UNITED STATES OF AMERICA

Before the

SECURITIES AND EXCHANGE COMMISSION

SECURITIES EXCHANGE ACT OF 1934 

Release No. 92115 / June 4, 2021

ADMINISTRATIVE PROCEEDING 

File No. 3-20171

In the Matter of

Robinhood Financial, LLC

Respondent.

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NOTICE OF PROPOSED PLAN OF 

DISTRIBUTION AND OPPORTUNITY 

FOR COMMENT

Notice is hereby given, pursuant to Rule 1103 of the United States Securities and 

Exchange Commission’s (“Commission”) Rules on Fair Fund and Disgorgement Plans 

(“Commission’s Rules”), 17 C.F.R. § 201.1103, that the Division of Enforcement has submitted 

to the Commission a proposed plan of distribution (the “Proposed Plan”) for the distribution of 

monies paid in the above-captioned matter.

On December 17, 2020, the Commission issued an Order Instituting Administrative and 

Cease-and-Desist Proceedings Pursuant to Section 8A of the Securities Act of 1933 and Section 

15(b) of the Securities Exchange Act of 1934, Making Findings, and Imposing Remedial 

Sanctions and a Cease-and-Desist Order (the “Order”)1against Robinhood Financial, LLC (the 

“Respondent”). In the Order the Commission found that Robinhood launched its retail brokerage 

business in 2015, and by mid-2018, it was one of the largest retail broker-dealers in the United 

States. One of Robinhood’s primary selling points was that it did not charge its customers 

trading commissions. In reality, however, “commission free” trading at Robinhood came with a 

catch: Robinhood’s customers received inferior execution prices compared to what they would 

have received from Robinhood’s competitors. For larger value orders, this price differential 

exceeded the amount of commissions that Robinhood’s competitors would have charged. These 

inferior prices were caused, in large part, by the unusually high fees Robinhood charged the 

principal trading firms to which it routed its customer orders for the opportunity to obtain 

Robinhood’s customer order flow. These fees are generally referred to as “payment for order 

flow.”2

 

1

 Securities Act Rel. No. 10906 (Dec. 17, 2020).

2 Exchange Act Rule 10b-10(d)(8) defines “payment for order flow” as including any monetary payment, service, 

property, or other benefit that results in remuneration, compensation, or consideration to a broker-dealer in return for 

the routing of customer orders.
2

Robinhood omitted to disclose its receipt of payment for order flow in certain of its 

communications with its retail customers. Since Robinhood’s launch, payment for order flow 

has been Robinhood’s single largest source of revenue. In its customer agreements and trade 

confirmations, Robinhood stated it “may” receive payment for order flow, and it disclosed 

certain information about those payments, as required, in its SEC-mandated Rule 606 reports. 

However, in FAQs on its website describing how it made money, and in certain communications 

with customers addressing the same issue, Robinhood omitted payment for order flow when it 

described its revenue sources because it believed that payment for order flow might be viewed as 

controversial by customers. Robinhood also instructed its customer service representatives not 

to mention payment for order flow in responding to questions about Robinhood’s sources of 

revenue. 

As a broker-dealer that routed its customer orders for execution, Robinhood had a duty to 

seek to obtain the best reasonably available terms for its customers’ orders, including price. This 

duty is referred to as the duty of “best execution.” From July 2016 through June 2019, while 

Robinhood was on notice that its high payment for order flow rates from principal trading firms 

could result in inferior execution prices for its customers, Robinhood violated its duty of best 

execution by failing to conduct adequate, regular, and rigorous reviews of the execution quality it 

provided on customer orders. Robinhood did not begin comparing its execution quality to that of 

its competitors until October 2018, and did not take appropriate steps during the entire period to 

assess whether its high payment for order flow rates adversely affected customer execution 

prices. The Commission ordered the Respondent to pay a $65,000,000.00 civil money penalty. 

The Commission created a Fair Fund, pursuant to Section 308(a) of the Sarbanes-Oxley Act of 

2002, so the civil penalty paid can be distributed to harmed investors (the “Fair Fund”).

The Fair Fund is comprised of the $65,000,000.00 paid by the Respondent, pursuant to 

the Order. The Fair Fund is subject to the continuing jurisdiction and control of the Commission 

and has been deposited at United States Department of Treasury's Bureau of the Fiscal Service in 

an interest-bearing account.

OPPORTUNITY FOR COMMENT

Pursuant to this Notice, all interested persons are advised that they may obtain a copy of 

the Plan from the Commission’s public website at http://www.sec.gov/litigation/fairfundlist.htm. 

Interested persons may also obtain a written copy of the Plan by submitting a written request to 

Noel Gittens, United States Securities and Exchange Commission, 100 F Street, NE, 

Washington, DC 20549-5876. All persons who desire to comment on the Plan may submit their 

comments, in writing, no later than thirty (30) days from the date of this Notice:

1. to the Office of the Secretary, United States Securities and Exchange 

Commission, 100 F Street, NE, Washington, DC 20549-1090;

2. by using the Commission’s Internet comment form 

(http://www.sec.gov/litigation/admin.shtml); or

3. by sending an e-mail to rule-comments@sec.gov.
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Comments submitted by email or via the Commission’s website should include 

“Administrative Proceeding File No. 3-20171” in the subject line. Comments received will be 

publicly available. Persons should submit only information they wish to make publicly 

available.

THE PROPOSED PLAN

The Net Available Fair Fund3is comprised of $65,000,000.00 in civil money penalties 

paid by the Respondent, plus interest and income earned thereon, minus all taxes, fees, and other 

expenses of distributing the Net Available Fair Fund. The Proposed Plan provides for the 

distribution the Net Available Fair Fund to Robinhood customers who were harmed as a result of 

Robinhood’s omissions and false and misleading disclosures during the Harm Period described 

in the Order.

For the Commission, by its Division of Enforcement, pursuant to delegated authority.4

Vanessa A. Countryman

Secretary 

 

3

 All capitalized terms used herein but not defined shall have the same meanings ascribed to them in the Proposed 

Plan.

4

 17 C.F.R. § 200.30-4(a)(21)(iii).