Wednesday

Robinhood, the popular online brokerage <a href="https://www.cryptopolitan.com/everything-to-know-about-robinhood-connect/" data-type="post" data-id="296658">platform</a>, has found itself in the midst of a legal battle with Massachusetts securities regulators.



The state&#8217;s highest court heard arguments on Wednesday regarding<a href="https://www.reuters.com/legal/robinhood-securities-regulators-face-off-over-massachusetts-fiduciary-rule-2023-05-03/" rel="nofollow noopener" target="_blank"> </a>the potential revival of a state fiduciary duty rule, which has been central to an enforcement action against Robinhood.



<h2 id="legal-clash-over-state-regulation">Legal clash over state regulation</h2>



The dispute revolves around a 2020 state regulation, which Robinhood claims oversteps the authority of Massachusetts Secretary of State Bill Galvin. 



Lawyers for both Robinhood Markets Inc and Galvin argued the legality of the regulation before the state&#8217;s Supreme Judicial Court.



In December 2020, Galvin accused the brokerage of encouraging inexperienced investors to place risky trades, alleging that the platform violated the rule he adopted to raise the investment-advice standard for brokers. 



According to his statements, he firmly believes that Robinhood&#8217;s license to operate as a broker-dealer in the state should be revoked. This may be due to concerns about the company&#8217;s business practices or other factors that have led him to this conclusion. 



However, a Superior Court judge sided with the brokerage firm in a lawsuit the company filed last year, invalidating the rule and significantly impacting the case against the brokerage, which is currently on hold pending the outcome of Galvin&#8217;s appeal.



<h2 id="debate-over-robinhood-8217-s-authority-and-ethics">Debate Over Robinhood&#8217;s Authority and Ethics</h2>



According to Robinhood&#8217;s lawyer, Amy Saharia, Galvin&#8217;s regulation overstepped existing laws by imposing a standard requiring brokers to avoid or mitigate conflicts of interest when providing investment advice. 



Saharia argued in court that Massachusetts law &#8220;does not give the Secretary the power to make conduct that is ethical under existing federal and state law unethical simply by announcing it to be so.&#8221;



However, a lawyer representing the Secretary of State maintained that the regulation is consistent with the investor protection goals of federal law. 



Galvin has asserted that Robinhood had a duty to safeguard its customers and their funds, but instead, it allowed inexperienced customers to make unlimited trades without proper screening.



Robinhood has been scrutinized for its so-called &#8220;gamification&#8221; of investing and its central role in the 2021 retail trading frenzy. 



A spokesperson for the Secretary of State said, &#8220;Secretary Galvin feels strongly in the need to apply fiduciary duty standards to financial professionals. The Robinhood case is the perfect example of the need for such a rule in Massachusetts.&#8221;



<h2 id="amc-bankruptcy-error">AMC Bankruptcy Error</h2>



In related news, Robinhood recently faced criticism after mistakenly informing its users that AMC Entertainment had filed for bankruptcy. 



AMC&#8217;s chairman and CEO, Adam Aron, condemned the platform&#8217;s error on Twitter and highlighted the company&#8217;s upcoming first-quarter earnings report, which he expects will reveal a sizable cash position.



Robinhood quickly apologized for the mistake, attributing it to a technical issue that caused an incorrect banner to be displayed for three minutes. 



Despite posting losses for four consecutive years and 14 straight quarters, AMC is actively seeking to raise cash through various means, including converting its APE preferred equity units into AMC common stock, executing a 10-for-1 reverse stock split, and raising additional capital by selling shares.

Robinhood clashes with securities regulators – Details

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