Robinhood Financial’s time in the class action spotlight continues as the popular fintech app faces a new lawsuit that alleges users lost “significant sums of money” when the company failed to provide basic information with regard to a T1 Halt placed on Hertz Corporation stock in March 2020.
According to the 20-page negligence case, Robinhood, whose mission is to “democratize finance for all,” fell well short of one of its responsibilities as a broker-dealer when it failed to keep traders in the loop on the Hertz T1 Halt—industry parlance for when a company’s stock is halted pending the release of “material news” likely to cause abnormal stock price volatility.
“When Robinhood’s targeted customers did not receive the basic information regarding the T1 Halt placed on the Hertz Corporation stock in March 2020, Robinhood’s targeted customers lost significant sums of money,” the suit claims.
Robinhood’s role as a broker-dealer comes with the responsibility to both act as a “teacher of sorts” to newcomers within the stock trading arena and operate “in accordance with the standard of care used by other professionals in the community,” the case explains. As part of these duties, the lawsuit states, Robinhood is obligated to inform customers about things such as a T1 trading halt for their own protection. Per the suit, this duty extends to removing any type of price quote or indication or interest on a stock that’s subject to a halt.
The lawsuit alleges Robinhood whiffed on its notification duty when it failed to relay to customers basic information regarding a T1 Halt placed on Hertz Corporation stock in March 2020, costing users significant amounts of money. Once the T1 Halt on Hertz stock was lifted, the suit says, the market price of the stocks dipped significantly, which caused the plaintiff and proposed class members financial damages stemming from pre-T1 Halt trades that “should have been cancelled, terminated or otherwise halted.”
Once the T1 Halt was put in place, Robinhood failed on at least one occasion to prevent customers from using its platform to engage with the halted stock, the case summarizes.
“Had Robinhood fulfilled its duty of managing the Robinhood interface for each of the stock services Robinhood’s interface was ‘deliberately engineered’ to provide for its targeted customer-base, Plaintiff and others similarly situated would likely never have been harmed,” the complaint alleges, arguing that any reasonable broker-dealer “knows or should know that their customers need to be informed that a given stock is subject to a T1 Halt” to protect against news-related volatility.
The lawsuit, which was removed to Florida federal court on November 30, aims to represent all former and current Robinhood customers in the U.S. and its territories who were affected by the company’s apparent failure to prevent customers from using its interface for stocks that were subject to a T1 Halt at any time within the last four years.
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