At present, there are many rumors floating in regards to the regulatory authority from Massachusetts (USA) taking action against Robinhood. There are reports that the regulator is planning to revoke Robinhood’s license as a broker-dealer.
Robinhood is one of the most prominent and even controversial stock trading applications, which is also cryptocurrency-friendly. The platform also allows cryptocurrency users to buy/sell and trade cryptocurrencies through its platform.
It has been reported that the securities division of the state of Massachusetts is the one taking action against Robinhood. The recent statement from the securities division of the state has clarified why it has resorted to this maneuver against Robinhood.
Securities division’s head, William Galvin has alleged Robinhood for being involved in activities where it has aggressively enticed and induced trading activities among the customers using the platform.
According to the securities division, the platform has been at it ever since its launch and has not been taking any measures to get rid of this strategy.
The securities division claimed that the platform has been found doing the same with inexperienced users and traders from the state of Massachusetts. The securities division of Massachusetts alongside Galvin on Thursday, April 15, 2021, made this statement.
This is not the first time the securities commission has alleged Robinhood for being involved in such activities. The regulatory authority had previously alleged the platform for being involved in the same activities back in December 2020.
Even at that time, the securities division had claimed that Robinhood is constantly involved in targeted inexperienced and novice traders/users in the state of Massachusetts.
The regulatory had claimed that Robinhood was practicing illegal strategies in order to target such traders. This has resulted in many novice traders losing their precious savings and funds as they had no experience in trading and were unable to manage their trades.
In their claim, the securities division has quoted a recent promotion that Robinhood has practiced repeatedly over the course of time. According to the regulator, the platform has been luring novice traders by offering them compensations in the form of rewards.
The Robinhood platform informs users they will be receiving monetary rewards based on the amount of deposit they make. This tends to work like a charm against the novice traders who for the cash rewards end up depositing their money through the platforms.
This kind of maneuver only puts novice traders at risk of losing their funds to such schemes. At the end of the day, Robinhood gets what it wants at the cost of staking the funds and life-savings of the novice traders.
Therefore, the securities division wants the broker-dealer license to be revoked for Robinhood so it cannot operate in Massachusetts.