© Reuters. The emblem of Robinhood Markets, Inc. is seen at a pop-up occasion on Wall Avenue after the corporate’s IPO in New York Metropolis, U.S., July 29, 2021. REUTERS/Andrew Kelly
By Nate Raymond
BOSTON (Reuters) -A Massachusetts choose on Wednesday dealt state securities regulators a serious setback of their enforcement motion in opposition to on-line brokerage Robinhood (NASDAQ:) by declaring the state’s new fiduciary obligation rule that underlies the case invalid.
Suffolk County Superior Court docket Choose Michael Ricciuti in Boston concluded that Massachusetts Secretary of State Invoice Galvin lacked the authority to undertake a rule in March 2020 that raised the investment-advice customary for brokers.
Galvin in December 2020 accused the app-based service of utilizing methods that handled buying and selling like a sport to lure younger, inexperienced clients, together with by having confetti rain down on the consumer’s display screen for every commerce made on its app.
Galvin, the state’s prime securities regulator, via an administrative case, has sought to revoke Robinhood’s broker-dealer license within the state. Elements of the case have been primarily based on alleged violations of the fiduciary obligation rule.
That rule went past a normal the U.S. Securities and Alternate Fee adopted in 2019 by requiring broker-dealers have a fiduciary obligation to supply funding with out regard to the pursuits of anybody however their clients.
However Ricciuti mentioned the rule overrode state legislation and that nothing within the state’s securities statute suggests the legislature supposed to offer Galvin the authority to take action via rule making.
He put his determination on maintain to permit Galvin, a Democrat, time to pursue an attraction. A spokesperson for Galvin didn’t instantly reply to a request for remark.
Dan Gallagher, Robinhood’s chief authorized workplace, in an announcement welcomed the ruling, saying Galvin has “constantly mischaracterized and disparaged Robinhood’s platform and clients with none authorized foundation.”
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