Home Finance Is Robinhood Protected? – Good Monetary Cents®

Is Robinhood Protected? – Good Monetary Cents®

Is Robinhood Protected? – Good Monetary Cents®


As Robinhood has grow to be more and more fashionable amongst buyers and merchants, the query of whether or not or not it’s a secure platform for buying and selling has come underneath scrutiny.

Many individuals have requested, “Is Robinhood actually secure?” With its easy-to-use interface and fee free trades, Robinhood has grow to be one of the crucial fashionable inventory buying and selling apps lately. However questions stay about how safe and dependable it’s when in comparison with conventional brokerages.

On this article we’ll check out what makes Robinhood secure and discover the dangers related to utilizing the app.

What’s Robinhood?

Robinhood is a inventory brokerage that provides commission-free buying and selling by means of its cell app and web site. It was based in 2013 by two Stanford roommates, Baiju Bhatt and Vlad Tenev, who wished to make investing easier and extra accessible to everybody.

picture of investor holding iphone with Robinhood app

Robinhood permits customers to purchase, promote, and maintain shares, ETFs, choices, cryptocurrencies, and extra with no fee charges.

In addition they supply academic assets to assist customers study the fundamentals of investing. Robinhood has grow to be fashionable amongst younger buyers seeking to get into the inventory market with out spending some huge cash on charges.

Is Robinhood regulated?

Robinhood is an SEC-registered broker-dealer and member of FINRA and SIPC, that means that it adheres to a algorithm and laws established by these organizations. Their CRD # 165998 which may be discovered on their FINRA BrokerCheck agency abstract.

screenshot of Robinhood Finra brokercheck firm summary

These protections assist safeguard buyers’ funds and securities within the occasion of a brokerage agency’s failure or different monetary losses.

Along with this safety, Robinhood additionally follows trade finest practices resembling Know Your Buyer (KYC) procedures and Anti-Cash Laundering (AML) legal guidelines by verifying buyer identities earlier than permitting them to commerce.

What about SIPC?

Robinhood’s membership in SIPC offers safety for purchasers towards broker-dealer chapter, with protection of as much as $500,000 in money and securities.

SIPC stands for the Securities Investor Safety Company. It’s a nonprofit company that gives safety to buyers towards theft, fraud, and different errors by their broker-dealers resembling misappropriation of funds or securities. Backside line if Robinhood have been to go bankrupt, SIPC would step in to assist out their buyers.

Along with this safety, Robinhood has carried out measures to watch suspicious exercise and defend customers from monetary loss as a result of fraudulent exercise. These measures embody fraud screening procedures designed to establish unauthorized trades and suspicious behaviors.

Is Robinhood Protected to Use?

Whereas the security of any funding platform is dependent upon a wide range of components, Robinhood has taken a number of steps to extend its safety and enhance buyer assist.

New updates embody issues like improved threat disclosure, extra customer support channels, and instruments to assist clients make extra knowledgeable choices.

Robinhood has improved its customer support assist with extra channels resembling on-line chat, electronic mail and telephone assist. This enables clients to simply get assist once they want it most.

Moreover, the corporate has carried out measures to higher monitor suspicious exercise and try to guard customers from monetary loss as a result of fraudulent exercise. Finally, it’s as much as particular person customers to resolve in the event that they really feel snug utilizing the platform or not.

How Does Robinhood Make Cash?

Robinhood makes cash in a number of methods. The first income for Robinhood is the curiosity they earn on buyer funds held in Robinhood accounts.

In addition they earn cash by means of choices buying and selling charges, margin curiosity, Gold subscriptions, and rebates from market makers.

Robinhood capitalizes on the explosive development of retail investing by providing commission-free trades whereas nonetheless making a revenue off its customers.

screenshot from Robinhood's website on how they make money

Robinhood additionally makes cash from retailers, resembling when clients purchase merchandise with their Robinhood debit card.

Moreover, they generate income by means of partnerships, resembling referral charges and commissions for referring customers to different companies.

Lastly, Robinhood additionally affords in-app upgrades that give customers entry to extra superior buying and selling choices and analytics instruments. They disclose on their web site the alternative ways they generate income.

