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Robinhood has agreed to pay fines of $45mn to cover data breach and record-keeping failures — one of a series of penalties levied by US regulators on Monday against financial firms, including units of Blackstone and KKR.
The online broker paid the biggest penalty in a group of settlements announced by the Securities and Exchange Commission that totalled more than $100mn in fines.
Robinhood’s failures included a 2021 data breach that exposed millions of customers’ email addresses and names as well as record-keeping issues including failures to properly record its positions involving fractional share trades — a popular service among younger, less affluent traders.
The $45mn payout comes with the broker poised to record a fifth consecutive quarter of profitability. In the three months to September, Robinhood reported net income of $150mn.
The company said it was pleased to resolve the issues, which it described as historical.
“We are well-positioned to continue leading the industry in developing the innovative products and services our customers want and need,” Lucas Moskowitz, Robinhood’s general counsel, said in a statement. “We look forward to working with the SEC under a new administration.”
The SEC on Monday also announced that 12 investment advisers and broker dealers agreed to pay more than $63mn to settle charges of record-keeping violations stemming from the use of unofficial messaging systems.
The move marks the SEC’s latest crackdown on Wall Street for messaging malpractice under chair Gary Gensler. Enforcement actions had so far focused on banks, which have agreed to pay billions of dollars in fines over “off-channel” communications.
“When firms fall short of those obligations, the consequences go far beyond deficient document productions; such failures implicate the transparency and the integrity of the markets and their participants, like the firms at issue here,” Sanjay Wadhwa, acting director of the SEC’s enforcement division, said on Monday.
The firms’ staff, including supervisors and senior managers, used “off-channel” communications for records they were legally obliged to maintain, the SEC said.
Three Blackstone units collectively agreed to pay the largest penalty of $12mn, followed by KKR at $11mn. Charles Schwab agreed to a sum of $10mn, while Apollo Capital Management, a collection of three Carlyle Group divisions and TPG Capital Advisors each separately agreed to pay $8.5mn.
Santander US Capital Markets and PJT Partners agreed to the pay the smallest penalties: $4mn and $600,000, respectively.
Apollo and TPG declined to comment. Blackstone, Charles Schwab and Santander said they were “pleased” to have resolved this matter. The other groups did not immediately respond to a request for comment.
In Blackstone’s case, senior managing directors from at least December 2019 shared information about investment advice and placing securities trades for clients on “unapproved” platforms, according to SEC filings.
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