Massachusetts regulators move towards revoking the online brokerage company’s dealership as sources claim the firm targets, inexperienced traders. Things have been intense for Robinhood for the past few months as it faced high controversies following the restrictions it imposed on some activities on the app.
The GameStop saga caused some uproar on social media, with many people criticizing its move some months ago. Unfortunately for Robinhood, the controversies continue as William Gavin, an executive at the state securities division, explained how the firm had been enticing trading amongst its users. The company is one of the largest in America and has grown in prominence following its move to join the digital asset space.
Massachusetts watchdogs sue Robinhood for infringing on the fiduciary rule
The head of the state’s securities division explained that the firm targets mostly new and inexperienced traders in Massachusetts. The agency revealed that it had previously received complaints and that this is one of its follow-ups showing how the trading firm targets inexperienced investors. The regulator drew attention to Robinhood’s activities and how it had promised customers rewards once they deposit money.
The watchdog sees it as proof that Robinhood had been illegally enticing traders with no investment exposure. The firm has fired back at the regulator and revealed that new customers would not have access to its services with the regulator’s move.
Interestingly, the firm had explained that it has over 500,000 customers in Massachusetts alone, showing how Robinhood has grown influential in the American market. The online trading business had taken steps concerning some new regulations created by regulators within the region.
It’s safe to note that some regulators believe that it had infringed on the laid down fiduciary rule, which means that the company had to work with its users’ interest at heart. The local regulatory bodies imposed the rule since 2020, and it has been helping the region regain some stability in the financial space.
Robinhood fires back against suit
Robinhood has taken some legal steps to prove that the regulators have exceeded their jurisdiction when looking at federal and state authorities. The business clarified that it doesn’t entice customers into investing and that it doesn’t make recommendations.
It also added that as a self-directed company, the rule could not be imposed on it. Robinhood has continually faced problems but has remained firm in the face of opposition from watchdogs and customers. The restriction prevented traders from benefiting from the outstanding price growth GameStop witnessed some months ago.
However, the company explained that it limited activities to prevent being seen as an accomplice to the conspiracy. Another problem it has dealt with is the death of one of its traders, Alex Kearns, who committed suicide some months ago when he saw that he owed over $700,000 on his Robinhood account.
The young man’s parents filed a suit after his death, alongside some internal issues it faced, causing more suits from its traders. Some days ago, another technical problem came up when Dogecoin hit another all-time high, but traders could not do some activities to benefit from the growth.