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Bosses at RobinHood started concealing their sources of income after a ‘best-selling author’ published a book exposing their practises as allegedly hurting inexperienced investors, US regulators said Friday.
Michael Lewis’ 2014 Flash Boys: press reach native ads A Wallstreet Revolt, which wasn’t specifically named by the Securities and press reach native ads Exchange Commission (SEC), allegedly left bosses at the popular financial trading app scrambling to remove information online on their business model.
The SEC said the company made the moves after ‘a best-selling author published a book’.
Lewis’ book detailed how the stock market is influenced by high-frequency traders, including the controversial practise of selling securities to Wall Street brokers, known as ‘payment for order flow’.
The SEC claims that Robinhood started masking the fact ‘payment for order’ flows made up 80% percent of its revenue since its launch in 2015 until mid 2016.
Bosses allegedly believed that making the revenue source public could put off customers and removed a section from their FAQs online titled ‘How does Robinhood make money?’,
A new FAQ page falsely claimed ‘payment to order’ income was ‘indirect’ and ‘negligible’, the SEC complaint read.