Robinhood Faces SEC Probe on Compliance With Short-Selling Rule

Annie Massa and Lydia Beyoud, Bloomberg News

The Robinhood logo on a laptop computer arranged in the Brooklyn borough of New York, U.S., on Saturday, Dec. 19, 2020. Robinhood Markets will pay $65 million to settle allegations that it failed to properly inform clients it sold their stock orders to high-frequency traders and other firms, putting a major compliance headache behind the brokerage even as new ones emerge. Photographer: Gabby Jones/Bloomberg , Bloomberg

(Bloomberg) -- Robinhood Markets Inc. said it faces a US Securities and Exchange Commission investigation into the brokerage’s compliance with a short-selling rule.

The SEC’s enforcement division requested information about Robinhood’s adherence to Regulation SHO and matters related to securities lending and fractional shares, the Menlo Park, California-based company said Wednesday in a filing.

The online brokerage, which slashed 23% of its workforce this week, has faced several regulatory actions in recent years.

On Tuesday, Robinhood’s cryptocurrency arm was fined $30 million by the New York State Department of Financial Services, which accused the firm of violating anti-money-laundering and cybersecurity rules. In 2020, the SEC fined Robinhood $65 million for misleading its customers about a key source of revenue, called payment for order flow. The firm didn’t admit or deny wrongdoing in that case.

Read more: Robinhood Slashes 23% of Its Workforce in Sweeping Overhaul