As a bright light continues to be shined on Robinhood and their suspect actions during the GME fustercluck, people seem to have forgetten that they’ve always treated their “customers” like dirt.
Two days ago we wrote about their $65 million SEC fine from all the way back in December of 2020. Today, let’s have a chat about how FINRA slapped Robinhood on the hands in December of 2019 for basically the same thing.
FINRA Rule 5310 requires a broker to perform “best execution”. This rule “requires firms to use reasonable diligence to ascertain the best market for the subject security and buy or sell in such market so that the resultant price to the customer is as favorable as possible under prevailing market conditions.“
What this means is a firm has to make some kind of effort to find the best price for your order. Apparently, Milton in the sales order department was super busy between October 2016 to November 2017 trying to find his Swingline stapler because Robinhood made ZERO effort to follow this rule.
So what did Robinhood do with all their orders? They couldn’t be bothered to try to find the best price, i.e. make sure you make as much money as possible, and just sent all their orders to the market makers they had explicit agreements with, i.e. make sure Robinhood makes as much money as possible.
So to recap:
- 2019: Robinhood is fined by FINRA for best case being incompetent (can’t follow rules like kindergarteners), to worst case knowingly stealing customer money (amount unknown).
- 2020: Robinhood is fined by the SEC for stealing $34.1 million from customers.
You aren’t the customer. You are the product.