Robinhood reveals new investigation hours before its IPO

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By Matt Egan, CNN Business

Regulators are investigating the information that Robinhood CEO Vlad Tenev is not licensed by FINRA, Wall Street’s almighty self-regulator, the online trading level announced Tuesday.

News of the probe comes much than 5 months aft CNN Business reported that Tenev, the nationalist look of Robinhood, is not registered with FINRA, abbreviated for the Financial Industry Regulatory Authority. That’s contempt the information that helium presides implicit 1 of the nation’s largest and astir almighty online brokerages.

It besides comes connected the eve of a blockbuster archetypal nationalist offering that could worth Robinhood astatine $35 billion.

In a filing precocious Tuesday, Robinhood said it received a FINRA investigative petition seeking documents and accusation related to its compliance with the agency’s registration requirements for subordinate personnel.

Robinhood said the FINRA probe is related to the “non-registration status” of some Tenev and co-founder Baiju Bhatt, who present serves arsenic main originative officer.

“Robinhood is evaluating this substance and intends to cooperate with the investigation,” the institution said successful the filing.

FINRA declined to remark connected the matter, noting that its investigations are confidential. Robinhood did not respond to a petition for comment.

Should Tenev beryllium FINRA-registered?

The FINRA probe comes aft Senator Elizabeth Warren, successful a February connection to CNN Business, called connected regulators to analyse whether executives similar Tenev “should beryllium licensed and trained connected marketplace rules and risks.”

FINRA mostly requires that the CEOs of registered broker-dealers beryllium registered with the agency. The purpose is to marque definite these executives person compliance grooming and show the competence required for enactment roles. Being registered with FINRA besides allows the nationalist to way immoderate violations by licensed individuals via the agency’s Broker Check tool.

Tenev is the CEO of Robinhood Markets, the genitor institution that is not registered with FINRA. (Robinhood Markets owns a broker-dealer and a clearing broker.)

The CEO of a genitor institution that owns a broker-dealer does not needfully request to beryllium registered.

At the clip of the archetypal CNN report, Robinhood told CNN Business that Tenev does not straight oversee the FINRA-registered managers of the broker-dealer oregon the clearing broker, but declined to accidental who does.

Some experts expressed alarm astatine the information that Tenev is not registered with FINRA, portion others said it whitethorn not beryllium a problem.

The cardinal whitethorn beryllium conscionable however progressive Tenev is with Robinhood’s day-to-day operations. Some of Tenev’s anterior comments suggest helium holds a important managerial role, including being progressive successful delicate negotiations with its clearinghouse during the GameStop trading turmoil successful January.

In a precocious February letter to Sen. Warren, FINRA said that these determinations are “fact-specific” and necessitate “careful appraisal of the individual’s activities.”

The FINRA licensing probe is conscionable Robinhood’s latest run-in with the regulator.

Last month, FINRA slapped the brokerage with its biggest-ever punishment and accused the institution of harming millions of customers and giving investors “false oregon misleading information.”

Robinhood neither admitted to nor denied the charges.

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