FINRA Orders Record Financial Penalties Against Robinhood
finra.org
finra.org
wow
If you are a photo sharing site using an ad supported business model, your ‘support’ can be some silly chat not.
If you are taking people’s money for banking or investment, you provide 24/7 phone support. Period.
https://www.td.com/ca/en/investing/direct-investing/services...
Schwab provides this and they don’t charge for trades. I am sure they have warts, but I can always talk with someone.
Like you, I love calling off hours. Never a wait.
So much this. I have been working in Fintech for 8 years now, and the lack of seriousness I've seen in different aspects of startups in this fields is appalling. When you are mingling with other's people money, you don't get the advantage to "move fast, break things". You don't get to "whoops" when someone hacks you and steals funds, you don't get to say you are sorry when a bug makes you lose millions to fraud.
But still my experience has been that the majority of product and business people in startups don't take it seriously. They keep pushing Engineering teams to move fast and release yet-another-half-assed-feature instead of listening to the clamours of the developers for bug fixing and security improvements.
Can’t imagine doing investments or raw banking.
Not surprised the ‘startup motto’ lives strong regardless of sector... but disappointing for sure.
At least this will be a good litmus test for community moderation.
This seems excessive. Even my own, regular bank, only has phone support between working hours.
I understand the sentiment, but this whole "everyone can trade options" is not solely Robin Hoods fault. It was, and still is, hyped and promoted on Reddits' WSB.
AirBnb style rentals and ride-sharing are both slowly rediscovering exactly why the taxi and hotel industry operate the way they do.
Every single stupid rule has a story attached to it.
By handing out the biggest fine in Finra history, they are telling the government that government regulation isn't needed — they can regulate themselves.
If you’re fined and don’t pay the fine to the entity, they revoke the membership and you are now breaking the law.
This comes from a long line of trade houses, literally spanning back 1000s of years. Trades have regulated themselves since before governments existed.
Not even remotely. Guilds followed states, and were usually under the purview of and regulated by cities.
I swear by Apollo Healer, by Asclepius, by Hygieia, by Panacea, and by all the gods and goddesses, making them my witnesses, that I will carry out, according to my ability and judgment, this oath and this indenture.
To hold my teacher in this art equal to my own parents; to make him partner in my livelihood; when he is in need of money to share mine with him; to consider his family as my own brothers, and to teach them this art, if they want to learn it, without fee or indenture; to impart precept, oral instruction, and all other instruction to my own sons, the sons of my teacher, and to indentured pupils who have taken the Healer’s oath, but to nobody else.
I will use those dietary regimens which will benefit my patients according to my greatest ability and judgment, and I will do no harm or injustice to them.[7] Neither will I administer a poison to anybody when asked to do so, nor will I suggest such a course. Similarly I will not give to a woman a pessary to cause abortion. But I will keep pure and holy both my life and my art. I will not use the knife, not even, verily, on sufferers from stone, but I will give place to such as are craftsmen therein.
Into whatsoever houses I enter, I will enter to help the sick, and I will abstain from all intentional wrong-doing and harm, especially from abusing the bodies of man or woman, bond or free. And whatsoever I shall see or hear in the course of my profession, as well as outside my profession in my intercourse with men, if it be what should not be published abroad, I will never divulge, holding such things to be holy secrets.
Now if I carry out this oath, and break it not, may I gain for ever reputation among all men for my life and for my art; but if I break it and forswear myself, may the opposite befall me.[6] – Translation by W.H.S. Jones.
> In a 2000 survey of US medical schools, all of the then extant medical schools administered some type of profession oath. Among schools of modern medicine, sixty-two of 122 used the Hippocratic Oath, or a modified version of it. The other sixty schools used the original or modified Declaration of Geneva, Oath of Maimonides, or an oath authored by students and or faculty. All nineteen osteopathic schools used the Osteopathic Oath.
The point I was trying to make was that guilds were not the first form of trades self regulating.
1. How is that of any relevance to my comment?
2. Are you somehow ahistorically asserting that medecine was the first trade to regulate itself?
And artisan guilds predate medieval europe by thousands of years.
In the city I was born which was founded around 2000 years ago and got it's first major in the 14th century, most of the majors back then there were guild masters (the city only later become a trading point).
The city I currently live in got it's first major in the 13th century who was also a guild master.
