A Massachusetts choose on Thursday rejected Robinhood’s bid to dam state regulators from transferring ahead with their enforcement motion alleging that the net brokerage encourages inexperienced investors to place risky trades with out limits.
Suffolk County Superior Court docket Choose Kenneth Salinger mentioned Robinhood might proceed difficult in courtroom the validity of the state’s new fiduciary rule, which underlies Massachusetts Secretary of State Invoice Galvin’s case in opposition to it.
However Salinger mentioned it didn’t observe that he ought to within the interim block Galvin, who oversees the state’s securities division, from transferring ahead together with his case, noting that a number of the claims weren’t based mostly on the brand new regulation.
“If the courtroom had been to strike down the challenged regulation, the division would nonetheless be entitled to press its separate claims that Robinhood’s alleged conduct was nonetheless unethical or dishonest,” Salinger wrote.
He requested additional briefing on whether or not Robinhood’s problem to the fiduciary rule ought to be placed on maintain pending the result of Galvin’s administrative case, although he mentioned it could be “uncommon” for a choose in his place to take action.
Debra O’Malley, a spokeswoman for Galvin, mentioned he was happy with the ruling. Menlo Park, California-based Robinhood had no quick remark.
Galvin announced the case against Robinhood in December, earlier than the social media-driven rally in shares like GameStop, caused by retail investors shopping for the shares on platforms that included Robinhood and different apps.
He accused the app-based service of utilizing methods that handled buying and selling like a recreation to lure younger, inexperienced prospects, together with by having confetti rain down on the user’s screen for every commerce made on its app.
Robinhood sued in April, arguing Galvin lacked authority to undertake the fiduciary rule and that it conflicted with federal legislation. The Securities and Alternate Fee in 2019 adopted its personal rule for brokerages that rejected the usual Galvin was implementing.