On September 1, 2021, Robinhood ($Hood) filed Amendment No 1 to its Form S-1 Registration Statement with the U.S. Securities and Exchange Commission (“SEC”). Form S-1 is the registration statement that Robinhood filed in connection with its July 2021 initial public offering (IPO).
Robinhood’s latest public filing discloses that Robinhood continues to face regulatory, legal, and reputational backlash for its past business practices.
The filing also discloses that the SEC and Financial Industry Regulatory Authority (“FINRA”) are investigating whether any Robinhood employees traded “meme stocks,” including GameStop Corp. and AMC Entertainment Holdings, Inc., before the public announcement that Robinhood would impose trading restrictions on those securities on January 28, 2021.
Robinhood is already facing regulatory investigations and litigation, including securities arbitrations, related to its decision to place trading restrictions on “meme stocks,” such as GameStop (NYSE: GME), AMC (NYSE: AMC), Blackberry (NYSE: BB), Nokia (NYSE: NOK), Koss Corporation (NYSE: KOSS), and Express, Inc. (NYSE: EXPR), on January 28, 2021.
Robinhood is also facing regulatory investigations and customer arbitration disputes related to its options trading approval process.
Iorio Altamirano LLP, a securities arbitration law firm in New York, is filing claims on behalf of Robinhood customers who suffered harmed due to the January 2021 trading restrictions or who were approved to trade options by Robinhood but did not satisfy eligibility requirements. For more about the investigations, click on the following links:
Iorio Altamirano LLP Investigating Robinhood for January 2021 Trading Restrictions
Investor Alert: Iorio Altamirano LLP Investigates Robinhood for Failing to Exercise Due Diligence Before Approving Options Accounts
January 2021 Trading Restrictions
Robinhood and its Co-Founder and CEO, Vladimir Tenev, among others, have received requests for information, and in some cases, subpoenas and requests for testimony, related to investigations and examinations of the early 2021 trading restrictions from the United States Attorney’s Office for the Northern District of California (“USAO”), the U.S. Department of Justice, Antitrust Division, the SEC staff, FINRA, the New York Attorney General’s Office, other state attorneys general offices and several state securities regulators. Also, a related search warrant was executed by the USAO to obtain Mr. Tenev’s cell phone.
Robinhood has also received inquiries from the SEC’s Division of Examinations and FINRA related to employee trading in certain securities that were subject to Robinhood’s trading restrictions on January 28, 2021, including GameStop Corp. and AMC Entertainment Holdings, Inc. According to the public filing, the regulatory probes relate to whether any employee executed trades in the subject securities in advance of the public announcement of the early 2021 trading restrictions on January 28, 2021.
In addition, Robinhood has received information and testimony requests from certain committees and members of the U.S. Congress, and Mr. Tenev, among others, has provided or will provide testimony concerning the January 2021 trading restrictions.
Many individual retail investors felt cheated and wronged when Robinhood restricted customers from purchasing specific securities on January 28, 2021, and are filing lawsuits in the form of securities arbitration complaints and class actions to recover losses.
Robinhood’s public filing also discloses that approximately 50 putative class actions have been filed relating to the early 2021 trading restrictions. The public filing does not disclose the number of FINRA arbitrations that customers have filed, but upon information and belief, dozens, perhaps hundreds, of claims have been filed.
Recently, a 26-year-old truck driver from Connecticut, represented by Iorio Altamirano LLP, filed a securities arbitration claim alleging that Robinhood’s decision to halt the purchase of securities by retail investors caused the share prices of the publicly traded companies to fall, resulting in losses.
Options Trading Approval Process
On June 30, 2021, FINRA and Robinhood entered into a Letter of Acceptance, Waiver, and Consent, whereby Robinhood consented to pay the largest financial penalty ever levied by FINRA, $70 million, for alleged systemic supervisory failures and significant harm suffered by millions of customers. Among those supervisory failures was the firm’s failure to exercise due diligence before approving options accounts.
The latest SEC filing includes the disclosure of several regulatory investigations and enforcement actions related to Robinhood’s options trading approval process.
First, the filing discloses that the SEC is conducting an examination, and FINRA and certain state regulatory authorities are conducting investigations regarding Robinhood’s options trading and related customer communications and displays. The SEC, FINRA, and state regulatory authorities are reviewing, among other things, how Robinhood displays cash and buying power to customers and its options trading approval processes.
Second, the filing discloses that on February 8, 2021, the family of Alexander Kearns, a Robinhood customer who traded options, filed a lawsuit in the Superior Court of the State of California, County of Santa Clara, against RHF, RHS, and RHM in connection with Mr. Kearns’s death by suicide in June 2020. The lawsuit asserts claims for wrongful death, negligent infliction of emotional distress, and unfair business practices under a California statute, and seeks damages and other relief.
Third, the Amendment to the Form S-1 discloses that on December 16, 2020, the Enforcement Section of the Massachusetts Securities Division filed an administrative complaint against Robinhood. The Complaint alleges three counts of Massachusetts securities law violations regarding unethical and dishonest conduct or practices, failure to supervise, and failure to act in accordance with the Massachusetts fiduciary duty standard. Among other things, the Massachusetts Securities Division alleged that Robinhood’s product features and marketing strategies, outages, and options trading approval process constitute violations of Massachusetts securities laws.
Finally, the public filing discloses that Robinhood is engaged in discussions with FINRA regarding a possible negotiated resolution of certain FINRA matters, including options trading and related customer communications and displays noted above.
Recently, a 36-year-old nightclub doorman, represented by Iorio Altamirano LLP, filed a securities arbitration claim alleging that he suffered losses as a result of Robinhood’s failure to exercise due diligence before approving his options trading account, a direct result of Robinhood’s overreliance on technology and its failure to supervise the operation and maintenance of its technology.
Iorio Altamirano LLP
Iorio Altamirano LLP is a securities arbitration law firm based in New York, NY, representing investors in securities arbitrations against Robinhood.
Iorio Altamirano LLP pursues individual FINRA arbitration claims nationwide on behalf of investors to recover financial losses from brokerage firms’ wrongful conduct.
Customers of Robinhood who suffered losses as a result of trading restrictions placed on or about January 28, 2021, or due to options trading are encouraged to contact Iorio Altamirano LLP using the following form for a free and confidential consultation. Iorio Altamirano LLP can review and analyze potential claims and advise individuals of their legal rights without obligation or cost.
Iorio Altamirano LLP is a bilingual law firm, fluent in both English and Spanish.