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Recently, Robinhood Markets, the California-based financial services entity has been accused of violating securities laws by aggressively marketing itself to inexperienced investors and not maintaining a proper infrastructure for handling the increasing investor base by a Massachusetts-based regulator.
As per the complaint, Robinhood has managed to create almost half a million clients in Massachusetts with accounts valued at above US$1.6 billion.
Complaint Filed Against Robinhood
Recently, on 16 December, administrative complaint registered by Secretary of the Commonwealth William Galvin, the state alleged that Robinhood manipulates the inexperienced investors by downplaying the risky stocks, and not even providing for proper infrastructure like working platforms for its increasing customers.
Further, the regulator has also taken a shot at how Robinhood has been using “Gamification Strategies” for wooing the younger and inexperienced investors.
The regulator also asserts that the Company did not screen the riskier stocks before recommending them to its customers. By this, it garnered more revenues whereas, as a broker it should guide its customers properly and protect their money from risky trades.
Even though the fine amount has not been specified, the regulator has asked for an order to appoint an outside consultant to review its infrastructure, policies, and procedures, among other penalties.
Defence Of Robinhood
Robinhood on the other hand in a statement has said that it will defend itself vigorously as it disagrees with the complaint.
In its statement, Robinhood also mentioned that it is a self-directed broker-dealer and does not indulge in making any investment recommendations.
Regarding its infrastructure and the outages being experienced, it stated that it has been working towards improving the platform’s performance.to h
Game-changer
In spite of all the complaints against Robinhood, the Company has proved to be a mover and shaker in many ways. It has forced major changes in the brokerage industry. It has brought many big wigs of brokerage industry follow suit and band together.
Must Watch; Robinhood Rally Under the Spotlight; All that You Need to Know!
