The Suffolk County Superior Court denied Robinhood’s motion to dismiss the Massachusetts securities regulator’s administrative complaint, Reuters reports.
In December 2020, the Massachusetts Secretary of the Commonwealth’s Securities Department said that the crypto-friendly platform exposes users to ‘unnecessary trading risks’ and ‘does not meet fiduciary standards’.
In April 2021 the regulator sought revocation of the fintech’s broker-dealer license, and thus to bar its activities. Secretary of the department William Galvin told The Wall Street Journal that the new complaint was filed when it became clear that Robinhood did not intend to change its position.
«They [Robinhood] refuse to acknowledge that they owe it to their clients to treat them as investors, and not just as people who are entertained and lured into investing their money»
Galvin added.
The online broker filed a встречный иск against the Massachusetts Securities Department. The platform’s representatives argued that the state фидуциарное правило adopted in December 2020 should be declared invalid.
According to Robinhood, the U.S. Securities and Exchange Commission установила its own standard for brokers in 2019. The company also asked the court not to hear the case until this issue is resolved.
The fiduciary rule or fiduciary standard is a set of provisions designed to elevate the standard of care owed to retail investors by broker-dealers and investment advisers. It requires market participants to place consumers’ interests above their own.
Judge Kenneth Salinger ruled that Robinhood may continue to challenge the validity of the new fiduciary rule. However, some of the regulator’s claims are not tied to the standard, so he denied the motion for a preliminary injunction.
«If the court strikes down the challenged order, the department would still be entitled to bring separate claims that Robinhood’s alleged conduct was unethical or unfair», wrote Salinger.
He also asked for a further briefing on whether to stay the consideration of Robinhood’s fiduciary-duty complaint until the Galvin case is resolved. The judge noted that this would be “unusual”.
Earlier, in February 2021, the parents of the 20-year-old trader accused Robinhood of driving their son to suicide. He received a $730,000 negative balance notice and took his life.
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