Robinhood faces FINRA questions over its media arm

Robinhood Markets' new media outlet, Sherwood News, has caught the eye of industry watchdogs, according to a recent regulatory filing.

Robinhood, the provider of a popular online trading application, noted in an annual report filed with the Securities and Exchange Commission on Tuesday that it is responding to several new regulatory inquiries into various products and services it offers. Among those is Sherwood News, the media outlet Robinhood started last April to report on markets, economics, business, technology and money.

Robinhood reported that it is fielding questions about Sherwood News from the Financial Industry Regulatory Authority, the broker-dealer industry's self-regulator. The filing says the inquiries are regarding "Sherwood Media's relationship to" Robinhood.

Robinhood's filing provides no more details, and the firm did not respond to requests for comment. A spokesperson for FINRA said the agency won't confirm or deny the existence of ongoing investigations.

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FINRA has been among the regulatory agencies that are scrutinizing broker-dealers' communications with the public for conflicts of interest. In September, FINRA representatives said during an annual advertising regulation conference in Washington, D.C., that they are looking deeper into how brokers are using technologies like artificial intelligence and social media to market their services to investors.

Robinhood has been taken to task by regulators in Massachusetts over allegations that it uses messages sent on its app to "gamify" stock trading — or encourage users to make frequent buy and sell transactions that aren't necessarily in their best interest. Robinhood agreed in January 2024 to pay $7.5 million to settle Massachusetts securities watchdogs' allegations it had prodded inexperienced investors into making risky bets. 

The Massachusetts Securities Division came up again in Robinhood's latest SEC filing. Robinhood said it is responding to state regulators' inquiries about so-called event contracts that allow investors to place trades tied to the outcome of events like elections or sports games. Robinhood announced earlier this month that it was suspending event contracts for the Super Bowl in response to a formal request from the Commodity Futures Trading Commission, which regulates futures markets.

A spokesperson for the Massachusetts Securities Division declined to comment on an ongoing matter. 

Robinhood also disclosed that Massachusetts regulators are looking into its Robinhood Gold credit card, which offers users additional benefits and services in return for monthly or annual fees. The firm introduced its Robinhood Gold Card in March 2024 with the promise of 3% reimbursements on most purchases and other perks.

Robinhood's regulatory history

Robinhood has had many run-ins with regulators over the years. The firm, which revolutionized the broker-dealer industry with the introduction of commission-free trading, agreed in 2021 to pay nearly $70 million to FINRA to resolve allegations that it had it misled investors, exercised weak oversight of its technology and allowed thousands of users to trade options without first ascertaining if that was in their best interest, among other infractions. 

Robinhood agreed in January to pay the Securities and Exchange Commission $45 million after being accused of failing to accurately report trading activity, comply with short sale rules, submit timely suspicious activity reports, maintain books and records, and safeguard customer information, among other things. In a statement at the time, Robinhood said, "As the SEC's order acknowledges, most of these are historical matters that our broker-dealers have previously addressed."