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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

#111

Post by IanDrake »

Two years ago I left IT and started my own wealth management company...and now I'm back. I can tell you, the regulations on the retail side of finance are nonsense and help no one.

Like gun control, bad actors don't care about your laws. The only people who are regulated are the honest ones, and the amount of regulation can put them out of business, or even dissuade them from being has honest as they'd like.

If RH lied about how they're compensated, then they are certainly guilty, but the harm to consumers is just the tip of the iceberg. Consider how much RH has harmed all the honest financial advisors who had to compete with a "free" service that hides their cost to consumers.

If I had lied to one client about how I was compensated, bye bye license.

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

#112

Post by dangus »

saddlerustle wrote: post #107
himoacs wrote: post #102

Earlier quoted context omitted.

Basically, if you want to buy AAPL at $100 and as your broker, I take that info and share it with someone else, such as an HFT, they will quickly (milliseconds/nanoseconds) buy AAPL and sell you at a higher price. So, while you expected to pay $100, you ended up paying $100.10. Now that doesn't seem a lot to you but times the difference (10 cents) by volume and number of Robinhood customers placing orders and it can…

That's not true. A $100 buy order will only ever execute at $100.

The default trade option on Robinhood isn’t a dollar value buy order. It’s a number of shares order at the market rate.

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

#113

Post by bun_at_work »

bagacrap wrote: post #105
gbronner wrote: post #22

This can and will be fixed by hiring the compliance department from another broker. Etrade just merged with MS, and a lot of the etrade people are in in the SF Bay Area....

they have agreed to bring in an "independent third party" although I have no idea how they can really remain independent when they're ultimately collecting a check from RH.

They are independent because there exists no preexisting conflict of interest between the third party and RH. That's what independent means in this case.

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

#114

Post by xivzgrev »

This is why fintechs have to have strong legal & compliance teams, especially when you reach a certain size.

This reminds me of their debacle where they launched a checking product with a high interest rate and promising it was backed by the federal government...without ever asking the government if that was true.

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

#116

Post by ehejsbbejsk »

bagacrap wrote: post #106
ehejsbbejsk wrote: post #55

I believe this is to punish RH for offering zero commissions. Especially on options. I seriously think what RH offers, for anyone who’s traded options on the retail side, is a game changer.

The article states that RH cost its consumers more in bad trade execution than it saved them in commissions. How are you sure this didn't happen to you?

I trade in multiple platforms and I put in limit orders (RH doesn’t even allow market afaik). To be fair, I am probably not your typical trader since I’ve been a fintech developer in the past as well as have been involved in analyzing many SEC cases for/against major financial institutions. I will say this: it’s extremely hard to prove execution quality on options trading let alone doing it in 2020 when the market was so volatile.

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

#117

Post by mtcoope »

saddlerustle wrote: post #107
himoacs wrote: post #102

Earlier quoted context omitted.

Basically, if you want to buy AAPL at $100 and as your broker, I take that info and share it with someone else, such as an HFT, they will quickly (milliseconds/nanoseconds) buy AAPL and sell you at a higher price. So, while you expected to pay $100, you ended up paying $100.10. Now that doesn't seem a lot to you but times the difference (10 cents) by volume and number of Robinhood customers placing orders and it can…

That's not true. A $100 buy order will only ever execute at $100.

Not a market order which majority of people on Robinhood are using market orders since they are the default. Most don't even know what a limit order is I'm guessing.

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

#118

Post by revel »

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?

I think this is just a practical consideration. Execution fees are typically less than a few cents per share and are often fractional. It's impractical to offer up dozens of single cent refunds for current and previous customers.

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

#119

Post by backtoyoujim »

revel wrote: post #118
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?

I think this is just a practical consideration. Execution fees are typically less than a few cents per share and are often fractional. It's impractical to offer up dozens of single cent refunds for current and previous customers.

practical for whom ?

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

#120

Post by emteycz »

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.

You know that Robinhood users declare themselves investors, right?
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