Several members of Congress led by Brad Sherman, D-Calif., want no-fee online brokerage Robinhood to prove it has done all it can to protect inexperienced investors from high risk trading that can potentially cause large losses.
About a month ago Alex Kearns, who described himself as a “20-year-old with no income” was approved by Robinhood to trade options on margin and killed himself after the website displayed that his account had a negative balance of $730,000.
“There was no intention to be assigned this much and take this much risk. I only thought I was risking the money that I actually owned,” wrote Kearns in a suicide note that a family member posted on Twitter. The negative balance didn’t reflect trades that hadn’t closed.
Following Kearns’ death Robinhood co-founders and co-CEOs Vlad Tenev and Baiju Bhatt announced that the firm was “considering additional criteria and education” for customers seeking authorization to trade complicated (level 3) options strategies, rolling out improvements to in-app messages and emails to users about their “multi-leg options spreads” and expanding educational content on options trading.
Related: After Investor’s Suicide, Robinhood Updates Trading Platform)