Is Robinhood regulated?
Trying to find out whether Robinhood is regulated? Not sure which authorities are overseeing Robinhood and why this matters?
Rest assured, the lack of regulation at Robinhood is not a reason for worry. Our brokerage experts have determined that Robinhood is a fully regulated broker, overseen in USA, UK. We gathered all the information on the regulatory profile of Robinhood and will explain why this matters.
I have personally tested several brokers globally and I am familiar with the regulatory and licensing procedures of at least a dozen financial authorities globally. Here are my key insights into the regulatory status of Robinhood as of August 2024:
- Robinhood operates under a very strict regulator, which is vital for the safety of your money if you have an account with the broker.
- Robinhood must separate client funds/assets from its own operations; this makes all the difference for the safety of your investments.
- Explore the services of Robinhood in our comprehensive Robinhood review for 2024 and browse other top-tier regulated brokers with our unique Find My Broker tool.
Robinhood has top-tier regulation
Think of a broker with strict regulatory oversight like a lifeguard at the beach. Just as the lifeguard keeps you safe in the water, offering immediate help when you need it, brokers operating with top-tier regulation protect your investments. They make sure your investments are secure and handled with integrity and transparency.
Robinhood has the following regulation:
- USA - Securities and Exchange Commission (SEC), Financial Industry Regulatory Authority (FINRA)
- UK - Financial Conduct Authority (FCA)
Why does all this matter? We are contacted by an alarming number of people who ended up working with unregulated brokers and they share with us some sad and frightening stories. Here’s an example.
Marco invested a substantial amount using what appeared to be a credible online trading platform. Initially, his investments showed gains, and he was able to make several withdrawals without issues. Encouraged, he increased his investments, but when he tried to withdraw some profits after a successful trade, his requests went unanswered, and customer service became unreachable. Further investigation revealed the broker was not regulated by any financial authority. Eventually, the platform vanished overnight, taking John's investments with it, leaving him with no recourse to recover his funds.
Choosing a broker with top-tier regulation means you're in safe hands. This level of strict oversight ensures that your investments are protected, you're getting fair pricing, and trading conditions are transparent and favorable.
Client fund segregation: your ultimate safeguard
As a broker with top-tier regulation, Robinhood is legally required to keep the funds and assets of its clients separate from its own money. This is a game changer in terms of the safety of your investments.
Client fund segregation is like having your money in a separate safe from Robinhood’s own cash. Thus, if your broker ever runs into financial trouble, your funds won't be touched to settle their debts - they're entirely off-limits. It’s a crucial setup because it protects your money, ensuring that what you’ve invested stays secure and accessible only to you. This segregation is a requirement imposed by top-tier regulators and not something you can request your broker to do. You will only have access to this safety net if your broker has the appropriate regulation.
In the highly unlikely event that Robinhood commits fraud and uses client assets for its own purposes, you can still recover your money if you have access to investor protection.
There are three major entities within Robinhood: Robinhood Financial LLC, Robinhood Crypto LLC an Robinhood UK Ltd. The former deals with stock and options trading, the second is responsible for crypto trading and the third is the UK entity.
Robinhood Financial LLC is a member of FINRA andfalls under the US investor protection scheme, the SIPC. The limit of SIPC protection is $500,000, which includes a $250,000 limit for cash.
Not all investments are protected by SIPC. In general, SIPC covers notes, stocks, bonds, mutual funds and other investment company shares, and other registered securities. It does not cover instruments such as unregistered investment contracts, unregistered limited partnerships, fixed annuity contracts, currency, and interests in gold, silver, or other commodity futures contracts or commodity options.
Robinhood Crypto LLC is not a member of FINRA or the SIPC. This means trading cryptocurrencies is not protected by any investor protection scheme. Robinhood UK Ltd falls under the UK protection scheme.
Robinhood does not provide negative balance protection.
Get to know Robinhood better and browse other top-tier regulated brokers
For detailed insights into trading conditions, costs, and service quality at Robinhood, check out BrokerChooser's Robinhood review for 2024. All our broker reviews are based on the analysis of nearly 600 data points and direct experience. When we review a broker, we go hands-on by opening a real-money account and trading on its platforms, giving us a complete view of what it offers and how it performs.
The BrokerChooser team has personally tested and reviewed more than 100 brokers globally, all of which have top-tier regulation. All our experience and expertise is included in the Find My Broker tool. Simply answer a few questions and get a personalized broker list.
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Everything you find on BrokerChooser is based on reliable data and unbiased information. We combine our 10+ years finance experience with readers feedback. Read more about our methodology.
