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Robinhood Ordered to Repay Investor Hurt by Trading Restrictions

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What You Need to Know

  • A FINRA arbitrator ruled in favor of an investor who alleged he lost money due to trade restrictions Robinhood placed on GameStop and other stocks last year.
  • The 27-year-old truck driver, who invested in shares of Koss and Express, alleged he suffered investment losses as a result or Robinhood's action.
  • Robinhood declined to comment on the arbitrator's decision.

A Financial Industry Regulatory Authority arbitrator has ordered Robinhood to pay $29,460 in compensatory damages, plus interest and fees, to an investor who alleged that he suffered investment losses as a result of the robo-advisor’s decision to restrict trading on GameStop and other select stocks last year in reaction to trading frenzy surrounding the stocks.

Robinhood declined to comment on the decision Friday.

The company was already the subject of multiple lawsuits that made the same allegations.

For example, a class-action complaint filed Feb. 4, 2021 in U.S. District Court for the Northern District of California, alleged it and several brokerages, fund companies and clearinghouses “conspired” to prevent retail investors from buying stocks like GameStop, thereby “stripping them of their rights to control their investments.”

In the FINRA arb case, Jose Batista, a 27-year-old truck driver who invested in shares of headphone maker Koss and retailer Express, allegedly suffered investment losses as a result of Robinhood’s action.

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The law firm Iorio Altamirano LLP  filed a FINRA arbitration claim on the investor’s behalf. At the arbitration hearing, attorneys Jorge Altamirano and August M. Iorio represented the investor.

In the Statement of Claim, the claimant asserted causes of action including breach of contract, breach of implied covenant of good faith and fair dealing, negligence, breach of fiduciary duty and unjust enrichment.

The sole public arbitrator, John James McGovern Jr., decided that Robinhood Financial and Robinhood Securities were “jointly and severally liable for and shall pay to Claimant interest on the above-stated sum at the rate of 10% per annum from January 28, 2021 through and including December 10, 2021.”

McGovern also said in his decision on Wednesday, which was posted on the FINRA website on Thursday, that the respondents were jointly and severally liable for and shall pay $150 to reimburse the claimant for the nonrefundable portion of his filing fee previously paid to FINRA Dispute Resolution Services. Robinhood must also pay a total of $1,350 in hearing session fees, the arbitrator said.

(Image: Shutterstock)