Brokerage Robinhood this week agreed to pay a civil penalty of $65M over charges from the Securities and Exchange Commission that it was misleading customers. In addition, Massachusetts securities regulators also filed a complaint against Robinhood, accusing it of “aggressive tactics to attract inexperienced investors” and “gamification strategies to manipulate customers.”

Why should we care?
“Between 2015 and late 2018, Robinhood made misleading statements and omissions in customer communications, including in FAQ pages on its website, about its largest revenue source when describing how it made money — namely, payments from trading firms in exchange for Robinhood sending its customer orders to those firms for execution, also known as ‘payment for order flow,’” the SEC said. Meanwhile, Massachusetts regulators allege that the platform fell short of its fiduciary standard to act in its customers’ best interests. The complaint said Robinhood gave inexperienced customers the ability to make an unlimited number of trades without first screening them, and using strategies such as “gamification” to encourage repeated use. Robinhood has gained 13 million users since its launch in 2013, and is valued at $11.2B. It reportedly plans to go public in 2021.