Bloomberg, citing its sources writes that the US regulators SEC and FINRA are investigating the activities of the startup Robinhood in connection with a large-scale disruption that occurred in March 2020. Clients of the company complained that as a result of malfunctions they could not complete transactions, which resulted in the loss of large sums.
According to analysts, the investigation could jeopardize Robinhood’s upcoming IPO.
Robinhood is a popular US application for commission-free transactions on the exchange. It can be used to invest in ETFs, stocks, derivatives, buy and sell cryptocurrencies.
In March, the service experienced a major failure – then the application was inoperative for more than a day. Technical problems coincided with a turbulent market situation – investors around the world were nervously reacting to the gathering pace of the global coronavirus pandemic. As a result, market volatility was extremely high. In this situation, many investors were unable to close their positions when the dynamics of the whole turned to their disadvantage. As a result, the size of the losses turned out to be much higher than if they made transactions immediately.
Bloomberg sources told Bloomberg that hundreds of customers complained about Robinhood and blamed the company for financial losses and lost profits.
Among other things, users were outraged by the poor quality of technical support – people could not contact Robinhood by phone, they were offered to write by email. At the same time, replies to emails had to wait several days. Loss amounts range from hundreds to thousands or even tens of thousands of dollars.
How Robinhood responds
Earlier, company representatives announced that the number of support staff has doubled over the past year, and it is planned to hire hundreds more. Also, the victims were offered compensation.
At the same time, a startup obviously does not always manage to cope with its growth – in just a few months of 2020, the number of new customers increased by 3 million and reached 13 million, almost half of them are newcomers to exchange trading. The number of transactions of these people exceeded 4.3 million per day.
Lack of information and insufficient customer support can even lead to tragic consequences. There, in June 2020, it became known that a 20-year-old user of the platform committed suicide – the young man did not understand options trading and owed more than $ 730 thousand. Then the representatives of the US Congress wrote an open letter to Robinhood and called for better informing their users about the risks associated with investment activities.
According to Bloomberg, the investigation could have far-reaching implications for Robinhood. The company, estimated at $ 11.2 billion, is going to conduct an IPO, and the listing may be postponed.
However, the management of Robinhood does not plan to change plans. Instead, the company is hiring lobbyists and opening an office in the US capital – top management makes no secret of their desire to “have a voice in Washington to protect customers and a fair market.”
In Russia, shares of American companies can be bought at St. Petersburg Stock Exchange… To do this, you do not need to open an account with a foreign broker or use applications like Robinhood, a Russian account will be enough. Open it can be online…
Read reviews, market analytics and investment ideas in Telegram channel ITI Capital