As brokerages focus on enhancing user experience, they risk shifting their customer’s focus from serious financial decisions to a game-like experience. Some think this is a good thing. That it will help engage the next generation of traders. Other think it’s a bad thing. That it will create a more spastic type of trader with unrealistic expectations on potential returns. State and federal regulators are focusing on digital brokerages and exploring guardrails for these types of platforms.
The challenges facing traditional technology providers (volume controls, fraud, system outages, and liquidity) are now facing these digital brokerages—with real-life consequences for individuals and their savings and retirement accounts. One company that has been making headlines is Robinhood, which was on the receiving end of a $70 million fine handed down by the Financial Industry Regulatory Authority, or FINRA, for what it called “systemic supervisory failures.” In coming up with the award, FINRA said it considered the “widespread and significant harm suffered by customers, including millions of customers who received false or misleading information from the firm, millions of customers affected by the firm’s systems outages in March 2020, and thousands of customers the firm approved to trade options even when it was not appropriate for the customers to do so.” Robinhood is also defending itself in litigation involving dozens of cases.
Will we continue to see litigation over these platforms as more and more retail customers (many young and inexperienced) realize that securities involve market risks? What’s the deal?
Find out! Listen to my interview with FinTech attorney Brad Rustin, a partner with Nelson Mullins. In addition to chairing the firm’s Financial Services Regulatory Practice, Brad counsels financial institutions in regulatory matters, including strategic agreements, product development, and operational compliance. A large portion of his work is on bank and non-bank partnerships involving white-label deployments, FinTech partnerships, or payments, digital assets, cryptocurrency, and lending partnerships. Brad is a Certified Anti-Money Laundering Specialist (CAMS) by ACAMS and a Certified Regulatory Compliance Manager (CRCM) by the American Bankers Association. He received his JD, magna cum laude, from the University of South Carolina School of Law and his BA in Political Science and History, cum laude, from Furman University. And now, he is not only a guest on the Emerging Litigation Podcast, but the FinTech advisor on the Editorial Advisory Board of the Journal on Emerging Issues in Litigation.
This podcast is the audio companion to the Journal on Emerging Issues in Litigation, a collaborative project between HB Litigation Conferences and the legal news folks at Law Street Media, and the Fastcase legal research family, which includes Docket Alarm and Judicata. If you have comments or wish to participate in one our projects, or want to tell me how insightful and informative our guests are, please drop me a note at Editor@LitigationConferences.com.
Thanks to Brad for speaking with me about this fascinating subject. As for me, I will stay away from “game trading.” Hearing people describe it reminds me of my PacMan obsession in college, which frequently cost me many hours that I should have spent differently, and too often a functioning shoulder.