Robinhood is Under SEC Investigation
Robinhood is being investigated by the SEC regarding its sale of client orders to high-frequency traders, according to CNBC.
The investigation is at an advanced stage and could result in a fine of more than $10 million if Robinhood chooses to settle. However, selling order flow is not against the law. Most brokerages participate in the sale of client orders. The issue with Robinhood is that most of its revenue comes from these sales.
Robinhood made around $180 million in trading revenue in the second quarter, almost double from the quarter prior. Investors rushed to get trading accounts as the market rallied. 3 million new accounts were created in the first four months of 2020.
“We strive to maintain constructive relationships with our regulators and to cooperate fully with them. We do not discuss or comment on our communications with our regulators,” a Robinhood spokesperson said.