Apps like Robinhood impacting markets in ‘huge way’: Mohamed El-Erian
Allianz chief economic adviser Mohamed El-Erian argues apps like Robinhood are reducing the barriers to retail entry. He also provides insight into the coronavirus pandemic, initial jobless claims, earnings and how to allocate capital in the current market environment.
Robinhood, the online trading platform that saw its popularity surge during the pandemic, may be too popular.
Continue Reading Below
Massachusetts securities regulators have filed an administrative complaint against the company, accusing it of deploying “aggressive tactics to attract new, often inexperienced, investors” and acting “without regard for the best interests of its customers.”
The Massachusetts Securities Division is now seeking an order for the California-based company to “provide restitution to fairly compensate investors for those losses attributable to the alleged wrongdoing” and to engage an independent compliance consultant to review its infrastructure, platform and policies, among other demands.
ROBINHOOD ON HIRING RAMP UP
“As a broker-dealer, Robinhood has a duty to protect its customers and their money,” William Galvin, the secretary of the Commonwealth of Massachusetts, said in a statement shared with FOX Business.
“Treating this like a game and luring young and inexperienced customers to make more and more trades is not only unethical but also falls far short of the standards we require in Massachusetts.”
CLICK HERE TO READ MORE ON FOX BUSINESS
The statement from Galvin’s office adds that “Robinhood, which earns revenue for trades executed by its customers, gave customers with no investment experience the ability to make a potentially unlimited number of trades, without properly screening them to be approved for options trading.”
TRADING APP ROBINHOOD RAISES $660 MILLION IN LATEST FUNDRAISING ROUND
In the 24-page complaint, the Massachusetts Securities Division alleges that Robinhood violated state laws and regulations by “aggressively marketing itself to Massachusetts investors without regard for the best interests of its customers and failing to maintain the infrastructure and procedures necessary to meet the demands of its rapidly growing customer base.”
The complaint alleges that the trading platform suffered as many as 70 outages or disruptions between January and the end of November this year.