million For Fines
Through a filing made with the Securities and Exchange Commission (SEC), Robinhood revealed that the protection of their hedge fund buddies has cost it dearly. As it stands now, the no-fee exchange is facing investigations by both FINRA and the SEC, who have started to probe both the service outages and the unfortunate suicide of a Robinhood options trader. Alongside this, the investigations are auditing its poor customer communication skills, as well.
The investigations themselves are apparently at their advanced stages, with talks of a fine of over $26 million set to be paid by the firm if it wants to settle with the exchange. However, the details regarding these particular investigations are rather scarce, with the likelihood of a deal being announced at this exact stage being rather low. In fact, neither side has even begun the settlement negotiations about the matter.
Choosing A Side With A $26.6 Million Price Tag
Robinhood explained that both RHS and RHF are expecting that a resolution, should it be reached, will involve everything from a fine, to FINRA rule violations, a censure, customer restitution as well as a mandatory compliance consultant. All of which are welcomed.
In Robinhood’s financial statement, the firm revealed that it had set aside $26.6 million in funds, which it expects will be the bottom range of its probable losses regarding all the legal actions against it. Robinhood was quick to stipulate that there’s no way for it to predict whether or not an actual resolution will be made.
The Gamestop Fiasco’s Fallout Still Present
US regulators are also confirming that they were in the process of looking into the recent and spectacular short squeezes that occurred in various stocks, which drove the price of these stocks through the roof. These large-scale short squeezes were enacted by groups of retail traders organized in the Reddit social platform. In particular, the SEC highlighted that it’s working very closely with FINRA and other regulators in order to assess the activities of these retail traders and the brokers involved.
The SEC, in particular, gave the politically correct, general warning regarding the matter. While refraining from naming any singular exchange, in particular, the watchdog promised the public that it was in the process of scrutinizing the actions done by various regulated entities. In particular, actions that may have unduly inhibited their trade ability or otherwise had intentionally disadvantaged investors.