Robinhood Trading platform is facing a legal complaint from a US state regulator accusing the firm of “aggressively marketing” its services to inexperienced traders, the WSJ recently on Wednesday.
The Massachusetts Securities Division has prepared a 20-page draft administrative complaint, seen by the WSJ, that states Robinhood had exposed investors to “unnecessary trading risks” & violated state laws and regulations.
Within the COVID-19 outbreak, many young, inexperienced investors have started employing the Robinhood application, which offers to trade in stocks, ETFs, and options, as also cryptocurrency buying and selling.
The platform has been reaping the advantages of the influx of users by “prioritizing its revenue over the simplest interest of its users,” the Massachusetts complaint alleges.
Robinhood is additionally accused of encouraging “continuous and repeated engagement with its app” by “gamifying” trading and permitting unqualified investors to trade options.
The Massachusetts regulator wants Robinhood to enhance its policies by approving users for options trading and is further seeking an administrative penalty to be paid by the platform. It should also get outside help in improving the platform to tackle outages, according to the draft.
“Robinhood has opened up financial markets for a new generation of individuals who were earlier excluded. We are committed to operating with integrity, transparency, and in compliance with all applicable laws as well as regulations,” a Robinhood spokeswoman told the WSJ.