Robinhood Sues to Kill Fiduciary Rule in Massachusetts

Robinhood went on to state in its blog that it “has helped bring millions more people into our financial system, and the Massachusetts Securities Division’s attempt to prevent Massachusetts residents from choosing how they invest is elitist and against everything we stand for. We don’t believe our customers are naïve as the Massachusetts Securities Division paints them to be.”

Robinhood told the court that it “should enjoin enforcement of the [Massachusetts] Secretary’s new rule and declare that it is contrary to state and federal law.”

As applied to Robinhood, Massachusetts’ fiduciary rule “is even more problematic,” the complaint states.

“Robinhood is a ‘self-directed’ brokerage firm that does not make investment recommendations or provide investment advice. By its own terms, the new rule does not apply to self-directed firms,” the complaint states.

“By trying to bring Robinhood within the scope of the new rule, the Secretary violates the basic administrative law requirement that regulators define their rules clearly enough so that regulated entities can know what is expected of them. In addition, by attempting to apply his new rule to Robinhood, the Secretary is in direct conflict with SEC rules, the Dodd Frank Act, the Commerce Clause and the First Amendment,” according to the complaint.

Said Robinhood in its blog: “The complaint reflects the old way of thinking: That new, younger, and more diverse investors don’t have a place in the markets. By trying to block Robinhood, the division is attempting to bring its residents back in time and reinstate the financial barriers that Robinhood was founded to break down. We will stand with our customers to enable them to have the investing experience they want. We will not succumb to unfounded, politicized allegations and unreasonable demands from the Massachusetts Securities Division. We welcome the opportunity to correct the record on both the facts and the law, and expect to prevail in state court.”