Infact the US Federal Reserve is not a government entity - its a private (and public somehow).
https://www.stlouisfed.org/in-plain-english/who-owns-the-fed...
This contrasts (as far as I can tell) with Australia, where the central bank is 100% state-owned.
What is keeping FINRA's interest in following up with punishments of members?
You can have your ability to deal in the financial markets removed for a bunch of things but in particular any sort of official sanction for dishonesty or fraud. There was a senior portfolio manager at Blackrock who was banned from the securities industry for ticket fraud on his daily commute (albeit over a number of years). https://www.theguardian.com/business/2014/dec/15/ca-ban-4300...
But yes, in an ideal world it wouldn't work this way. who watches the watchmen? If FINRA isn't regulated, then they can do what they like.
In fact, FINRA itself was only established in 2007; the previous self-regulatory organization was the National Association of Securities Dealers, NASD - you may have heard of their Automated Quotation service, NASDAQ. FINRA was created after a long period of the SEC criticizing NASD for prioritizing the good of its business over effective self-regulation (see e.g. https://www.washingtonpost.com/archive/business/1994/11/15/s... and https://apnews.com/article/2d710b55afae651b8ad0737477ba2d79).
These fines are to calm down govt and fk robin hood same time.
See for instance: https://www.law.cornell.edu/cfr/text/17/240.15b7-1
FINRA is the only national securities association.
Quite a "trustworthy" regulation entity, which helped brokers remove evidence of financial misconducts and blocked public scrutiny into that matter.[0][1]
I have close to zero confidence in the finance industry being able to regulate itself.
[0] https://www.reuters.com/investigates/special-report/usa-finr... [1] https://www.sciencedirect.com/science/article/abs/pii/S03044...
I myself have filed a FINRA complaint against them 3 years ago for sending an order that was supposed to trade at the open but instead traded in the pre market session. In their attempt to make trading "easy" they removed basic long standing assumptions around how you trade. I lost money because my order was executed early. FINRA requested the complaint be addressed by RH. Guess what... They never responded. Great way to treat your customers...
Just the first few pages are enough to convince me that Robinhood is a very poorly run organisation. As a financial technologist with a couple of decades' experience, basic things such as only having a 'physical inaccessibility' BCP plan is appalling.
I wouldn't touch this company with a penny of my money, whether as a customer or an investor.
They're a FinTech firm and they didn't plan for technology outages but did for stuff like weather events? That's just crazy and noob-level planning.
If you want to invest, buy an index fund. If you want to gamble, go to a casino.
If you want to gamble, while fooling yourself that you're investing, day-trade options, preferably in a meme stock.
Yeah, I wouldnt go that far, daytrading reputable shares is still better than casino
There's punters who make good money on the horses, just like there's investors who make good money day trading, but most casual punts are little better than random guesswork.
So it is better in terms of expected costs if we're comparing 1 daytrade gamble with 1 casino gamble.
It's like saying 'you don't need anything more than Windows Home. Just leave everything on default, let Microsoft work for you! Everything else is worthless overcomplicated crap.'
Meanwhile, the reality is that finance (much like any other industry) is filled to the brim with mediocrity, and even spending a cursory amount of time doing research would net a significant positive income flow. But people don't do it. They get discouraged when they find out the markets aren't 'fair', everyone has an 'edge', and they resign themselves into thinking that the best way to make money is to just give it away to one of the big players that made it all so unfair in the first place.
They milk your money for all its worth and give you a pittance, but you remain content with yourself because this month you made 6% return on your 'investments'. The S&P went up, after all, and you, the intelligent market participant, were there to reap the benefits :^)
Meanwhile, the 'intelligent' money that outwits you throws it all in Chinese Starbucks competitors that cook the books[1], speculative electric car companies that roll parts kits downhill[2], or leverages billion dollar funds 5:1 resulting in a magnificent $10bn implosion.
[1]https://en.wikipedia.org/wiki/Luckin_Coffee
[2]https://arstechnica.com/cars/2020/09/nikola-admits-prototype...
[3]https://www.cnbc.com/2021/04/27/ubs-nomura-push-global-banks...
You left out the best part: The $50B was used to bet on 90 Day Fiancé and Star Trek. Bill Hwang is a true degenerate gambler.
