Judge Enables Robinhood Case to Proceed
A Massachusetts judge on Thursday provided state securities regulators a green light to proceed with their case against Robinhood Financial LLC, ruling that it wouldn’t be in the general public interest to block an administrative hearing on accusations that the online brokerage doesn’t safeguard unskilled financiers.
Robinhood, the zero-commission trading platform that has exploded in appeal this year, asked a court last month to issue an initial injunction to prevent an administrative grievance brought by the Massachusetts Securities Department from proceeding. In its request, Robinhood argued that the state’s new fiduciary guideline– which state regulators have actually accused Robinhood of breaching– need to be invalidated.
In his judgment, Suffolk County Superior Court Judge Kenneth W. Salinger didn’t rule on the validity of the state’s fiduciary rule, which requires brokers to act in their customers’ best interest. Rather, he indicated Robinhood could continue to challenge the guideline in court.
< div data-mobile-ratio=" 100 %" data-layout-ratio=" 100 % "data-subtype=" photo "class =" image-container responsive-media post __ inset __ image __ image" > < figcaption class=" wsj-article-caption short article __ inset __ image __ caption" itemprop =" caption" > William Galvin, Massachusetts Secretary of the Commonwealth Image: Matt Stone/Boston Herald/Getty Images Robinhood has argued that the fiduciary guideline doesn’t apply to the company, in part, since it is a self-directed brokerage that doesn’t make financial investment suggestions or provide advice. The brokerage has actually likewise argued that the guideline remains in conflict with other guidelines and determinations,
and that the state’s leading securities regulator, Secretary of the Commonwealth William Galvin, is unable to” redefine the typical law of broker-dealers.” The fiduciary guideline was supported by Mr. Galvin and worked last year. In the choice, Judge Salinger requested further details from both celebrations about whether Robinhood’s obstacle to the fiduciary guideline must move on, or whether it should be stopped briefly pending the outcome of state regulators ‘administrative problem.
Mr. Galvin’s office in December filed a complaint against Robinhood, alleging the company strongly marketed to inexperienced investors and failed to implement controls to protect them. His workplace in April also asked that the company’s registration as a broker-dealer in the state be withdrawed to prevent Robinhood from operating there. Mr. Galvin’s accusations were filed as an administrative complaint instead of in court, meaning that the case will be handled by a hearing officer.
In enabling securities regulators’ administrative problem to go forward, Judge Salinger kept in mind that state securities regulators’ complaint against Robinhood consisted of accusations of offenses outside the fiduciary guideline, which it would “not remain in the public interest” to advise prosecution of the other claims.
Debra O’Malley, a spokeswoman for Mr. Galvin, stated in an e-mail he was “pleased with this triumph.”
Robinhood spokeswoman Jacqueline Ortiz Ramsay stated in a statement that the company was “pleased that the court will address” the state’s fiduciary guideline.
” We stand behind our consumers, and we anticipate continuing to democratize finance for all in Massachusetts and throughout the country,” she stated.
The online brokerage has actually previously contested state regulators’ claims, countering that it has actually unlocked to investing to millions of individuals. Robinhood had about 20 million users at the end of 2020, the Journal previously reported.
A decision concerning Massachusetts’ fiduciary guideline could have broad ramifications for the brokerage market. In an amicus quick filed this month, the Securities Market and Financial Markets Association, a trade association, argued that enabling it to stand could lower the ability for broker-dealers to “naturally run” in the state, adding that business will likely provide less details to investors on their platforms, fearing that “supplying such information will subject them” to the fiduciary guideline.
Write to Caitlin McCabe at [email protected]!.?.! Copyright © 2020 Dow Jones & Company, Inc. All Rights Booked. 87990cbe856818d5eddac44c7b1cdeb8 Appeared in the May 28, 2021, print edition as’ Judge Allows Massachusetts to Pursue Robinhood Case. ‘Released at Fri, 28 May 2021 00:01:00 +0000 Attribution- For More Details here is the Short Article Post Source: https://www.wsj.com/articles/judge-allows-robinhood-customer-protection-case-to-proceed-11622146018