State securities regulators in Massachusetts will be able to proceed with a case against Robinhood after a judge ruled the action could move forward, The Wall Street Journal (WSJ) reported.
Judge Kenneth W. Salinger said it wouldn’t be in the public interest to block a case against Robinhood for allegedly not protecting rookie investors, according to WSJ.
The office of Secretary of the Commonwealth William Galvin filed a complaint in December saying that the popular brokerage app was marketing aggressively to less experienced investors and failing to put controls in place to protect them, WSJ reported. His office also filed in April to revoke Robinhood’s license as a broker-dealer to stop the company from operating there. His complaints were filed as an administrative complaint, meaning they will be handled by a hearing officer instead of in court.
Robinhood tried to get the case thrown out by saying the state’s fiduciary rule, which Robinhood has been accused of violating, doesn’t apply because Robinhood is a self-directed brokerage and doesn’t make any recommendations or provide advice, WSJ reported. Robinhood asked the court to issue a preliminary injunction to stop the case from going forward. But now that won’t be happening.
Salinger said there are other accusations besides the fiduciary rule issue, according to WSJ.
PYMNTS previously reported on Robinhood’s troubles in Massachusetts, writing that the issue at hand was that the inexperienced investors’ money could be at risk. This came even before the frenetic trading storm that happened around meme stocks like GameStop and AMC in early 2021.
In response to the allegations, Robinhood said the regulators were being “elitist.” Accusing them of participating in an old-school way of thinking, a Robinhood blog post stated the ruling was trying to bring residents “back in time” and put financial barriers back in place which Robinhood intended to break down.