Maloney Elicits Apology from Robinhood CEO at Congressional Hearing
WASHINGTON, DC — At today’s Financial Services Committee hearing entitled “Game Stopped? Who Wins and Loses When Short Sellers, Social Media, and Retail Investors Collide,” Congresswoman Carolyn B. Maloney (D-NY), senior member of the committee, elicited an apology from Vlad Tenev, Chief Executive Officer of Robinhood Markets, Inc, for Robinhood’s recent failures. When questioned about Robinhood’s behavior last month during the market frenzy surrounding GameStop, Tenev admitted to Congresswoman Maloney that the brokerage fell short of meeting its customers’ needs.
During her questioning of the CEO, Congresswoman Maloney stated, “[T]he actions of Robinhood and other trading platforms during the GameStop frenzy caused confusion, anger, and undermined investor confidence in the fundamental fairness of our capital markets. None of this is healthy for our markets or good for investors.
“What makes markets work fairly is when everyone knows the rules and that the rules remain consistent and predictable - and are enforced. But because of Robinhood’s actions, too many customers did not get that predictability.”
The Congresswoman pressed Tenev on what his responsibility to Robinhood customers entails, “Do you believe your lack of candor with your customers might have contributed to the wild speculation and confusion that resulted in the aftermath of your trading restrictions?”
Tenev responded, “Look, I’m sorry for what happened. I apologize, and I’m not gonna say that Robinhood did everything perfect, and that we haven’t made mistakes in the past. But what I commit to is making sure that we improve from this, we learn from it, and we don’t make the same mistakes in the future.”
You can watch the full exchange here.
In late January 2021, in an attempt to create financial losses for certain hedge funds, a group of retail investors coordinated through the social media platform Reddit to increase the stock price of GameStop and other companies by purchasing shares of the stock.
Many of the GameStop shares were purchased by individuals through trading platforms such as Robinhood. GameStop and other securities reached record high prices, with increased volatility across the market.
In reaction to this market action, Robinhood, and other broker dealers, placed restrictions on transactions involving these stocks, including by temporarily restricting purchases of GameStop shares by retail customers, leading to public and regulatory scrutiny. Robinhood subsequently testified that the company imposed trading restrictions in order to meet regulatory and clearinghouse capital requirements, which was not initially disclosed to its customers.