Robinhood failed to disclose certain trading data that regulators have previously fined other brokerages for, report says

Co-founder of Robinhood, Vladimir Tenev.

Noam Galai/Getty Images for TechCrunch

• Robinhood failed to disclose data on an unknown number of fractional share trades, Reuters reported.
• The trading app launched its fractional-share service in December 2019, but only began reporting trades this year.
• US regulators have previously fined other brokerages for violating trade reporting rules.
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US-based trading app Robinhood failed to disclose data on certain stock trades for more than a year, Reuters reported on Thursday.

The data relates to stock trades executed under its fractional-share service launched in December 2019.

Fractional shares allow investors to hold partial shares of a company's stock. Instead of spending $650 on a Tesla share, one can spend a much lower amount to own a portion or fraction of a share.

Financial brokerages are required to publicly disclose all trades, including those smaller than a share, to trade-execution facilities under Financial Industry Regulatory Authority (FINRA) and Securities and Exchange Commission rules, Reuters said.

The regulations allow all market participants to fairly assess share prices.

But Robinhood didn't report its fractional share trades until the week of January 25, 2021, Reuters said, citing analysis of FINRA data and a source familiar with the company.

It is unclear how many trades were failed to be reported. But as of December 31, the trading app's users held about $802 million worth of shares purchased through its fractional share service.

FINRA's enforcement arm has previously fined other financial-services firms, including Merrill Lynch and Deutsche Bank's US securities division, for violating trade reporting and supervisory rules.

Since its founding in 2013, Robinhood has attracted 13 million users with its commission-free, streamlined trading experience.

Some experts told Reuters that Robinhood's lack of reporting is not a major lapse, but justifies a fine so that the incident isn't repeated.

A spokeswoman for Robinhood told Reuters that the company executes only a "very small percentage of its fractional orders from its own inventory."

Robinhood didn't immediately respond to Insider's request for comment.

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