Game Over: Robinhood Pays $7.5 Million to Resolve “Gamification” Securities Violations | Vinson & Elkins LLP

The charges and settlement with Robinhood represent the latest development in a growing trend of concern amongst securities regulators regarding how modern broker-dealers and investment advisors interact with their customers in the digital age. Although the United States Securities and Exchange Commission (the “SEC”) has not enacted a fiduciary duty standard as extensive as that in Massachusetts, the SEC recently proposed new conflict of interest rules that, if adopted, will require broker-dealers and investment advisors to investigate whether their use of most forms of technology in investor interactions results in a conflict of interest that places the interests of the firm ahead of the investor’s interests and, if so, take affirmative action to eliminate or neutralize that conflict of interest. In his public comments accompanying the SEC’s proposed rules, Chair Gensler identified specific concern over the possibility that automated digital engagements with customers, such as “push” notifications or stock recommendations, could be leveraged by firms to subtly nudge investors into making decisions that benefit the firms’ own revenues, profits, and interests rather than the individual investor’s—a hypothetical that is substantially similar to the course of action the MA Securities Divisions alleged Robinhood had engaged in.

Source: Game Over: Robinhood Pays $7.5 Million to Resolve “Gamification” Securities Violations | Vinson & Elkins LLP