Robinhood Will Retool Checking Product Following Scrutiny • Hacker News Board

Re: Robinhood Will Retool Checking Product Following Scrutiny

#61

Post by throwaway98434 » Sun, Dec 16, 2018, 7:26 AM UTC

JumpCrisscross wrote: post #47

AnthonyMouse wrote: post #46

Earlier quoted context omitted.

I don't know. The fact that it was done completely publicly (and therefore was discoverable and discovered immediately) basically moots any need for harsh penalties. They were essentially testing the fences. That isn't bad , especially when it's done completely in the open. It gives the regulators an opportunity to say "no" and shut it down immediately if they want to, or say nothing and let it proceed. If they say n…

> the alternative is that nobody is willing to try anything new just because there is no existing precedent explicitly saying that it's OK The part that was grossly problematic was Robinhood falsely claiming it was SIPC-insured. SIPC insurance isn’t automatically granted. There isn’t any useful innovation limited by telling people “try new things, but don’t lie about having certifions you don’t have.”

Had they launched a product, sure. But this was mere talk about a future product which they've decided "to retool" after scrutiny.

No one was harmed here. This is fine.

Re: Robinhood Will Retool Checking Product Following Scrutiny

#62

Post by AnthonyMouse » Sun, Dec 16, 2018, 7:32 AM UTC

eropple wrote: post #53

AnthonyMouse wrote: post #51

Earlier quoted context omitted.

A plausible explanation is that they expected it to apply. "Try new things, but never make a mistake" is essentially equivalent to "never try new things."

C'mon. Never try new things? How about ask before you start promoting them ? You think a couple phone calls with SIPC wouldn't have disabused them of the notion? This is slack laziness and cavalier disrespect for their userbase. I had started toying with Robinhood; I immediately pulled everything I've got back out. They aren't trustworthy custodians.

> How about ask before you start promoting them? You think a couple phone calls with SIPC wouldn't have disabused them of the notion?

Why is that supposed to be necessary? The government is more than capable of telling you if it's a problem, and if it's not a problem -- which is the default -- it would only waste resources on the part of everyone.

What I suspect may have happened here is that the traditional banks soiled themselves when they saw the announcement and started calling around to see who they could get to put a stop to it.

The head of the SIPC essentially said as much in the article: "This has gigantic ramifications for the banking industry." As if his role is to save the mortgage banks from competition.

> I had started toying with Robinhood; I immediately pulled everything I've got back out. They aren't trustworthy custodians.

Presumably they're SIPC insured. :)

Re: Robinhood Will Retool Checking Product Following Scrutiny

#63

Post by JumpCrisscross » Sun, Dec 16, 2018, 7:32 AM UTC

throwaway98434 wrote: post #61

JumpCrisscross wrote: post #47

Earlier quoted context omitted.

> the alternative is that nobody is willing to try anything new just because there is no existing precedent explicitly saying that it's OK The part that was grossly problematic was Robinhood falsely claiming it was SIPC-insured. SIPC insurance isn’t automatically granted. There isn’t any useful innovation limited by telling people “try new things, but don’t lie about having certifions you don’t have.”

Had they launched a product, sure. But this was mere talk about a future product which they've decided "to retool" after scrutiny. No one was harmed here. This is fine.

> this was mere talk about a future product

Which is why something between slap on the wrist and massive fines is in order.

The FDIC and SIPC work through public trust. When a broadly-marketed consumer product sets a precedent for degrading that trust, it causes real harm. Robinhood grabbed users through marketing this affiliation and gained tangible value from it. The last thing we need is the next growth hacking scheme involving falsely marketing trusted affiliations before pulling the product, customer lists in hand.

Re: Robinhood Will Retool Checking Product Following Scrutiny

#64

Post by fastball » Sun, Dec 16, 2018, 7:33 AM UTC

vinay427 wrote: post #41

jnwatson wrote: post #40

Earlier quoted context omitted.

Sure, but they just weren't sophisticated enough. It isn't wrong, they just need to go through some more steps, like Fidelity. It will be a non-issue in 60 days.

Sure, though it wasn't an ominous attempt to shut them down, which is what the commenter was replying to.

I don't know.

This line from the SIPC CEO

  ...I have serious concerns about this. This has gigantic ramifications for the banking industry.

makes me thing that this is precisely what it is. "We don't want to let you do this easily because the other banks can't compete."

Re: Robinhood Will Retool Checking Product Following Scrutiny

#65

Post by fastball » Sun, Dec 16, 2018, 7:34 AM UTC

muhneesh wrote: post #19

The correct response here would be for Robinhood to cancel the product and apologize, instead of revamping their marketing materials. They are not offering a "cash management" service. Unless they get insured or find another vehicle to prevent funds from being at risk, they are effectively just borrowing money from their customers. This is sardonically innovative, as they've invented the retail investor equivalent of…

TIL banks didn't exist before the FDIC existed.

