Robinhood Markets has agreed to pay $65 million to settle Securities and Exchange Commission allegations that the broker failed to properly inform clients that it sold their stock orders to high-frequency traders and other financial firms.
Robinhood, known for its popular smart-phone app that offers commission-free trading, also agreed to have an outside consultant monitor its compliance with rules that require firms to provide best execution for trades. Robinhood has gained notoriety during the pandemic by attracting a massive customer base of younger investors.
The case involves disclosures from 2015 to late 2018 by a Robinhood unit, according to a Thursday SEC statement. The company said it is now fully transparent in its communications with customers about how it makes money.
“The settlement relates to historical practices that do not reflect Robinhood today,” said Dan Gallagher, the firm’s chief legal officer. “We recognize the responsibility that comes with having helped millions of investors make their first investments, and we’re committed to continuing to evolve Robinhood as we grow to meet our customers’ needs.”