In a blog post today, Robinhood responded to an attempt by the State of Massachusetts Securities Division to revoke Robinhood’s broker-dealer license in the state thus blocking its ability to operate.
Robinhood said they have filed in Massachusetts State Court a complaint and motion for a preliminary injunction to prevent the Massachusetts Securities Division from proceeding with their administrative case against online investment platform. Robinhood said that the Massachusetts Securities Division’s new Fiduciary Rule exceeds its authority under both Massachusetts state law and federal law.
Noting that they love the state of Massachusetts, Robinhood said the state regulator was attempting to prevent residents from “choosing how they invest is elitist and against everything we stand for.”
To quote Robinhood:
“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.”
The Massachusetts Securities Division, under the leadership of William Galvin, originally filed an Administrative Complaint in December 2020. The complaint alleges that Robinhood has failed to meet its fiduciary responsibility that it owes to its customers. The complaint outlined a litany of alleged infractions while demanding restitution and requiring Robinhood to cease and desist its activities.
It should be noted that Galvin has been one of the most vocal opponents in regards to certain aspects of Fintech innovation including investment crowdfunding. In 2015, Massachusetts was part of an effort to undermine Reg A+, a securities exemption that was reanimated by the JOBS Act that has since reinvigorated the once-moribund rule.
In 2019, Massachusetts was a voice battling the Securities and Exchange Commission’s move to harmonize the exempt offering ecosystem. Massachusetts feared losing some of its authority as the SEC sought to preempt some of the state authority in regulating securities.
In 2013, Galvin warned about “Bitcoin Mania” comparing it to Tulips in Holland during the 1600’s. Bitcoin was trading around $16,000 at that time.