Robinhood CEO says SEC charges “don’t replicate Robinhood right now”.
Robinhood CEO Vlad Tenev responded Monday to claims that the stock trading firm misled customers about its money-making tactics, which resulted in a $ 65 million settlement with the Securities and Exchange Commission last week.
While appearing on CNBC’s Mad Money, Tenev said privately held Robinhood has made staff changes to strengthen its legal and compliance activities, including the hiring of a chief legal officer and the addition of two new chief compliance officers Officers aiming to do “top of the class.”
“The SEC settlement addresses historical practices that don’t reflect Robinhood today,” he said in an interview with CNBC’s Jim Cramer. “We not only want the best product and technology team, we want the best compliance, legal and regulatory teams too.”
The SEC accused Robinhood on Thursday of misleading customers and omitting important information about the trading app’s source of income. Robinhood, a pioneer in commission-free trading, draws money by sending client orders to market makers like Citadel Securities or Virtu who pay to execute trades. The legal but controversial practice, according to the SEC, resulted in execution prices that were below those of other brokers, costing clients $ 34.1 million despite the benefit of zero-cost trades.
An SEC filing reveals that Robinhood made payments of $ 180 million on trades in the second quarter.
“Robinhood has provided customers with misleading information about the real cost of trading the company,” said Stephanie Avakian, director of the SEC’s enforcement division, CNBC.
With the settlement, the company did not approve or deny the indictment.
Dan Gallagher, a former SEC commissioner during the Obama years, joined Robinhood in May as the company’s chief legal officer, according to his LinkedIn page.
Tenev, who co-founded and co-founded the company with Baiju Bhatt in 2013, said Robinhood will continue to act as a self-directed broker, providing tools and products that customers can use to make their own trading decisions. Bhatt resigned as co-managing director about a month ago.
One way that Robinhood seeks to help customers conduct informed business is through educational content that is accessible on the platform. Tenev said more than 3 million users read the content and articles available on the app, and daily visits have increased 260% since January.
JMP Securities estimates Robinhood now serves 16 million users, despite Tenev refusing to confirm the number.
The company has also improved communication of order flow payments for its revenue streams, including adding a section to the website that lists consumer stats on execution quality, he added.
“I think this is ultimately what customers are interested in,” said Tenev. “I think what they really want to see is what the quality of execution I get from Robinhood. And that’s fair feedback. Now we’re making it available on our website and we want to make improvements over time.”
Comments are closed.