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SEC charges Robinhood with misleading its customers

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Miguel A. Rodriguez
Miguel A. Rodriguez
17 December 2020
The Silicon Valley-based startup accused of deceiving its clients about its practices

According to the latest statement published on its website, the Security and Exchange Commission (SEC) charged Robinhood today with misleading its clients about how it makes money. Also, the company failed to deliver to its customers the promised best execution of trades. SEC statement read:

“Between 2015 and late 2018, Robinhood made misleading statements and omissions in customer communications, including in FAQ pages on its website, about its largest revenue source when describing how it made money – namely, payments from trading firms in exchange for Robinhood sending its customer orders to those firms for execution, also known as ‘payment for order flow.’”

Robinhood didn’t fail to talk about the charges, which it didn’t admit nor denied, saying that ″We are fully transparent in our communications with customers about our current revenue streams, have significantly improved our best execution processes, and have established relationships with additional market makers to improve execution quality.”

Following the charges, Robinhood agreed to pay a civil penalty worth $65 million.

But while Robinhood pays $65 million in penalties, one of its competitors – Public.com has raised the same amount in Series C funding. Among investors are Advancit Capital, Lakestar, Mantis VC, and stars such as Will Smith and Keisuke Honda.

In the past eight months, Public.com managed to raise $90 million from investors.

Sources: sec.gov. cnbc.com, finance.yahoo.com

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Miguel A. Rodriguez
Miguel A. Rodriguez
Financial Writer

Miguel worked for major financial institutions such as Banco Santander, and Banco Central-Hispano. He is a published author of currency trading books. 

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