Robinhood attracts heavy regulatory demands

Robinhood Markets Inc’s blockbuster public listing will attract a lot of new regulatory demands for the company which may be a weakness of the online broker, experts say.

The company recently made the headlines with the broker’s disclosure of SEC and FINRA’s probe into employees’ trading in meme stock. Robinhood said that the US watchdogs inquired weather employees of the company traded GameStop Corp. and AMC Entertainment Holdings, Inc before broker publicly restricted trading on these stocks in the end of January 2021.

The probe also included questions about compliance in personnel registration rules.

Robinhood said in a SEC filing on Tuesday:

These matters include inquiries related to whether any employee trading in these securities may have occurred in advance of the public announcement.

The new requirements on Robinhood as a publicly listed company are enforced by the US SEC and are said to include disclosure, governance and internal controls.


As a public company Robinhood will now be required to release quarterly financial results. Those will include previously undisclosed information on the crypto and options trading contribution to the company’s revenue.

The public listing will also require the company to announce any sort of information that may affect its stock price such as government probes, security breaches, etc.

The legal obligations on Robinhood will also see the company have a majority of independent board directors overseeing the management. They will also have to create and audit committee and select an independent, external auditor.

Robinhood will also have to set in place a heap of rules and process to guarantee integrity and compliance with laws and regulations and prevent fraud or embezzlement.

Just ahead of its IPO filing, Robinhood went through government and regulatory investigations, going back-and-forth with the SEC about its filing and less than a month ago, the online broker was hit with the largest FINRA penalty of $70 million for “systemic” failures, providing “false and misleading” information and other issues.

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