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SEC charges Robinhood $65M for misleading customers about revenue sources

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Re: SEC charges Robinhood $65M for misleading customers about revenue sources

#161

Post by slg »

sonotmyname wrote: post #158

> The order finds that Robinhood provided inferior trade prices that in aggregate deprived customers of $34.1 million even after taking into account the savings from not paying a commission. $65M penalty for $35M in misbehavior. That is how you get Wall Street to pay attention. More like this please!

Unless the likelihood of getting caught is less than 50% in which case this was still the smart financial move for the company based on expected value. The way to get people to pay attention is to hold people involved in corporate misdeeds personally liable.

Re: SEC charges Robinhood $65M for misleading customers about revenue sources

#162

Post by notional »

> As the SEC’s order finds, one of Robinhood’s selling points to customers was that trading was “commission free,” but due in large part to its unusually high payment for order flow rates, Robinhood customers’ orders were executed at prices that were inferior to other brokers’ prices. Despite this, according to the SEC’s order, Robinhood falsely claimed in a website FAQ between October 2018 and June 2019 that its execution quality matched or beat that of its competitors.

Reading through the comments had me confused, but it really boils down to a misleading FAQ page. All of which is pretty damn funny because of how innocuous I view FAQ pages to be.

Re: SEC charges Robinhood $65M for misleading customers about revenue sources

#163

Post by sonotmyname »

whimsicalism wrote: post #73
eru wrote: post #70

Earlier quoted context omitted.

Nobody forced you to sign up with them.

I haven't. But there are obvious power dynamics when large market actors can get people to waive their right to sue. There's a reason they're called "inalienable." They're not supposed to be self-alienable either.

> there are obvious power dynamics when large market actors can get people to waive their right to sue.

When this was all going down, RobinHood was a plucky startup being praised all around the valley, not a 'large market actor'.

> There's a reason they're called "inalienable." They're not supposed to be self-alienable either.

Not sure which founding father suggested the inalienable right to tort, but apparently he was overruled since it didn't make it's way into any founding documents.

Re: SEC charges Robinhood $65M for misleading customers about revenue sources

#164

Post by baq »

gamerDude wrote: post #6

If the SEC has gone through and has accounted for the 34 million in cost to consumers, why are they not having robinhood reimburse the customers for their lost money on the trades and then charging the additional 30 million on top for lying? Why does the SEC take all the money?

this is a fine. SEC takes it because it has to. SEC is a regulator and fines are a way to regulate.

Re: SEC charges Robinhood $65M for misleading customers about revenue sources

#165

Post by aabhay »

notional wrote: post #162

> As the SEC’s order finds, one of Robinhood’s selling points to customers was that trading was “commission free,” but due in large part to its unusually high payment for order flow rates, Robinhood customers’ orders were executed at prices that were inferior to other brokers’ prices. Despite this, according to the SEC’s order, Robinhood falsely claimed in a website FAQ between October 2018 and June 2019 that its exe…

This is a very tame reading of the mistake. Telling customers that their stock orders would be executed at prices matching other firms, when in fact Robinhood was executing those orders at inferior prices -- that's a big misrepresentation. You're paying extra for something while being told that you're not.

Re: SEC charges Robinhood $65M for misleading customers about revenue sources

#166

Post by 6gvONxR4sf7o »

colejohnson66 wrote: post #43
phillnom wrote: post #24

Earlier quoted context omitted.

I didn't downvote but wanted to suggest just using "they" when you don't know.

I’d recommend “OP” and “GP” as they are pretty common acronyms on the internet

Those always confuse me even more. Is OP the top level comment or the post we’re commenting on? Different people seem to use it differently, which isn’t super useful for communicating. And is GP the comment two above yours or two above mine?

Re: SEC charges Robinhood $65M for misleading customers about revenue sources

#167

Post by sonotmyname »

miguelmota wrote: post #159

As long as profits are greater than fines, these penalties aren't enough to incentivize good behavior.

> The order finds that Robinhood provided inferior trade prices that in aggregate deprived customers of $34.1 million even after taking into account the savings from not paying a commission.

Sooooooo the fine is nearly 2x the cost to consumers due to malfeasance. That should cover your concern here.

Re: SEC charges Robinhood $65M for misleading customers about revenue sources

#168

Post by jellicle »

sonotmyname wrote: post #158

> The order finds that Robinhood provided inferior trade prices that in aggregate deprived customers of $34.1 million even after taking into account the savings from not paying a commission. $65M penalty for $35M in misbehavior. That is how you get Wall Street to pay attention. More like this please!

No, much more than $34M in misbehavior. Hurt customers by $34M over what they would have been charged if they had paid commissions.

So Robinhood took money from its customers to this extent: all the cash as if its customers were paying commissions, and also $34M, and for that they're being fined $65M, which will probably be negotiated down to $2M or something like that.

Re: SEC charges Robinhood $65M for misleading customers about revenue sources

#169

Post by weego »

notional wrote: post #162

> As the SEC’s order finds, one of Robinhood’s selling points to customers was that trading was “commission free,” but due in large part to its unusually high payment for order flow rates, Robinhood customers’ orders were executed at prices that were inferior to other brokers’ prices. Despite this, according to the SEC’s order, Robinhood falsely claimed in a website FAQ between October 2018 and June 2019 that its exe…

Nothing you do or say is innocuous when you're in a regulated market.

Re: SEC charges Robinhood $65M for misleading customers about revenue sources

#170

Post by jstummbillig »

sagarm wrote: post #136
gamerDude wrote: post #82

Earlier quoted context omitted.

Got it, so, in theory this sets the groundwork for a class action lawsuit?

Robinhood probably has a binding arbitration clause in their contract that prohibits users from joining a class action lawsuit, no?

You can put a clause in your contract that prohibits someone from using specific legal action at your discretion? That sounds wild so I am interested. What is the justification for this? How could anyone basically preemptively and effectively exempt themselves from specific legal action regardless of wrongdoing? What would happen if the other party tried anyway?
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