Gamifying Trading: Robinhood Defends Case against Regulator at Top Court

Wednesday, 03/05/2023 | 13:41 GMT by Solomon Oladipupo
  • A lower court ruled in favour of Robinhood in March last year.
  • Massachusetts’ watchdog accused the broker of violating its fiduciary duty rule.
Robinhood

Massachusetts’ securities watchdog will appeal against a ruling delivered last year in favour of Robinhood following its enforcement action against the online brokerage in December 2020. Massachusetts Secretary of State, Bill Galvin, and Robinhood will argue the validity of the regulator's fiduciary duty rule at the Supreme Judicial Court of Massachusetts, Reuters reported on Wednesday.

Regulator Appeals Case at Supreme Court

Galvin in an administrative action against Robinhood sought to revoke the firm's broker-dealer license, accusing the firm of failing to protect its customers and their money. As a result of this alleged failure, Galvin accused Robinhood of violating its fiduciary duty rule which raised investment-advice standards for brokers in early 2020.

Furthermore, the Secretary alleged that the commission-free brokerage treated trading as a game and implemented strategies to lure young and inexperienced traders. He also claimed that Robinhood rained down confetti on the phone screen of its traders after the execution of each trade.

However, in March 2022, Judge Michael Ricciuti of the Suffolk County Superior Court in Boston ruled in Robinhood's favour, arguing that the federal stance on the matter overrides the state regulator’s requirements. Moreover, Ricciuti judged that Galvin went beyond his authority to implement a regulation that conflicted with federal laws.

At the time, Finance Magnates reported that the ruling only impacted a part of the Massachusetts securities watchdog's action against Robinhood as the regulator could still pursue the claims that the brokerage adopted unethical practices and even failed to adequately supervise its employees.

In February, Galvin appealed against the ruling at the Supreme Judicial Court, asking the top Massachusetts court to reverse the lower court’s decision. Oral presentations were then fixed for May 3, 2023.

The latest information on the case reveals that Massachusetts’ supreme court will consider whether to revive the fiduciary rule or not. However, Robinhood’s lawyers are maintaining the lower court’s ruling that Galvin does not have the authority to implement such a rule, Reuters reported.

Robinhood Settles with NASAA

Meanwhile, seven state securities regulators led by Alabama last month fined Robinhood’s brokerage subsidiary up to $10.2 million for its outages in March 2020. The regulators under the aegis of the North American Securities Administrators Association (NASAA) settled with Robinhood for its 'operational and technical failures' that hurt Main Street investors during the period.

On the contrary, Judge Edward Chen of the US District Court in San Francisco in February dismissed a lawsuit accusing Robinhood Markets, Inc. of misleading retail investors during an initial public offering almost two years ago.

BlackBull adds DXtrade; Gate.io's new license; read today's news nuggets.

Massachusetts’ securities watchdog will appeal against a ruling delivered last year in favour of Robinhood following its enforcement action against the online brokerage in December 2020. Massachusetts Secretary of State, Bill Galvin, and Robinhood will argue the validity of the regulator's fiduciary duty rule at the Supreme Judicial Court of Massachusetts, Reuters reported on Wednesday.

Regulator Appeals Case at Supreme Court

Galvin in an administrative action against Robinhood sought to revoke the firm's broker-dealer license, accusing the firm of failing to protect its customers and their money. As a result of this alleged failure, Galvin accused Robinhood of violating its fiduciary duty rule which raised investment-advice standards for brokers in early 2020.

Furthermore, the Secretary alleged that the commission-free brokerage treated trading as a game and implemented strategies to lure young and inexperienced traders. He also claimed that Robinhood rained down confetti on the phone screen of its traders after the execution of each trade.

However, in March 2022, Judge Michael Ricciuti of the Suffolk County Superior Court in Boston ruled in Robinhood's favour, arguing that the federal stance on the matter overrides the state regulator’s requirements. Moreover, Ricciuti judged that Galvin went beyond his authority to implement a regulation that conflicted with federal laws.

At the time, Finance Magnates reported that the ruling only impacted a part of the Massachusetts securities watchdog's action against Robinhood as the regulator could still pursue the claims that the brokerage adopted unethical practices and even failed to adequately supervise its employees.

In February, Galvin appealed against the ruling at the Supreme Judicial Court, asking the top Massachusetts court to reverse the lower court’s decision. Oral presentations were then fixed for May 3, 2023.

The latest information on the case reveals that Massachusetts’ supreme court will consider whether to revive the fiduciary rule or not. However, Robinhood’s lawyers are maintaining the lower court’s ruling that Galvin does not have the authority to implement such a rule, Reuters reported.

Robinhood Settles with NASAA

Meanwhile, seven state securities regulators led by Alabama last month fined Robinhood’s brokerage subsidiary up to $10.2 million for its outages in March 2020. The regulators under the aegis of the North American Securities Administrators Association (NASAA) settled with Robinhood for its 'operational and technical failures' that hurt Main Street investors during the period.

On the contrary, Judge Edward Chen of the US District Court in San Francisco in February dismissed a lawsuit accusing Robinhood Markets, Inc. of misleading retail investors during an initial public offering almost two years ago.

BlackBull adds DXtrade; Gate.io's new license; read today's news nuggets.

About the Author: Solomon Oladipupo
Solomon Oladipupo
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About the Author: Solomon Oladipupo
Solomon Oladipupo is a journalist and editor from Nigeria that covers the tech, FX, fintech and cryptocurrency industries. He is a former assistant editor at AgroNigeria Magazine where he covered the agribusiness industry. Solomon holds a first-class degree in Journalism & Mass Communication from the University of Lagos where he graduated top of his class.
  • 1050 Articles
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