Robinhood pays $45 million to resolve SEC violations over reporting and cybersecurity errors

Robinhood has agreed to pay $45 million in civil penalties to resolve securities law violations.

The settlement follows an investigation by the U.S. Securities and Exchange Commission (SEC) into the activities of its subsidiaries, Robinhood Securities LLC and Robinhood Financial LLC, according to a statement on January 13.

The fines include $33.5 million from Robinhood Securities and $11.5 million from Robinhood Financial.

violation

Sanjay Wadhwa, acting director of the SEC’s Division of Enforcement, said Robinhood’s failures spanned several key areas, including inaccurate reporting, inadequate cybersecurity measures, and inadequate fraud protection.

Wadhwa said:

“Today’s order alleges that the two Robinhood companies failed to accurately report trading activity, comply with short selling rules, file suspicious activity reports in a timely manner, maintain books and records, and protect customer information,” the statement said. It was found that important regulatory requirements were not complied with.

The SEC found that these companies failed to comply with various regulatory requirements from 2019 to 2022. The violations included delays in investigating and reporting suspicious transactions from January 2020 to March 2022.

Additional breaches include failing to implement adequate protections against identity theft from April 2019 to July 2022; A cybersecurity vulnerability that lasted from June to November 2021 also led to unauthorized access to users’ data.

The companies were also accused of failing to maintain proper records of electronic communications, a key regulatory requirement.

Robinhood Securities faced additional investigation for issues related to fractional stock trading, stock lending practices, and regulatory reporting failures. To address these issues, the company has agreed to certify that it has taken steps to prevent similar violations.

Both companies acknowledged the SEC’s findings and agreed to take disciplinary action. It also committed to conducting an internal review to strengthen compliance in electronic communications.

robinhood cryptocurrency

Although the recent SEC order does not pertain to Robinhood’s cryptocurrency business, the company faces regulatory challenges. Last year, the company revealed that reception Wells notice from financial regulator hints at possible enforcement action.

Robinhood’s 2024 report reveals substantial activity in the crypto segment. As of November 2024, the platform has recorded $119 billion in cryptocurrency trading volume and manages $38 billion in digital assets under custody.

The company also revealed that it has expanded its offering of crypto assets in the US, adding tokens such as Solana and Cardano, bringing the total number of digital assets available in the region to 20.

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