NEW: Warren Shares New Details on Robinhood's Controversial Actions During GameStop-fueled Market Volatility
Releases Response to Her Questions About the Company's Decision to Abruptly Halt Customers' Trading, Its Forced Arbitration Policy, and Its Ties to Hedge Funds
Washington, DC - United States Senator Elizabeth Warren (D-Mass.), a member of the Senate Banking, Housing, and Urban Affairs Committee and the Senate Finance Committee, today released Robinhood's response to her February 2, 2021 letter requesting answers on the company's decision to abruptly halt customers' trading and other controversial actions during the market volatility related to trading of GameStop shares.
Senator Warren also released the following statement:
"Robinhood's response to my letter reveals that the company did not have enough cash on hand to manage a surge in trading and buried important information about consumers' rights. Robinhood promised to democratize trading, but hid information about its prerogative to change the rules by cutting off trades without notice -- and about customers' inability to access the courts if they believe they've been cheated -- behind dozens of pages of legalese. While I hope Robinhood follows through on its statement that it is open to reviewing its use of forced arbitration, the SEC should ban these harmful and exploitative clauses outright. What's still not clear from Robinhood's response to my questions is the full extent of Robinhood's ties to giant hedge funds and market makers. I'm going to keep pushing regulators to use the full range of their regulatory tools to ensure the fair operation of our markets, particularly for small investors."
In her letter dated February 2, 2021, Senator Warren raised questions about Robinhood's adherence to regulatory requirements and its contractual obligations to its retail investors. She also raised concerns about Robinhood's forced arbitration requirements, which could prevent its customers from seeking judgements and remediation in court. Her letter also asked Robinhood to explain its decision to restrict trades, its relationship with hedge funds and other large financial institutions, and the steps it is taking to ensure it provides fair and honest treatment to its customers in the future. Senator Warren also sent copies of her letter to the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA).
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