Michelle Price and Chris Prentice

WASHINGTON, (Reuters) – Robinhood (NASDAQ) Markets still faces a variety of regulatory and legal threats a year following the retail “memestock” trading frenzy that led to the brokerage to limit trading in certain stocks. This angered customers.

This episode led to multiple investigations by the government, numerous private lawsuits from aggrieved investors and customers, as well as increased regulatory scrutiny over Robinhood’s business model. All of these factors weighed down on Robinhood’s stock price.

Robinhood is regulated in the highest degree and has to be monitored closely,” Dan Gallagher (chief legal and corporate affairs officer at Robinhood) stated in a statement.

He added that Robinhood is still the best platform choice for investors because of its industry-leading legal, compliance and management teams.

Some recent court victories were also won by the company. The latest news:

MEME STOCK PROBES LAWSUITS

Robinhood reported in July, and in an updated October file that regulators had issued subpoenas to the CEO Vladimir Tenev. These investigations were part of investigations into brokerage trading restrictions during volatility meme stocks a year back.

Robinhood indicated that regulators include the U.S. Attorney’s Office of the Northern District of California (USAJD), the U.S. Securities and Exchange Commission(SEC), and Financial Industry Regulatory Authority. New York Attorney General’s Office and other state attorneys, Congress, and state securities regulators.

Robinhood faces private lawsuits as a result of the me stock volatility and Robinhood’s core business processes, including payment-for-order flows (PFOF), in which retail brokers route wholesale market orders in return for payment.

This has been a success for the company. Investors’ claims of negligence, breach of fiduciary obligation and fraud were dismissed by a federal judge. [L1N2U724N]

A separate lawsuit against Robinhood, other brokerages and Citadel Securities was dismissed by the Miami judge. The suit claimed that Robinhood conspired with Citadel Securities to keep “meme stocks,” which are false allegations. Plaintiffs refiled their lawsuit.

In the midst of the meth stock fracas, another suit is being filed against Robinhood alleging it has violated securities law.

LEGAL AND OTHER INVESTIGATING RISKS

Robinhood owed less than $30,000 to a user seeking compensation for negligence, breach or other problems related to its trading restrictions in January 2021. This was the first claim that succeeded after several others had been denied. Jorge Altamirano was the Robinhood customer’s attorney. His firm received an “overwhelming outreach” and is now examining legal claims.

New York State’s Department of Financial Services has also been investigating Robinhood for anti-money laundering, and cybersecurity concerns.

In April 2021 the California Attorney General’s Office served a subpoena to obtain documents concerning Robinhood’s trading platform. It also requested information about Robinhood’s operations and business.

Robinhood was also sued by the Massachusetts Securities Division in December 2020. The suit alleges unethical, dishonest conduct and failures to fulfill its fiduciary obligation. Robinhood has denied the claims and is fighting this suit.

SEC, FINRA and others have asked for information regarding the now defunct “For You”, and any other “other features” that show securities lists to customers.

California’s attorney General and FINRA spokespersons declined to comment. All other agencies declined to comment on requests. Robinhood has stated that it cooperates with the probes but declined to provide any further details.

NEW REGULATIONS

SEC investigates the practices of non-commissionable brokers in the light of meme stock scandal. Robinhood claimed that transactions-based revenue account for over 70% of its revenue on Thursday.

Gary Gensler, SEC Chair has raised concerns about whether customers are being incentivized by brokers to trade more often to increase their profits. He also suggested banning PFOF.

Additionally, the agency examines game-like features that encourage trading and other digital engagement.

Robinhood warned that new regulations in these areas may require significant changes to the business model.