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Home Business GameStop case: Robinhood must face series of lawsuits | Business

GameStop case: Robinhood must face series of lawsuits | Business

The brokerage Robinhood, popular with retail investors behind the hype in the stock market American in recent weeks, is likely to face a series of lawsuits after deciding to restrict trading in securities such as that of the game retailer GameStop. Since last Thursday, when the measure was taken, at least 11 lawsuits have been filed against the broker in several districts across the country. On Friday, it eased restrictions, allowing negotiation, but limiting the number of contracts that can be purchased.

Robinhood justified the decision by stating that, with the greater movement of papers, the amount demanded by the clearing houses increased “tremendously” in the last week, by about ten times. “It was not because we wanted to prevent the purchase of these shares. We did this because the necessary amount that we had to deposit in the clearinghouse was so big that we had to take measures to limit the purchase, ”said the broker in a blog on Friday night. The financial company went to the market and managed to raise about US $ 1 billion to cope with the growing demand from customers and have cash to offset transactions.

Created in 2013 by two children of immigrants who met in Stanford, Robinhood has grown in recent years with the motto that investing is for everyone. Its public, in general, is formed by young people, who are attracted by the possibility of investing through an easy application and without the need to pay a brokerage fee. The popularity grew, in the midst of the pandemic, especially in online forums like Reddit’s WallStreetBets, where individuals started to combine coordinated purchases and challenge big investors, who operate “sold”.

The interruption of operations also generated criticism in the political universe. Democratic Congresswoman Alexandria Ocasio-Cortez said the restrictions imposed on the broker’s trading of certain shares are “unacceptable” and that she would support a congressional hearing on the decision. Texas Republican Senator Ted Cruz of Texas said he agreed.

“It is difficult to imagine a set of circumstances in which Congresswoman Alexandra Ocasio-Cortez and Senator Ted Cruz could agree,” says an excerpt from one of the lawsuits filed against the brokerage in Florida, on behalf of Steven Baird. “Robinhood’s decision to block access to the market for millions of its clients, in favor of institutional investors, such as funds and banks, shocked public opinion so much that it brought together two of the most opposed members of Congress.”

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In another class action, opened in New York, lawyer Alexander Cabeceiras says that by interrupting access, Robinhood deprived investors from operating in the market, benefiting other market agents, and ignoring its own purpose of facilitating the access of individuals to the market of actions.

On Friday, the Securities and Exchange Commission, the US Securities and Exchange Commission, said in a statement that it would closely review the shares of brokerage firms that restricted investors’ ability to trade shares.


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