SEC fines trading app Robinhood $65M for misleading customers

Dec. 17 (UPI) -- Stock trading app Robinhood must pay a $65 million civil penalty after regulators say it deceived customers about how it makes money, authorities said Thursday.

The Securities and Exchange Commission said the trading startup failed to deliver on promised best executions for trades.

"One of Robinhood's selling points to customers was that trading was 'commission free,' but due in large part to its unusually high payment for order flow rates, Robinhood customers' orders were executed at prices that were inferior to other brokers' prices," the SEC said in a statement.

"Despite this ... Robinhood falsely claimed in a website FAQ ... that its execution quality matched or beat that of its competitors."

Stephanie Avakian, director of SEC enforcement, said the company hid its true costs of trading and repeatedly misled customers.

"Robinhood failed to seek to obtain the best reasonably available terms when executing customers' orders, causing customers to lose tens of millions of dollars," Joseph Sansone, chief of the SEC market abuse unit, said.

"Today's action sends a clear message that the commission will not allow brokers to ignore their obligations to customers."

Robinhood agreed to pay the penalty without admitting to or denying the SEC's findings. A company attorney said the penalized activities "do not reflect Robinhood today."

Robinhood said in August it raised $200 million in Series G funding and it raised more than $1 billion in total funding this year ahead of plans to begin offering public shares.