Massachusetts state regulator seeks to revoke Robinhood’s broker-dealer license because the regulators claimed that the company targeted inexperienced investors so let’s read more in our latest crypto news.
The Massachusetts state regulator is seeking to revoke the broker-dealer license of Robinhood in the state. William Galvin who is the head of the state’s securities division who said in an administrative complaint that the company has a “Continued pattern of aggressively inducing and enticing trading among its customers including Massachusetts customers with little or no investment experience.”
The new filing is a follow-up to a complaint that was filed by Galvin’s office in 2020 alleging that Robinhood’s marketing illegally targeted investors that have almost no experience. The state pointed to the recent activity of the company including the promotion that provides customers with cash rewards based on the deposits as a proof of a “firm culture which has not changed.”
Robinhood responded to the new complaint arguing that the action will likely prevent “millions of Bay staters” from accessing its platform. Back in December, the company said that its platform had about 500,000 customers in Massachusetts. The company filed a lawsuit seeking to invalidate the recently adopted fiduciary rule in the state as the regulators accused it of violating. Adopted in 2020 the rule requires broker-dealers to act in the best interest of their clients. Robinhood stated:
“The Massachusetts Securities Division’s new Fiduciary Rule exceeds its authority under both Massachusetts state law and federal law. Robinhood is a ‘self-directed’ brokerage firm that does not make investment recommendations or provide investment advice. By its own terms, the new rule does not apply to self-directed firms.”
Robinhood faced mounting pressure from the regulators and users alike after becoming involved in the controversial GameStop stop short-squeeze as the company halted buying for GameStop stocks in 2021 and draw the ire of the trading community. The 20-year –old Robinhood user Alex Kearns took his own life after receiving a negative balance of $730,000 on his app. The note of his computer posed the question:
“How was a 20 year old with no income able to get assigned almost a million dollars worth of leverage?”
Robinhood experienced a number of technical issues that cause major losses for traders and triggering more legal action against the company. The recent event occurred when Robinhood’s crypto trading platform ran into technical issues as DOGE hit a new ATH of $0.27.
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