“This should have never happened,” Rep. Lauren Underwood told CNN Business on Tuesday.
In response to the letter, Robinhood said it would work with the lawmakers. “We take our responsibility to our customers seriously and will work with the Representatives and Senators to address their questions and concerns,” a spokesperson said in a statement.
‘A recipe for disaster’
The tragedy drew widespread attention to the potential risks of the free-trading boom ushered in by Robinhood, which caters to young, first-time investors.
Kearns, a college student with no income, was using Robinhood to trade complex options instruments. The Kearns family believes Alexander was misled by the app’s interface suggesting he owed $730,000, when that was not really the case.
Underwood accused Robinhood of incentivizing risky trading to new investors while providing limited customer support.
“I see that as a recipe for disaster,” Underwood told CNN Business. “Robinhood has designed a platform that feels very much like a video game…It’s not a game. It’s real life.”
A Robinhood spokesperson said the company has doubled the number of customer support agents it has and plans to add hundreds of registered financial services professionals by the end of the year. That customer service typically takes place via email.
Gaps in oversight?
The tragedy could prompt increased scrutiny from regulators.
Lawmakers are “exploring avenues to compel” regulators to increase oversight on Robinhood and similar platforms, Underwood said in an interview.
“This spotlights some real gaps in our systems and oversight,” she said.
The Securities and Exchange Commission, which Underwood mentioned in the letter as a a regulator that should be urged to take action here, declined to comment.
Jay Clayton, chairman of the SEC, told lawmakers last month the incident was “just terrible.” Clayton said the agency is working with FINRA, the finance industry’s self-regulator, to improve disclosure requirements in this area.
The letter from lawmakers requested a written response from Robinhood to a series of questions, including whether the startup evaluates a user’s age and experience before granting approval to advanced options instruments. The lawmakers asked if Robinhood plans to add a phone support number — something the startup confirmed it does not currently have.
The zero-commission business model of Robinhood has transformed the brokerage industry by capturing market share from existing players. Robinhood’s rivals eventually capitulated and slashed fees to zero.
more recommended stories
Advisers to President Trump hesitated to give military options and warned adversaries over fears he might start a war
“We used to only think of.
Denying federal aid to state, local governments could put neediest residents at risk
Republicans and Democrats are split over.
See governor's message to critics after testing positive
Gov. Mike DeWine (R-OH) discusses testing.
History made as first African American general leads one of the military services
Gen. Charles Brown is the new.
Arizona was a Covid-19 hot spot a month ago. Here’s how it’s turning things around
Today, that decision appears to have.
Coronavirus updates: US death toll rises for 5th straight week
A pandemic of the novel coronavirus.
Latest news from around the world
Recent storms and IT issues have.
Beirut in crisis after deadly explosion. Here’s how you can help
In the wake of the massive.
Ohio governor says 91 people got coronavirus after infected man went to church
“It spread like wildfire, wildfire. Very,.
‘Alarming’ rate of cyberattacks aimed at major corporations, governments and critical infrastructure amid COVID-19: Report
Interpol says that attackers have switched.