Two brokerage units of Robinhood Markets HOOD -1.22%decrease; red down pointing triangle agreed to pay $45 million to settle an investigation by the Securities and Exchange Commission into a range of alleged violations, including one stemming from a 2021 data breach that exposed millions of customer names and emails.
The settlement is the latest in a string of big penalties paid by Robinhood as it has grown from a disruptive startup into a more established financial firm. Founded in 2013, the company pioneered the practice of zero-commission trading and drew millions of predominantly young customers to its innovative trading app, while repeatedly coming under scrutiny from regulators.
In the November 2021 breach, email addresses for about five million Robinhood users were exposed, as were the full names of a different group of about two million users, the Menlo Park, Calif.-based company said at the time. The intruder carried out the attack by impersonating a Robinhood employee and accessing company systems, Robinhood said.
The SEC alleged that the two units covered by Monday’s settlement—Robinhood Securities and Robinhood Financial—failed to adopt sufficient policies and procedures to protect customer information.
“We are pleased to resolve these matters. As the SEC’s order acknowledges, most of these are historical matters that our broker-dealers have previously addressed,” said Lucas Moskowitz, general counsel at Robinhood Markets.
Separately, the SEC alleged that the Robinhood units failed to implement an adequate program to protect customers against identity theft, despite a “significant escalation” in hacker takeovers of Robinhood customer accounts in 2020 and 2021.
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