Robinhood faces civil fraud investigation by the SEC

Robinhood stock firm is reportedly under civil fraud investigation conducted by the SEC.
Robinhood has allegedly not disclosed how it routes client orders to high-frequency trading shops.
The investigation is in “an advanced stage” and could result in a $10 million fine.

Robinhood, a well-known millennial stock and options brokerage, is reportedly under civil fraud investigation because of its failure to properly disclose how it routes client orders to high-frequency trading shops.

According to The Wall Street Journal report, the investigation (conducted by the Securities and Exchange Commission) is in an "advanced stage" and could result in a $10 million fine. Robinhood generates a significant portion of its revenue through a practice known as payment for order flow (PFOF). Under this deal, a broker will sell off client order flow to high-speed traders such as Citadel Securities, which internalizes and matches the orders.

As per the report, "the two sides haven't formally negotiated a proposed fine.” Robinhood has previously been charged with fines because of its order routing practices. In 2019, FINRA declared a $1.25 million fine against Robinhood for improperly routing orders.

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