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Robinhood Will Retool Checking Product Following Scrutiny

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Re: Robinhood Will Retool Checking Product Following Scrutiny

#91

Post by AnthonyMouse »

mikeash wrote: post #88
AnthonyMouse wrote: post #87

Earlier quoted context omitted.

> “You can trust this product. If it ever breaks, AnthonyMouse on Hacker News will reimburse you the full purchase price.” > Would you be ok with that? When I'm in the insurance business and the party making that claim is paying me insurance premiums under the same terms that I'm already insuring existing things with a commensurate level of risk? That is how insurance works. If you have renter's insurance and you buy…

That is fraud unless your insurance explicitly covers new purchases without first being informed. That is far from a given.

If you buy on credit and call the insurer to notify them while you're still in the store and they unexpectedly refuse, it's hard to call that fraud when the store can just take back the product before you even leave with it.

Re: Robinhood Will Retool Checking Product Following Scrutiny

#92

Post by dmoy »

Lazare wrote: post #73
dmoy wrote: post #69

Earlier quoted context omitted.

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.

The idea is that they would be sweeping it into short term treasuries, and no, they don't pay 3% either, but it's more than a chequing account pays. The remainder would presumably come from interchange fees. Ie, you put $500 into Robinhood, you then pay for something using your debit card, a cut goes to Visa, a cut of that goes to Robinhood, and a cut of that goes to subsidise your 3% interest.

So they're making up like 0.7% from fee cuts? As soon as they get big enough all debit card transactions are capped at 0.05% and like a quarter or something.

If the average transaction size is like $20 then they would not be able to make ends meet unless they took basically all of the fee for themselves.

In a universe where debit interchange fees are regulated to 0.05% and less than a quarter, I don't understand how this works.

Edit: I looked up the average debit card transaction amount, and it's over $40. The math doesn't work out at all.

Edit2: I guess if there's 3 more fed rate hikes the math might work out? That's not a good look though, if they don't increase rates along with the fed, because the gap between them and various savings account will shrink to almost nothing.

Re: Robinhood Will Retool Checking Product Following Scrutiny

#93

Post by village-idiot »

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.

Robinhood specifically? No. But it’s not exactly hard to find cases where corporations make the same mistake repeatedly to no change and no consequence. Facebook’s habit of “accidentally” changing everyone’s privacy settings comes to mind

Re: Robinhood Will Retool Checking Product Following Scrutiny

#94

Post by mikeash »

AnthonyMouse wrote: post #91
mikeash wrote: post #88

Earlier quoted context omitted.

That is fraud unless your insurance explicitly covers new purchases without first being informed. That is far from a given.

If you buy on credit and call the insurer to notify them while you're still in the store and they unexpectedly refuse, it's hard to call that fraud when the store can just take back the product before you even leave with it.

If you state it as “I have insurance coverage” rather than “I should be able to obtain coverage immediately” then I don’t see how that’s not fraud. There’s no legal principle that you’re off the hook if your crime doesn’t succeed.

Re: Robinhood Will Retool Checking Product Following Scrutiny

#95

Post by AnthonyMouse »

dragonwriter wrote: post #85
throwaway98434 wrote: post #61

Earlier quoted context omitted.

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.

> Had they launched a product, sure. But this was mere talk about a future product which they've decided "to retool" after scrutiny. It was not mere talk, it was talk about a waitlisted feature used to induce signups to (and because of a “referrals move you up the line” policy, also to induce providing personal information if third parties as referrals to) Robinhoods existing service. That is, it was false representa…

> That is, it was false representation used to induce people providing Robinhood things of value, and thus, arguably, commercial fraud.

That's assuming they knew the representation was false. If they reasonably expected to be able to get the insurance, claiming that they would get it was a true statement of their intentions.

Re: Robinhood Will Retool Checking Product Following Scrutiny

#96

Post by AnthonyMouse »

mikeash wrote: post #94
AnthonyMouse wrote: post #91

Earlier quoted context omitted.

If you buy on credit and call the insurer to notify them while you're still in the store and they unexpectedly refuse, it's hard to call that fraud when the store can just take back the product before you even leave with it.

If you state it as “I have insurance coverage” rather than “I should be able to obtain coverage immediately” then I don’t see how that’s not fraud. There’s no legal principle that you’re off the hook if your crime doesn’t succeed.

> If you state it as “I have insurance coverage” rather than “I should be able to obtain coverage immediately” then I don’t see how that’s not fraud.

But the second one is the one that applies to a future product you haven't actually provided yet.

Re: Robinhood Will Retool Checking Product Following Scrutiny

#97

Post by JumpCrisscross »

AnthonyMouse wrote: post #90
JumpCrisscross wrote: post #66

Earlier quoted context omitted.

> 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.

> 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. But that's the weird thing. This new product is essentially a combination of two things. 1) A brokerage account instructed to hold safe treasury-relate…

> This is exactly the sort of thing the SIPC normally insures

Car accidents are the sort of thing most insurers usually insure. That doesn’t make it okay to lie about whether you have insurance. If this is still somehow confusing you, please stay away from banking and healthcare.

> An ATM card and bank routing number that makes it easy to transfer to/from the brokerage account, so that it can be used as a checking/savings account. This is the real innovation

I have a Fidelity Cash Management Account that does exactly this. The cash deposits are swept into FDIC-insurer accounts. The brokerage products are SIPC insured. I have a debit card I can spend against the cash deposits.

The difference is Fidelity applied for and obtained SIPC protection. This involves installing various auditing and safety mechanisms. Approval isn’t guaranteed. Automatically forcing the SIPC to insure everything that looks like a brokerage account would be a horrible idea.

Re: Robinhood Will Retool Checking Product Following Scrutiny

#98

Post by mikeash »

AnthonyMouse wrote: post #96
mikeash wrote: post #94

Earlier quoted context omitted.

If you state it as “I have insurance coverage” rather than “I should be able to obtain coverage immediately” then I don’t see how that’s not fraud. There’s no legal principle that you’re off the hook if your crime doesn’t succeed.

> If you state it as “I have insurance coverage” rather than “I should be able to obtain coverage immediately” then I don’t see how that’s not fraud. But the second one is the one that applies to a future product you haven't actually provided yet.

I don’t think so (for example, my car insurance automatically covers a new car I buy without the need for immediate notification) but even if so, that’s all the more reason why the first statement is fraud.

Re: Robinhood Will Retool Checking Product Following Scrutiny

#99

Post by jakebasile »

fastball wrote: post #64
vinay427 wrote: post #41

Earlier quoted context omitted.

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."

Uninsured deposit accounts in a fractional reserve system are extremely risky to the banking system as a whole. Perhaps he meant that?

Re: Robinhood Will Retool Checking Product Following Scrutiny

#100

Post by halibuthaler »

AnthonyMouse wrote: post #95
dragonwriter wrote: post #85

Earlier quoted context omitted.

> Had they launched a product, sure. But this was mere talk about a future product which they've decided "to retool" after scrutiny. It was not mere talk, it was talk about a waitlisted feature used to induce signups to (and because of a “referrals move you up the line” policy, also to induce providing personal information if third parties as referrals to) Robinhoods existing service. That is, it was false representa…

> That is, it was false representation used to induce people providing Robinhood things of value, and thus, arguably, commercial fraud. That's assuming they knew the representation was false. If they reasonably expected to be able to get the insurance, claiming that they would get it was a true statement of their intentions.

Ummm but if you want people to trust you with their money and build reputation shouldn't you do your DD and make sure what you say is true? imo RH is either reckless or deceptive, and neither is a good look for a company like them
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