Robinhood, the commission-free brokerage, has suffered a major defeat in its case against the Massachusetts Secretary of State, Bill Galvin. The Supreme Judicial Court of Massachusetts today (Friday) ruled that a state fiduciary duty rule that is central to the case is valid, according to Reuters.
In December 2020, Galvin initiated an enforcement action against Robinhood, claiming that the online brokerage failed to protect its customers and their money. The Secretary alleged that Robinhood treated trading as a game and implemented strategies to lure young and inexperienced traders.
Furthermore, Gavin argued that the alleged failure violated the state’s fiduciary duty rule which raised investment-advice standards for brokers in early 2020. He, therefore, sought to revoke the online trading platform’s broker-dealer license.
However, in March last year, a trial court, the Suffolk County Superior Court in Boston, ruled in favour of Robinhood. The court argued that federal laws took precedence over the state regulator’s stipulations. Additionally, Judge Michael Ricciuti, who heard the case, determined that Galvin overstepped his jurisdiction by implementing a regulation that was at odds with federal legislation.
Earlier in May, Finance Magnates had reported that Galvin and Robinhood would argue the validity of the state regulator’s fiduciary duty rule at the highest court in Massachusetts.
