As part of a rapidly developing chain of events on January 28, 2021, trading in certain stocks was restricted by several online brokerages. The popular investing and trading app, Robinhood, which has been the subject of other controversies in the past few months, reportedly joined firms such as TD Ameritrade, Charles Schwab, and Interactive Brokers in temporarily preventing retail customers from buying (and engaging in certain options transactions) in several stocks that have been subject to recent heightened volatility, such as movie theater chain AMC (NYSE: AMC) and, most notably, gaming retailer GameStop (NYSE: GME). Denied the ability to buy these securities (but allowed to maintain or liquidate holdings), affected retail customers may have lost key opportunities to invest—potentially in violation of rules established by the Financial Industry Regulatory Authority (FINRA) and other regulators.

As widely reported in recent days, shares of stocks such as GameStop have risen and fallen in an unprecedented manner, purportedly driven (at least in part) by investors belonging to a group on the social media app Reddit. In the case of GameStop, shares began to rise sharply on January 11, 2021, after trading around $20 per share or lower for an extended period. Days later, GameStop briefly reached a high of over $480 after trading opened on January 28, 2021, before the price plummeted below $130 before noon Eastern time, only to rise again and close at $193.60 (with the price rising further in after-hours trading). According to publicly available information, Robinhood, after allowing retail investors to trade in stocks such as GameStop without restriction, abruptly pulled the stock from the trading app on or about January 27, 2021, preventing customers from buying or shorting the stock on January 28, 2021.

California-based Robinhood, which consists of corporate parent Robinhood Markets, Inc. and subsidiaries Robinhood Financial LLC (an SEC-registered broker-dealer) and Robinhood Securities, LLC (also an SEC-registered broker-dealer), operates as an online-only brokerage firm. Robinhood is relatively new, having been founded in 2013, but has sustained significant growth due to its offering of free trading, a web-based application, and marketing primarily aimed at younger, less experienced, investors.

As a regulated broker-dealer, Robinhood, and other brokerage firms who also restricted trading activities in GameStop and other stocks on or about January 28, 2021, are required by FINRA Rule 5310.01 to “make every effort to execute a marketable customer order that it receives fully and promptly.” By not responding to and fulfilling customers’ trades, by blocking those investors from buying certain singled-out securities, Robinhood and other brokerages may have breached their obligations and potentially caused their customers to incur losses.

The attorneys at Giarrusso Law Group LLC have considerable experience in bringing claims on behalf of investors who have been victimized by the negligence or wrongdoing of a brokerage firm. Investors may pursue losses through securities arbitration before FINRA, or in some instances, through litigation. Investors who wish to discuss a possible claim may contact us by telephone at (201) 771-1115 or by email at info@gialawgroup.com for a no-cost, confidential consultation.