[0] Which ought to be super easy - pay some devs to write a new app front-end to their existing trading systems, but without a lot of complexity to it so it's easy to use by novices.
Robinhood’s user growth is surging. To the target market, brokerage customers who respond to good UI more than trading needs, it’s apparently not a problem. That target market is demonstrably unusually profitable.
I don't know how common that is on other platforms, but I'm feeling these fines probably are justified.
- No attention to the quality of core infrastructure.
- misleading information about customer ability to trade on margin ,cash in customers accounts, risk, and margin calls.
- failed to exercise due diligence before approving customers to place options trades.
- policy to not report certain failures and complaints to to FINRA.
- several other issues like bad customer identification.
Robinhood is designed to be cheap, easy and addictive. It's all that. The cost is quality.
Good, finally some of these crooks are getting busted, and in this particular instance busted for having hacked-up things. Can't do that in a professional business, or else one gets busted, as one should.
I don't know whether Robinhood as a stock would be worth investing in (probably, but that's your decision to make).
As far as adverse press and reputation are concerned, these sorts of things only have a negative effect if they represent some kind of underlying/fundamental issue with the company.
Unless if you think that Robinhood will repeatedly be hit by regulatory fines, and that the fines or other actions are large enough to strongly impact their bottom line, the FINRA action probably isn't much of a factor.
Do you think the size of those piles of money is priced in? The size of the fear of the size of those piles of money?
The PR related stuff seems easier to figure out.
It's either a great idea or a terrible idea, and I can't tell.
FINRA isn't government.
On the other hand it’s it’s easy to fine a firm for patterns of behavior.
https://www.reddit.com/r/Superstonk/comments/mowzjk/the_brok... has a list of brokers, who restricted trades and their clearing houses.
The way I see it, if I own a stock and want to sell it, my broker’s duty in that situation should be exclusively to me. Even if they don’t have the ability to let other customers enter a position, they shouldn’t block the exit gates for me in a naive attempt to maintain balance of buy and sell orders.
If it could be shown that they did this intentionally to manipulate the market, of course they should be fined for it. But if the truth is in line with the official statement at the time, I don’t see wrongdoing.
Which I think is the OPs point.
I’d note that the other choice they could have made — blocking selling when it was not necessary — would also have the appearance of market manipulation (in the other direction).
If they had lots of deposits and went under surely people would've been less than impressed and asking why they didn't take action sooner.
a) cutting corners and ending up in that position
b) not being completely transparent about what was happening
The CEO claimed they had no liquidity issues at all, then claimed they didn’t have enough money to meet margin requirements. Since then, we have found out that the DTCC that asked for more collateral recanted prior to market open but RH still discontinued retail buying anyway.
Like an IT outages reflects poorly on a tech company, not being able to manage your books reflects poorly on a financial company.
What corners were cut? That they didn't prepare for a unprecedented buy wave in meme stocks along with a massive increase in deposit requirements?
it's a bit easy for robinhood to say "fuck the old banks, we don't need to be part of their network, and we're going to open complex derivative trading to everyone", and then as soon as everyone starts buying massive amounts of call options, suddenly realising that they need massive collateral and they don't have any partners to rely on
Them opening/pushing options to their userbase was a long term move, but GME blowing up and deposit requirements spiking up was a short term event. Therefore those events aren't really contradictory.
>fuck the old banks, we don't need to be part of their network
That was part of their messaging? I haven't been keeping up with their blog posts, but AFAIK their messaging is closer to "democratizing finance" rather than "fuck the old banks".
Are we to believe these cutting edge financial institutions with their sub-millisecond high frequency trading, specialists in order execution, eight-figure salaries and dedicated high-speed microwave links are somehow unable trade cash for goods like every store does hundreds of times a day?
Price discovery means that buy/ask spread changes based on supply and demand, were this the case, and there was no collusion, then there would have been no need to shut down trading.
The problem is the supply was inflated due to naked shorts, and Robin Hood's clearing house/business partner (Citadel) was caught with their pants down facilitating this naked shorting.
Under normal market mechanics, there would be no panic. The price would have increased, early adopters would have gotten profit, late adopters would have missed out and lost as the correct price was found.
The January blocking of trades was a desperate 'Hail Mary' to prevent an actual squeeze, and it *worked*.
Calculations based on married put/calls shows that 190% of GME has, and still is shorted. There is no way to close the short position without increasing demand.
https://www.reddit.com/r/Superstonk/comments/oc4f79/well_the...
