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FINRA Investigating Robinhood Founder For Not Being A Registered Broker

Earlier this year, Silver Law Group wrote an article about the serious issues posed by Robinhood’s founder not being a registered FINRA member and published an Expert Analysis on law360.com addressing the same issue.

FINRA is investigating Robinhood over its CEO, Vlad Tenev’s, failure to register as a broker with the Financial Industry Regulatory Authority, a self-regulatory organization responsible for overseeing the­­ brokerage industry.

Congress has authorized FINRA to protect investors by ensuring fair and honest dealing in the brokerage industry. One of the key ways FINRA accomplishes this is by overseeing more than 600,000 individual brokers across the country, who each must maintain a FINRA broker’s license by undergoing strenuous application and continuing education requirements. However, Vlad Tenev, Robinhood’s CEO, has never obtained FINRA registration.

Requiring heads of firms like Robinhood to register with FINRA would increase accountability on Wall Street. This is especially important in light of Robinhood’s recent initial public offering (NASDAQ: HOOD). The company currently has a market cap of just under $30 billion.

Robinhood Under Increased Scrutiny In Past Months

Robinhood has found itself in the spotlight in recent months for a variety of issues including, but not limited to, Robinhood’s handling of volatile trading surrounding “meme stocks” AMC, GameStop, and others.

FINRA Rules Require Those Engaged in Securities Business To Register

FINRA Rule 2010 requires that “[e]ach person engaged in the investment banking or securities business of a member shall be registered with FINRA as a representative or principal.” According to FINRA’s website, this includes salespeople, branch managers, department supervisors, partners, officers and directors. Moreover, FINRA’s website states: “we require individuals and firms who wish to conduct business with the investing public to achieve and maintain certification as members of FINRA.”

Robinhood has previously come under scrutiny for Tenev’s lack of FINRA registration, and took the public position that Tenev is the CEO of Robinhood Markets Inc., which is simply the holding company for the brokerage entity Robinhood Financial LLC. Accordingly, under Robinhood’s theory, Tenev is under no obligation to register with FINRA.

Unregistered Brokerage CEOs An Industry Norm

Unfortunately, Tenev’s lack of registration is not an exception to the rule. FINRA regulations currently permit brokerage executives to operate firms without being registered themselves. This includes the heads of “boiler rooms” – brokerage firms that cold call investors and make extremely aggressive sales pitches for high-risk, speculative, and flawed securities – and other fraudulent operations.

Main street investors are the victims of this framework, as brokerage executives are able to evade FINRA jurisdiction and oversight and investors face significant legal hurdles to hold these controlling individuals accountable.

Investment Losses?  Let Silver Law Group Help

Silver Law Group is a team of investor advocates that can help you recover improper losses. Our team of leading securities attorneys routinely meet with clients by telephone or video conference and are capable of representing investors nationwide.

Silver Law Group is experienced in representing investors in securities and investment fraud cases. Our lawyers represent victims of stockbroker misconduct and handle most cases on a contingency fee basis, meaning you won’t owe us any money until we recover for you. Scott Silver, managing partner of Silver Law Group, is the chairman of the Securities and Financial Fraud Group of the American Association of Justice and has extensive experience representing investors in securities and investment fraud cases. Please contact us for a confidential consultation at ssilver@silverlaw.com or toll free at (800) 975-4345.

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