A former Commissioner of Security and Exchange Commission who now works for commission-free brokerage Robin Hood believes the regulator’s focus on issues that have continually made headlines over the past year and a half is laughable, according to Dispatches.
“When I hear discussions about this regulation and it is related to January 28 It makes me laugh a little” Dan Gallagherwho currently holds the position of Chief Legal Officer at Robin Hoodsaid in a video interview with Paul Hastings lawyers, posted last week, according to FA-IQ sister publication Ignites.
“You hear these other, you know, quite frankly, I think silly ideas of ‘gamification of brokerage apps because of this’ or ‘market structure and market makers and lack of competition caused this payment for the order flow, “and that’s just garbage, guys, that’s not true,” Gallagher added, according to the post.
Robinhood’s use of gamification tactics — which included the ubiquitous digital confetti sprayed on a user’s screen following a trade execution — first became a cause of regulatory action not by the SEC but by the Massachusetts Secretary of the Commonwealth Guillaume Galvin. In December 2020, the watchdog accused the brokerage of using such tactics to manipulate clients into “luring young, inexperienced clients into more and more trades.”
The Financial Sector Regulatory Authoritymeanwhile, warned in February 2021 that companies that rely on app-based platforms designed with “game-like” elements designed to induce customers to trade need to think carefully about how they deal and disclose potential risks.
Gensler first said the SEC was considering new rules for trading apps using gamification tactics in the third round of hearings to United States House Committee on Financial Serviceswhich was held in May 2021, on the stock market frenzy of so-called “meme” stocks such as GameStop in January of this year.
And the general manager of Robinhood Vlad Tenev had been grilled by lawmakers on the same committee in February — about three months before Gensler’s hint that the SEC might be looking into gamification — about Robinhood’s reliance on orders for order flow.
It was only last month that Gensler proposed a major overhaul of the equity market and the role payments play in it for order flow.
Gallagher served as SEC commissioner from November 2011 to October 2015 and entered private practice immediately after, joining Robinhood as chief legal officer in May 2020, according to his LinkedIn profile.
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