How Robinhood makes cash:

  • The charges charged for premium accounts and companies
  • Curiosity earned on buyer deposits
  • Fee for order movement, when consumers and sellers are matched with market makers
  • Income from credit score merchandise resembling margin lending and margin curiosity
  • Promoting knowledge to exterior corporations
  • Fee-free buying and selling on sure shares and ETFs

Has Robinhood Been in Hassle?

Robinhood has come underneath scrutiny for its enterprise practices, notably with reference to customer support and threat disclosure.

In December 2020, the corporate settled with the U.S. Securities and Trade Fee (SEC) for $65 million associated to allegations of false promoting and misrepresenting their pricing construction.

Robinhood additionally confronted a public outcry after one among its clients, a 20-year-old faculty pupil, dedicated suicide. His household alleged, Alexander E. Kearns, had suffered monetary losses because of the firm’s dangerous buying and selling practices and lack of buyer assist. Robinhood later agreed to pay an undisclosed sum to his household and launched updates to their customer support plans aimed toward offering higher help and security measures for customers.

Moreover, in March 2021 the corporate settled a lawsuit introduced by Massachusetts regulators for $26.5 million associated to its seeming “gamification” of buying and selling, which inspired clients to commerce extra steadily and take greater dangers than applicable for his or her degree of expertise or funding targets.

In June 2021, FINRA fined Robinhood Monetary LLC $57 million and ordered the agency to pay roughly $12.6 million in restitution, plus curiosity, to 1000’s of harmed clients for a complete of $70 million.

cnbc headline that reads: Robinhood to pay $70 million for outages and misleading customers, the largest-ever FINRA penalty

The sanctions signify the biggest monetary penalty ever ordered by FINRA and replicate the scope and seriousness of the violations.

In whole, Robinhood has 9 whole disclosures of their report (see screenshots beneath):

screenshot of 9 total disclosures for Robinhood on Finra BrokerCheck

Right here’s one among their pending allegations on their agency abstract for:


screenshot of Robinhood app pending regulatory disclosure on FINRA.org

The Backside Line – Robinhood App is Protected?

There’s no denying that Robinhood is a registered broker-dealer with the Securities and Trade Fee (SEC) and is a member of the Monetary Trade Regulatory Authority (FINRA).

In addition they use encryption to guard customers’ private and monetary info, and it affords two-factor authentication for added safety.

However you possibly can’t deny the quantity of hassle they’ve received in since they launched their platform. Due to that I might encourage any new investor to tread rigorously.

FAQs on Robinhood App Security and Safety

Is Robinhood a secure platform to make use of for buying and selling?

Robinhood is a SEC and FINRA regulated platform and usually thought of secure to make use of for buying and selling.

What sort of safety measures does Robinhood have in place to guard my account?

Robinhood makes use of a wide range of safety measures to guard consumer accounts, together with two-factor authentication, encryption, and common safety audits.

Has Robinhood had any safety breaches prior to now?

Robinhood has not skilled any main safety breaches thus far. Nevertheless, in July 2020, the corporate did disclose a knowledge breach that affected a small variety of customers, however no monetary info was compromised.

How Robinhood received into going hassle?

Sure, Robinhood has 9 disclosures on their FINRA BrokerCheck agency profile. A type of situations handled the favored meme inventory GameStop in January 2021.

Cited Analysis Articles

  1. SEC.gov (seventeenth, December 2020) SEC Costs Robinhood Monetary With Deceptive Prospects About Income Sources and Failing to Fulfill Responsibility of Finest Execution (https://www.sec.gov/information/press-release/2020-321
  2. FINRA Orders Document Monetary Penalties In opposition to Robinhood Monetary LLC (thirtieth, June 2021) https://www.finra.org/media-center/newsreleases/2021/finra-orders-record-financial-penalties-against-robinhood-financial
  3. BrokerCheck Report (n.d.) ROBINHOOD FINANCIAL, LLC https://recordsdata.brokercheck.finra.org/agency/firm_165998.pdf
  4. CNBC Robinhood to pay $70 million for outages and deceptive clients, the largest-ever FINRA penalty (thirtieth, June 2021) https://www.cnbc.com/2021/06/30/robinhood-to-pay-70-million-for-misleading-customers-and-outages-the-largest-finra-penalty-ever.html



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