ROBINHOOD – $65 MILLION LAWSUIT – New Changes!

Robinhood agreed to settle a $65 million lawsuit – here are the NEW changes

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Robinhood just agreed to pay the SEC a $65 million fine – and now there’s some new changes to are coming to the app that are pretty controversial and it’s created some confusion and questions as to whether or not we should continue using Robinhood or take our money elsewhere. So if you’re not sure what’s going on, let me give you a brief overview and a backstory of what’s going on. – The Commonwealth of Massachusetts Securities Division has accused Robinhood of 5 acts of misconduct.

1. Robinhood is accused of using aggressive marketing tactics to lure inexperienced investors.

2. Failing to make changes that were considered reasonable to prevent anymore stock market outages like the ones we had earlier this year where all stock trading stopped during the peak of the year on March 2nd and partially March 3.

3. Taking advantage of new investors by gamifying investing.

4. Failed to follow their own rules and policies for supervising stock options trading.

5. A breach in fiduciary conduct that is required by the Act and Regulations.

Prior to 2013, we had to pay fees for buying and selling stocks, but Robinhood changed the game of finance and investing forever – so of course, their app grew exponentially. Their customer base grew by 500% between the years of 2016, and 2018 from 1 million people, to six million people. But between the end of 2019, and May 2020, they grew from ten million to thirteen million – that’s 30% in just a few months.

As of last about a week and a half ago, Robinhood had $1.6 billion dollars worth from about 486,000 customers from the state of Massachusetts. It’s argued that during this time, Robinhood was advertising itself to really young and inexperienced investors. For example, of those that were approved to do options trading (which is arguably the most dangerous reckless form of investing) 68% were approved to trade, despite those same customers informing Robinhood that they had limited or no prior investment experience.

Furthermore, between January 1st 2020, to end of November 2020, Robinhood has as many as 70 stock market trading outages. March 2nd was the biggest point gain in the history of the Dow Jones Average, and the app left millions of people unable to buy or sell stocks when the market opened – for the entirety of that day, and the same issue happened partially on the third. The SEC document argues by that point Robinhood should have known that it’s current infrastructure wasn’t able to handle that kind of traffic and should have upgraded.

Once the people that were invited signed on and became customers, Robinhood allegedly flooded them with strategies that are argued to have been designed to get people to continue investing and keep people coming back for more – the accusation here is an issue of gamification which is a very fine line that brokerages can not cross. The cash management tool was another example of this which invited people to tap the live action icon 1,000 times a day to move up in the line queue – all tactics that are arguably addicting game like strategies.

The SEC document also says that Robinhood allowed people to make an unlimited amount of trades and to encourage more trading activity , Robinhood had a list of the most traded stocks which was a widely popular tool that people used to inform their investing decisions.

As a result, Robinhood is making new changes. Starting on January 11, 2021, we’ll no longer be able to buy closed-end funds, limited partnerships, master limited partnerships, royalty trusts, tracking stocks, New York registry shares, and units on Robinhood. You can still hold you shares and sell them, but you can no longer invest / buy them.

SEC document: https://bit.ly/3nwtTrk
MLP Stocks: https://www.suredividend.com/mlp-list/

*None of this is meant to be construed as investment advice, it’s for entertainment purposes only. Links above include affiliate commission or referrals. I’m part of an affiliate network and I receive compensation from partnering websites. The video is accurate as of the posting date but may not be accurate in the future.

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