Re: Robinhood Will Retool Checking Product Following Scrutiny

#66

Post by JumpCrisscross » Sun, Dec 16, 2018, 7:38 AM UTC

AnthonyMouse wrote: post #62

eropple wrote: post #53

Earlier quoted context omitted.

C'mon. Never try new things? How about ask before you start promoting them ? You think a couple phone calls with SIPC wouldn't have disabused them of the notion? This is slack laziness and cavalier disrespect for their userbase. I had started toying with Robinhood; I immediately pulled everything I've got back out. They aren't trustworthy custodians.

> How about ask before you start promoting them ? You think a couple phone calls with SIPC wouldn't have disabused them of the notion? Why is that supposed to be necessary? The government is more than capable of telling you if it's a problem, and if it's not a problem -- which is the default -- it would only waste resources on the part of everyone. What I suspect may have happened here is that the traditional banks s…

> Why is that supposed to be necessary?

If I say “I’m insured by AIG,” I actually need to be insured by AIG. It’s not AIG’s job to tell me I’m lying. SIPC coverage isn’t automatically granted. Robinhood already has SIPC coverage through their brokerage products; this is abundantly clear to everyone there. Whether through fuck-up or will, they ignored a clear regulatory line.

Re: Robinhood Will Retool Checking Product Following Scrutiny

#67

Post by muhneesh » Sun, Dec 16, 2018, 7:43 AM UTC

fastball wrote: post #65

muhneesh wrote: post #19

The correct response here would be for Robinhood to cancel the product and apologize, instead of revamping their marketing materials. They are not offering a "cash management" service. Unless they get insured or find another vehicle to prevent funds from being at risk, they are effectively just borrowing money from their customers. This is sardonically innovative, as they've invented the retail investor equivalent of…

TIL banks didn't exist before the FDIC existed.

This is a ridiculous strawman as it relies on an equation of social and economic systems before the 1930s to today, but despite that, it's a bad strawman given that the FDIC was created in direct response to restore faith in American banks after the Great Depression.

I'm all for fintech, but I'm not for blind trust in startups looking for hypergrowth as it relates to consumer protections.

Re: Robinhood Will Retool Checking Product Following Scrutiny

#68

Post by pytyper2 » Sun, Dec 16, 2018, 8:10 AM UTC

evanriley wrote: post #8

snuxoll wrote: post #2

Somebody from Robinhood's legal team either said "yeah, the SPIC will totally be okay with this" or management ignored any advice to the contrary, whichever it was those people need to pull their heads out of their asses. Even Schwab, an investor bank, has insurance from the FDIC for their deposit (and sweep) accounts - if they could have gotten away with just SPIC coverage don't you think they would have?

As well as Fidelity's checking account, Cash Management Account, is FDIC insured. This definitely feels like a case of Robinhood ignoring some advice.

Probably correct, they also might be far less leveraged than your average deposit taking institution.

Re: Robinhood Will Retool Checking Product Following Scrutiny

#69

Post by dmoy » Sun, Dec 16, 2018, 8:11 AM UTC

Lazare wrote: post #23

I think it's becoming increasingly clear what happened. As whitepoplar noted here ( https://news.ycombinator.com/item?id=18691477 ) other similar services are FDIC insured because the funds are swept into FDIC bank accounts behind the scenes. But FDIC insured bank accounts pay very, very little interest, and Robinhood wanted to offer a high interest rate. Their innovation was, instead of sweeping the funds into FDIC…

The only treasuries over 3% are pretty long term. Like, decades long. How do you sweep short term deposits into 20 year bonds?

Like I get generally how a treasuries backed money market fund works, but the average maturity there is like 2 months, not 20 years.

Re: Robinhood Will Retool Checking Product Following Scrutiny

#70

Post by dmoy » Sun, Dec 16, 2018, 8:21 AM UTC

dvtrn wrote: post #35

village-idiot wrote: post #25

Earlier quoted context omitted.

It’s more surprising when everyone lets them try a second, third, or fourth time

Has Robinhood here slipped up multiple times like this? I'm asking as someone who's only heard of the product, never tried it, doesn't look remarkably interesting to me/doesn't fill a financial need I have, never gave it much thought aside from this latest fuss.

Few times a year they have problems where people can't log in and execute trades for hours or so. Earlier this week (last week?), they shut down all options trading.

Not the sort of stability I'm looking for in a brokerage.

But I'm also a very boring/lazy investor.