Regulators Scrutinize a Robinhood Advertising and marketing Ploy: Totally free Shares

WASHINGTON— Robinhood Marketplaces Inc. has for years supplied prospects a totally free share of inventory for opening an account or referring mates. The apply could soon price tag the on the web brokerage a whole lot much more dollars.

Brokerages like Robinhood are expected to provide proxy resources to a general public company’s shareholders forward of once-a-year meetings. They are then reimbursed by the public organization for the price tag of distribution.

This indicates that Robinhood’s stock giveaways have saddled some corporations with more substantial expenses for providing proxy statements. Now, the apply is sparking a backlash from corporations and scrutiny from sector regulators.

1 company pushing again is Florida-based drugmaker Catalyst Pharmaceuticals Inc., which suggests Robinhood’s software expense it additional than $200,000 very last year and could be even extra high-priced this 12 months.

“Catalyst has grow to be knowledgeable that Robinhood has been providing away shares of Catalyst’s prevalent stock at no charge as element of its marketing system,” Catalyst Chief Govt Patrick McEnany wrote in a June remark letter to the Securities and Trade Fee. “Catalyst believes that there are possible various firms dealing with this very same concern, and that the costs of distributing resources to small stockholders under these situations is onerous and unreasonable.”