Robinhood, a FinTech focused on online stock brokerage for those not expertly versed in that subject, has attracted much praise and activity — but with that, a regulatory probe from the U.S. Securities and Exchange Commission into alleged poor management of the app, Bloomberg reported.
The picture painted is one of “novice investors in over their heads, struggling to understand why they’ve lost money on stock options or had shares liquidated to pay off margin loans,” according to grievances seen by Bloomberg from the Federal Trade Commission.
In particular, one instance in early March had the entire app shut down completely for a day. That resulted in complainants losing thousands of dollars just as the pandemic was throwing the markets into flux. Others missed opportunities to profit. All the while, there was no one available to talk to at the company, Bloomberg reported, and many couldn’t even find the phone number.
The SEC and the Financial Industry Regulatory Authority are looking into the incident, especially about the lack of customer service, Bloomberg reported.
Regulatory scrutiny could put the company’s potential initial public offering in jeopardy. But the company defended itself by saying it has bolstered its team and become more reliable since the March snafu, Bloomberg reported.
Robinhood faced more problems on Monday (Aug. 31), though, according to CNN, along with other brokerages like E-Trade, Schwab, Vanguard and TD Ameritrade. Users on Twitter reported delays that sometimes sabotaged deals on what was a big day for trading as investors chomped at the bit for Apple or Tesla’s newly split stock.
Robinhood tweeted that the problem, which it called “display issues,” was fixed by midday Monday, CNN reported. But users weren’t happy — one furious customer inquired if their $2,000 loss due to not being able to execute a trade was a display issue, too.
Over 2,600 users each reported problems with Robinhood and Vanguard, according to internet service DownDetector, per the report. There were over 1,300 complaints about Schwab as well, and more than 250 reports regarding E-Trade, CNN reported.
In response to the outages in March, Robinhood offered credits to customers affected by the downtime or delays, saying it hoped its actions would make up for the mishap.