Yes, this is conjecture, but the author is well respected, and if you can disprove any of it, reddit is very happy to help you strengthen/disprove it's case.
It's all seems quite cultish over in superstonk, but no-one believed Michael Burry back in 2008.
What is the “caught with their pants down” referring to? I’ve seen dubious speculation but this is the first I’ve heard of them being caught on anything.
When all the shares on the market are synthetic (fake), and retail and investors own more shares than are issued, then there is a serious problem that can either be brushed under the rug, or untangled by force (liquidation)
Citadel itself is a hedge fund AND a market maker, it has two arms both ran by Ken Griffin.
The path they were going down pre January was to short Gamestop into bankruptcy with no means to raise capital, much like Toys R us was. When Gamestop got a new CEO, and changed direction, they had already gone 'all-in' with their shorting with no way out.
Main thing about shorting, it's an infinite risk position, but hedgefunds have historically been able to short into oblivion.
1. they didn't shut down trading, only forced positions to go into close-only
2. they absolutely needed to do that, given that they were at risk of not being able to meet deposit requirements, which would mean they would have to suspend trading for all stocks
>Calculations based on married put/calls shows that 190% of GME has, and still is shorted. There is no way to close the short position without increasing demand.
1. shorts in excess of 100% doesn't indicate anything nefarious, due to synthetic longs created by shorts
2. I'm very skeptical of these "calculations", when official numbers put short interest at far lower than that, eg https://fintel.io/ss/us/gme.
>Yes, this is conjecture, but the author is well respected,
Is he? Respected by whom? The superstonk community? The financial community? If it's just the latter it doesn't mean much.
>It's all seems quite cultish over in superstonk, but no-one believed Michael Burry back in 2008.
“But the fact that some geniuses were laughed at does not imply that all who are laughed at are geniuses. They laughed at Columbus, they laughed at Fulton, they laughed at the Wright brothers. But they also laughed at Bozo the Clown.”
-- Carl Sagan
2. I'm skeptical too, but there is no way the reported figures are accurate. Finra itself lists RC Ventures/Blackrock twice, and adds up to more than 100% for institutional investors. Information on Bloomberg terminals is completely wrong, and information on short positions is self reported.
I'm tempted to believe criand's latest DD, as it's yet to be disproven. Older DD has not stood the test of time so well.
In regards to qualifications, yes, the superstonk members are self policing, but also they don't accept that credentials mean you are automatically right, and people who are wrong are called out almost immediately.
There's not going to be a place where it says 'This stock is owned 290%', but then again, that's the nature of Russell's teapot. Given what I've seen with news coverage, the promotion of AMC as an alternative, and the passing of so many SEC rule changes, it's hard to imagine zero fuckery behind the scenes.
Source? The only thing we know for sure is that they restricted trading. Their official explanation was due to volatility/deposit requirements. What's the evidence that they did it to "prevent retail from FOMOing in more"?
>2. I'm skeptical too, but there is no way the reported figures are accurate
They may not be 100% accurate. I'll entertain the possibility that they're a few percentage points off, but are they more than 10x off as the DD suggests?
>Finra itself lists RC Ventures/Blackrock twice, and adds up to more than 100% for institutional investors
Can you link the Finra report? I can't locate it directly, so I'm just going off whatever's reported by other sites
>as it's yet to be disproven. Older DD has not stood the test of time so well.
This should tell you all you need to know. The general problem with debunking conspiracies is that it takes more effort to debunk than it is to make it up.
>Given what I've seen with news coverage, the promotion of AMC as an alternative
The alternative explanation to the "even the media is in on it!" conspiracy is that GME was months ago, and AMC is far more recent so is therefore getting more attention. Another problem is that: what about the hedge funds shorting AMC? Don't they stand to lose if AMC blows up? Where's their conspiracy? Do the GME shorters have better conspiracy people than the people shorting AMC?
this standard phrase is used so often it should be a meme. almost like having a defense attorney make a public statement to the news media, which is 100% of the time "my client is innocent, charges are frivolous, lawsuit is a witch hunt"
And not even that. Being proven innocent can protect you from legal problems, but social-wise not much happens, because the amount of people badmouthing you, who don't know - or pretend to not know - that you were found innocent, is too great.