Robinhood Has 'Done a Great Thing for Young Investors'

Katherine Ross

Robinhood is reportedly facing an SEC investigation over its relationships with high-speed trading firms.

The Securities and Exchange Commission is investigating Robinhood over its ties to high-speed trading firms, the Wall Street Journal reported on Wednesday.

The SEC is focusing on whether Robinhood properly disclosed to customers that its orders were being sold to high-speed trading firms, and whether that lack of disclosure amounts to civil fraud.

The investigation is reportedly in an advanced stage, and if Robinhood is found liable, it may have to pay a fine as high as $10 million if it agrees to settle with the SEC, according to the WSJ. The two sides haven't formally negotiated a settlement, and a deal is unlikely to be reached this month.

The app offers commission-free stock trades, and has seen considerable growth in recent years and has become particularly popular during the COVID-19 pandemic. 

The company said it made $180 million in the second quarter, compared to $91 million in the first quarter. Robinhood reported 4.31 million daily active trades in June. The majority of Robinhood’s revenue comes from options trading, which is viewed as risky particularly for amateur investors.

Meanwhile, take a look at Robinhood's most-sold stocks in August, courtesy of Jonas Elmerraji of Trend Playbook.

You can follow Katherine Ross on Twitter at @byKatherineRoss.

Read more from Katherine Ross here.

Latest Videos From TheStreet and Jim Cramer:

 

LIVE WITH JIM CRAMER - WATCH THE REPLAY
Enter your email to register or login. Registration information may be shared with advertising partners in accordance with our Privacy Policy.
Comments (7)
No. 1-7
Emmanwo8
Emmanwo8

Rohinhood needs to get it together !

AlexM5
AlexM5

I enjoy trading through robinhood because thats how I started off and I guess I got used to it. Which other trading apps are good to trade through?

JavierFrausto
JavierFrausto

Robinhood is here to stay

kperkins2
kperkins2

Robinhood needs to tread lighlty! They could face some trouble!

Ben Heisler
Ben Heisler

Is a $10 mil fee to the SEC basically a slap on the wrist for a company like Robinhood?

dougv
dougv

Portnoy called this!

sbear
sbear

Speaking as a millennial, Robinhood freaks me out!