Senators demand answers after Robinhood’s misstep

By Folake Dosu  |  December 28, 2018

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Robinhood’s announcement that it would begin rolling out checking and savings accounts made heads turn with promises of no-fee accounts that would net customers 3 percent annually on either account, with daily payments to boot. 

That is, until the Securities Investor Protection Corporation CEO and President Stephen Harbeck raised concerns about the nature of these services. Harbeck stated that Robinhood had not contacted the SIPC before the launch and that these accounts would operate more similarly to brokerage accounts rather than FDIC-covered bank accounts that offer consumers more protection.

Harbeck’s revelation led to Robinhood admitting that its initial statement “may have caused some confusion” and revealed plans for a subsequent relaunch and rebrand.

This turn of events dissatisfied lawmakers and, as CNBC reports, seven U.S. senators felt compelled to send a letter to Securities and Exchange Commission Chairman Jay Clayton and the heads of the Securities Investor Protection Corporation and the Federal Deposit Insurance Corp. The politicians enumerated concerns about federal oversight of fintech startups in the wake of this Robinhood announcement.

“We would appreciate an update on how the SEC, FDIC, and SIPC carefully monitor fintechs who, intentionally or not, blur financial products for competitive advantage. Robust competition should not come at the expense of customer clarity and every effort should be made not to mislead customers.”

“We would appreciate an update on how the SEC, FDIC, and SIPC carefully monitor fintechs who, intentionally or not, blur financial products for competitive advantage,” the senators wrote in the letter. “Robust competition should not come at the expense of customer clarity and every effort should be made not to mislead customers.”

“We are concerned that re-branding Robinhood’s original announcement to cash management may simply be a way to circumvent regulatory scrutiny without offering full transparency to its customers,” the senators said. “Marketing an investment account as a traditional checking and savings account can be misleading and confusing for consumers.”

The undersigned included Sen. John Kennedy, R-La., Jack Reed, D-R.I., Robert Menendez, D-N.J., Mark Warner, D-Va., Brian Schatz, D-Hawaii, Jerry Moran, R- Kan., and Doug Jones, D-Ala. The senators requested a response by the end of January.

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