William Galvin is as old school as they come, even for a state securities regulator. Galvin, 70, drives an Impala, uses a flip phone, and leaves the emailing and tweeting to his staff. But he may turn out to be the worst nightmare of Robinhood Markets, the company whose zero-commission brokerage app captivates millennial and Gen Z investors.
Galvin is the secretary of the Commonwealth of Massachusetts, a position he’s held since 1995, when the founders of Robinhood were still in grade school. In that time, Galvin turned the office that oversees elections, historic preservation, and record-keeping into a financial regulator that’s sometimes ahead of its national counterparts. He’s won penalties from such Wall Street giants as Morgan Stanley and Goldman Sachs, as well as local icons like the mutual fund manager Putnam Investments.
In December his office sued Robinhood, alleging that the trading platform violated state law by emphasizing the addictive thrills of trading over helping novice investors learn how to make sound investment decisions. He says the company’s brightly designed smartphone app is promoting the “gamification” of investing with features such as animated confetti when users make their first transaction and promotions giving away free stock for signing up or referring friends.
Although the company doesn’t charge commissions, it makes money from trading activity because outside firms such as Citadel Securities pay to be able to fill Robinhood customers’ orders. (Those firms can earn profits on tiny differences in market prices.) Robinhood co-founders Vlad Tenev and Baiju Bhatt could become billionaires after an initial public offering, which could take place within weeks, Bloomberg has reported.
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