Is Robinhood in trouble? SEC confirms it is reviewing brokerages’ decisions

The U.S. Securities and Exchange Commission (SEC) has confirmed it is “working closely” to determine whether there have been breaches of regulations after few online brokers halted trading of certain stocks on their platforms.

Robinhood and IB in trouble?

The regulator has faced intense pressure from the trading community to act after Robinhood, Interactive Brokers (IB), and other online brokers, halted trading of certain names on their platforms. Robinhood, in the meantime, has resumed “limited buying” of certain stocks.

“The Commission is closely monitoring and evaluating the extreme price volatility of certain stocks’ trading prices over the past several days. Our core market infrastructure has proven resilient under the weight of this week’s extraordinary trading volumes. Nevertheless, extreme stock price volatility has the potential to expose investors to rapid and severe losses and undermine market confidence,” Acting Chair Allison Herren Lee said in a statement. 

Robinhood has already faced lawsuits regarding its controversial decision, while outraged customers have also accused the broker of selling users’ shares without consent. The broker is obviously in trouble, with the SEC confirming it is working “to ensure that regulated entities uphold their obligations to protect investors and to identify and pursue potential wrongdoing. “

“The Commission will closely review actions taken by regulated entities that may disadvantage investors or otherwise unduly inhibit their ability to trade certain securities.”

“In addition, we will act to protect retail investors when the facts demonstrate abusive or manipulative trading activity that is prohibited by the federal securities laws. Market participants should be careful to avoid such activity. Likewise, issuers must ensure compliance with the federal securities laws for any contemplated offers or sales of their own securities,” it is added in the statement. 

The statement represents the most aggressive stance from the SEC since the WSB saga has started. Numerous members of Congress have already laid their eyes on Robinhood, with Representative Alexandria Ocasio-Cortez, a Democrat from New York, supporting calls for a hearing on Robinhood’s decision to restrict the trading of GameStop, AMC and other stocks. Her colleague from the Republican party Ted Cruz quickly endorsed AOC’s request.

Summary

The SEC has issued a statement to note they are “working closely” with other regulators in reviewing decisions taken by Robinhood and other brokers that have caused a wide outrage among retail investors.