A legal battle is continuing between Robinhood Markets and the state of Massachusetts over the state’s fiduciary rule, Financial Advisor reports.
Massachusetts secretary of the commonwealth William F. Galvin said he will appeal a ruling last year by Superior Court Judge Michael Ricciuti that struck down the rule.
In March 2022, Ricciuti ruled that Galvin was beyond his authority in promulgating the fiduciary rule, which required advisors and broker-dealers to act in the best interests of customers. The rule was declared invalid.
The case dates back to December 2020 when Galvin, the state’s top securities regulator, accused Robinhood of violating state law by using overly aggressive tactics to attract new and often inexperienced investors, as well as “gamification to encourage and entice continuous and repetitive use” of its mobile application. Galvin attempted to have Robinhood’s broker-dealer license in the state revoked.
California-based Robinhood then filed a lawsuit in April 2021 seeking to overturn the fiduciary rule, which had become effective in September 2020. The company asserted that the SEC’s Reg B1 approved the previous year pre-empted the Massachusetts regulation.
Galvin has now taken his case to the state’s highest court, the Massachusetts Supreme Judicial Court, asking that Ricciuti’s ruling be overturned. In the appeal, Galvin asked the court to “vindicate the secretary’s power to protect retail investors”. Oral arguments will be held this Wednesday.
Two friend-of-the-court briefs were filed in support of Galvin’s appeal by the public interest group Better Markets and The Institute for the Fiduciary Standard, whose president Knut Rostad was quoted as saying, “Barring a fiduciary rule is legally suspect and lets conflicted advice that may be in investors’ worst interest flourish.”.
Hyman Cotter PC routinely represents investors nationwide who were harmed when financial professionals and their firms breached their fiduciary and other duties. Our team includes lawyers who have worked for large financial institutions, including Morgan Stanley and UBS Financial Services, and regulatory bodies such as the SEC. We bring a unique level of knowledge when representing the rights of investors. If you were the victim of a breach of fiduciary or other duties owed to you by a financial professional or financial firm, contact Hyman Cotter PC at 312-291-4600 or through our online contact form for a no-cost evaluation of your matter.
