Robinhood cannot block Massachusetts securities regulators' case, judge rules

Reuters

Published May 27, 2021 01:31PM ET

Updated May 27, 2021 07:01PM ET

By Nate Raymond

BOSTON (Reuters) -A Massachusetts judge on Thursday rejected Robinhood's bid to block state regulators from moving forward with their enforcement action alleging that the online brokerage encourages inexperienced investors to place risky trades without limits.

Suffolk County Superior Court Judge Kenneth Salinger said Robinhood could continue challenging in court the validity of the state's new fiduciary rule, which underlies Massachusetts Secretary of State Bill Galvin's case against it.

But Salinger said that did not mean he should in the interim block Galvin, who oversees the state's securities division, from proceeding with his case, noting that some claims were unrelated to the new regulation.

"If the court were to strike down the challenged regulation, the division would still be entitled to press its separate claims that Robinhood's alleged conduct was nonetheless unethical or dishonest," Salinger wrote.

He requested further briefing on whether Robinhood's challenge to the fiduciary rule should be put on hold pending the outcome of Galvin's administrative case, though he said it would be "unusual" to do so.

Debra O'Malley, Galvin's spokeswoman, said he was pleased by the ruling, while Jacqueline Ortiz Ramsay, a spokeswoman for Menlo Park, California-based Robinhood, welcomed the judge's decision to address the rule's validity.

Galvin's office had argued the issue should be first heard by the administrative hearing officer presiding over his case against Robinhood, which is seeking to go public through an initial public offering.