On March 2, 2020, Robinhood’s trading platform failed to open for trading–the single purpose for which it was created–free trading. As we have come to learn, the failure was the result of a programming error that did not account for the leap year in February.
Broker-dealers such as Robinhood Financial are governed by the U.S. Securities and Exchange Commission and the Financial Industry Regulatory Authority (FINRA).
FINRA Rule 2010 requires that members must “observe high standards of commercial honor and just and equitable principles of trade.” In addition, FINRA Rule 5310 requires a broker-dealer to “use reasonable diligence to ascertain the best market for the subject security and buy or sell in such market so that the resultant price to the customer is as favorable as possible under prevailing market conditions”. While these rules don’t specifically address a broker-dealer’s responsibility in the event of a failure in their trading platforms, they should be interepreted broadly to apply to Robinhood’s failures.
While Robinhood and its lawyers will argue that it did not engage in fraud and therefore should not be liable for any trading losses, that would be the wrong outcome for the general public. Broker-dealers such as Robinhood that operate digital trading platforms must be held to a higher standard when its users only expect a single service in exchange for access to their cash–an operating platform.
If you have been financially injured as a result of Robinhood’s trading platform failures, you should evaluate your available options. The agreements that you electronically entered with Robinhood contain a mandatory arbitration provision. That means the likelihood of participating in a class action are unlikely. If you believe your case involves substantial losses (in excess of $30,000), please email me at firstname.lastname@example.org. In your email, please provide information about your situation, your trades that incurred loss, the amount of your losses, and your contact information. I stand ready to provide you with a free consultation. If your case involves losses less than $30,000, there are numerous options available to you. You should also feel free to reach out to me by email, but it might not be cost-effective for me to represent you.
Law School Clinics – Investors with limited income or with small dollar claims may find it difficult or impossible to hire a lawyer. Law schools across the country have established securities arbitration clinics to provide legal representation to investors who cannot hire a lawyer to handle their claims. For a list of these clinics, please visit – https://www.sec.gov/fast-answers/answersarbclinhtm.html. I am partial to the University of Miami’s clinic as I was part of its inaugural class of students.
File Your Own Arbitration Claim – You can file your own arbitration claim through FINRA. For information on how to file a claim, please visit https://www.finra.org/arbitration-mediation/initiate-arbitration. Information about the process is available at https://www.finra.org/sites/default/files/arbitration-claim-filing-guide.pdf and https://www.finra.org/arbitration-mediation/overview/additional-resources/faq/filing-claim. There is also a simplified arbitration process for cases involving less than $50,000. You can request a hearing on the “papers” or an abbreviated telephonic hearing. More information about that process is available at https://www.finra.org/arbitration-mediation/simplified-arbitrations. Filing fees for simplified cases range from $50 to $600 depending on the size of the claim and claimants can also request a hardship waiver.
PIABA – You can search for an attorney at PIABA.org to assist you. Many attorneys will accept smaller cases, but there is no guarantee. Some will occasionally take on a matter pro bono (i.e., for free).
Contact Robinhood, FINRA, and the SEC – If you are interested in taking a less confrontational path towards resolving your potential claim, you may want to try reaching out directly to Robinhood, FINRA or the SEC. You can lodge a complaint at Robinhood at https://robinhood.com/contact. The SEC’s Office of Investor Education and Advocacy maintains a website for investors to file complaints, which is available at https://www.sec.gov/oiea/Complaint.html. FINRA maintains its own informal complaint website at https://www.finra.org/investors/have-problem/file-complaint/complaint-center.