Robinhood Caught Selling User Info to Financial Firms
According to a report by the SEC, it is understood that Robinhood Financial has enjoyed millions of dollars while selling customer details to HFT firms. Robinhood is the very same organization that claimed to leverage high ethical standards in order to benefit the masses rather than practicing shortcuts to earn a quick buck.
Robinhood Faces Public and Regulatory Scrutiny
Upon visiting the Robinhood app's user friendly interface, notable inclusions of ethical quotes concerning the financial system are displayed, sitting with the ethos that the industry should aid common people and not function for wealth. They further announced that Robinhood encourages zero commission trading. Such lucrative quotes has indeed played a major role in luring a growing customer base who share these values.
Although the practice of selling customer information and preferences to financial companies is not only common, but a major part of collaborations between investment companies and HFT firms, however for companies such as Robinhood who stress notions such as zero commission trading concepts, recent SEC issued claims have caused a major community uproar.
Another revelations into SEC claims indicate that this lows cost investment firm had been selling out customer demographics at a ten times higher rate when compared to other investment firms. Whilst organizations such as IBRK and Vanguard not only safeguard user information, IBRK additionally allows users to select a variety of exchange for placing their order.
As stated in official reports, Robinhood claims that their revenue is earned from the interest generated from user accounts and margin lending. The SEC, however, claims that Robinhood earned most of its profit from the selling of customer details.
More Concerning Factors Unfold
Seeking Alpha reports have recently suggested that the selling of customer information by Robinhood indeed creates a conflict of interest for the app's customer base. Their report further reveals the theoretical calculation through which Robinhood had earned a fortune by selling out information.
Further indicating the graveness of the situation, Seeking Alpha stated that the SEC has slammed penalties to a handful of organizations who have purchased user information. The remainder have not yet been charged for illegal transactions. In this context, last year Citadel Securities LLC had received a penalty of over $20 million for issuing deceptive statements regarding their process for structuring trade prices.