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The Securities and Exchange Commission is examining Robinhood’s option practices and its decision to restrict trading in certain shares at the height of the
GameStop
mania last month, Robinhood said in a security briefing Friday.
The trading platform – which is privately owned but is expected to be disclosed this year – made the disclosures in an annual audit required by brokers under the 1934 Securities Exchange Act.
Robinhood has angered investors and some members of Congress over its decision, which began on January 28, to restrict the purchase of certain shares, including GameStop (ticker: GME), BlackBerry (BB).
AMC Entertainment Holdings
(AMC), and Bed Bath & Beyond (BBBY). The company said it was forced to restrict trading due to the rising financial demands of its clearing house.
Robinhood is also facing several other inquiries and customer issues that, according to the company, could result in financial penalties.
Regulators from the state and the Regulatory Authority of Financial Industry, or Finra, are also investigating options that trade on Robinhood and interruptions experienced by users of the investment app in March 2020. Robinhood is negotiating a settlement with Finra that could cost the company at least $ 26.6 million, the filing said.
The company’s option practices have been under scrutiny since 20-year-old Alex Kearns killed himself last year after expressing distress over an option trade in his Robinhood account. Kearns’ family has filed a lawsuit against the company. Robinhood said it was’ devastated ‘by Kearns’ death last June and that he was “committed to making Robinhood a place to learn and invest responsibly.”
The company is also pursuing a lawsuit over ‘account takeovers’, where someone apparently gained access to Robinhood accounts.
The trade restrictions imposed by Robinhood in January led to 46 lawsuits, the company said. And a long list of agencies are investigating the issue, including the U.S. Attorney’s Office for the Northern District of California, the SEC’s Examinations Division, Finra, the New York Attorney General’s Office, other state attorneys’ general offices and a number of government bonds. regulators, ”the company said.
“Due to the very preliminary nature of all these proceedings, we are unable at this time to estimate the likelihood or extent of possible losses regarding these matters,” Robinhood said.
Write to Avi Salzman at [email protected]