Galvin Appeals Robinhood Ruling That Struck Down State's Fiduciary Rule

“Too many retail customers are ripped off by their brokers who put their financial interests above the best interests of their clients. That’s wrong,” Stephen Hall, legal director and securities specialist at Better Markets, said Friday in a statement. “When advising or investing their clients’ money, brokers should be required always to put their clients’ best interests first.

“That’s why we are supporting the Massachusetts Secretary of the Commonwealth who issued a regulation to force stockbrokers to be prudent and loyal when recommending investments to retail investors—a standard that aligns with what true investment advisers have been expected to do for decades,” Hall explained.

He added: “This case is yet another legal action related to Robinhood’s long-running efforts to avoid accountability to its retail clients. Rather than embracing the high standard in the Massachusetts rule and focusing on ways to help its clients build long-term wealth, Robinhood sued the Secretary to block the rule under a variety of legal theories.”

Better Markets’ brief also refutes one of ”Robinhood’s core legal theories — that the SEC’s 2019 Regulation Best Interest supersedes or ‘preempts’ the Massachusetts regulation.”

This argument, Hall said, “cannot stand under current Supreme Court jurisprudence; the state’s rule here does not conflict with the SEC’s rule but simply adds an additional layer of protection for investors. And that’s a good thing, since the SEC’s Regulation Best Interest is a weak remedy for adviser conflicts of interest, one that has not lived up to the letter or spirit of Dodd-Frank or the federal securities laws.”

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