Robinhood Financial agreed to pay $US65 million ($85 million) to settle government charges that it failed to disclose the full details of its dealings with high-speed traders and didn’t get the best prices for customers trading on its app, the Securities and Exchange Commission said on Thursday (US time).
Robinhood and other retail brokerage firms can bring in revenue by routing customers’ orders to high-speed traders and other big investors, which in turn pay for the right to execute many of the trades in hopes of making a profit.
The charges stem from an investigation by the SEC into how Robinhood disclosed its arrangements with high-speed traders. Robinhood neither admitted nor denied the SEC’s findings under the settlement.
“Between 2015 and late 2018, Robinhood made misleading statements and omissions in customer communications, including in FAQ pages on its website, about its largest revenue source when describing how it made money – namely, payments from trading firms in exchange for Robinhood sending its customer orders to those firms for execution, also known as ‘payment for order flow,’” the SEC statement read.