Regulators Scrutinize a Robinhood Internet marketing Ploy: Absolutely free Shares

WASHINGTON— Robinhood Marketplaces Inc. has for many years specified buyers a free share of stock…

WASHINGTON— Robinhood Marketplaces Inc. has for many years specified buyers a free share of stock for opening an account or referring buddies. The observe could soon price tag the online brokerage a good deal much more dollars.

Brokerages like Robinhood are essential to supply proxy elements to a community company’s shareholders in advance of annual conferences. They are then reimbursed by the public enterprise for the value of distribution.

This suggests that Robinhood’s inventory giveaways have saddled some corporations with greater bills for providing proxy statements. Now, the practice is sparking a backlash from corporations and scrutiny from market place regulators.

One particular business pushing back is Florida-based drugmaker Catalyst Prescription drugs Inc., which states Robinhood’s program price it extra than $200,000 last 12 months and could be even far more high priced this calendar year.

“Catalyst has grow to be informed that Robinhood has been offering away shares of Catalyst’s frequent inventory at no demand as element of its advertising software,” Catalyst Main Govt Patrick McEnany wrote in a June remark letter to the Securities and Trade Commission. “Catalyst thinks that there are most likely a lot of organizations struggling with this very same problem, and that the fees of distributing resources to compact stockholders underneath these situations is onerous and unreasonable.”