Sen. Elizabeth Warren, D-Mass., prodded Robert Cook, CEO of the Financial Industry Regulatory Authority, Thursday in a letter to “conduct a thorough review” of Robinhood’s activities during the GameStop trading frenzy.
In her letter, Warren also asked Cook to explain how FINRA will respond to Robinhood’s role “in recent market volatility, its decision to cut off customers’ trading, and the broader concerns about market fairness that these events represent.”
“Given several findings that Robinhood violated rules governing broker-dealers and lacked systems to ensure their compliance with those rules, the public deserves to understand what steps FINRA has taken to ensure future compliance by Robinhood, whether Robinhood improved its systems and compliance in response to the many complaints filed by regulators and lawmakers, and whether continued violations of market rules may have contributed to the company’s role in recent market swings,” Warren wrote.
In a blog post on Jan. 29, Robinhood stated that it “limited buying in volatile securities to ensure it complied with deposit regulations,” not because it wanted to stop investors from buying certain stocks.
The amount required by clearinghouses “to cover the settlement period of some securities rose tremendously” during the week of Jan. 25, it said.
Relationships between trading platforms and large financial institutions like Citadel, largely through payment for order flow arrangements, may be misaligning brokerage industry incentives, Warren said.