Robinhood Tripled Prior Year’s Lobbying Spend in First Half of 2021
Robinhood Financial, faced with increased scrutiny of its zero-commission platform and potential regulatory reforms gutting its payment-for-order-flow business model, tripled its lobbying expenses in the first half of 2021, compared to the full prior year, according to data compiled by OpenSecrets.org.
Robinhood started in the summer of 2020 hiring high-power Capitol Hill seasoned lawyers, who are among the 16 names now registered as its lobbyists for the company.
In August 2020, the company announced its hire of Lucas Moskowitz, who had most recently been a partner at the law firm WilmerHale, but had previously served in several roles with the U.S. Securities and Exchange Commission, including as the agency’s Chief of Staff under then Chairman Jay Clayton and as a senior counsel in the Division of Enforcement, according to a Robinhood press release.
Moskowitz also served federal legislators, as chief investigative counsel for the Senate Banking Committee and counsel for the House Financial Services Committee.
In November last year, Robinhood hired Beth Zorc, who had most recently been senior vice president and head of public policy for Wells Fargo, according to her LinkedIn page. Prior to that, Zorc also had worked as senior counsel on Capitol Hill for the same Senate and House committees as Moskowitz.
Bolstering its Washington-centric lobbying efforts made sense for Robinhood, which has faced a storm of legislative, litigated, and regulatory scrutiny in the past year, including a $70 million fine imposed in June by the Financial Industry Regulatory Authority for supervisory failures.
It was also the target of SEC Chairman Gary Gensler, who remarked several times during the summer about potential regulatory reform over the self-directed company’s gamification and payment for order flow (PFOF) practices. PFOF allows Robinhood and other broker-dealers to receive fees for trades routed through a clearing firm by that clearing firm.
Since Robinhood began its lobbying push, legislative proposals banning PFOF practices have not disappeared but their prospects have dimmed. On July 30, the House Financial Services Committee approved a bill that did not outright ban PFOF, as some investor advocates had hoped, but proposed a congressional study of the practice which would help lawmakers in the future “consider banning or limiting” it.
A spokesman for Robinhood declined to comment on this story.
Robinhood, which has a market cap of $38.6 billion at press time, spent its federal lobbying dollars attempting to sway lawmakers about topics including taxes on securities trading, market infrastructure, market volatility, and real-time settlement, according to its disclosures filed with the U.S. Senate, from which OpenSecrets collected its data.
In comparison, the lobbying spend of Charles Schwab, a much larger brokerage with a market cap of $135.8 billion at press time, outpaced that of Robinhood, reaching $1.35 million for the first half of this year. That’s on pace to end slightly higher than $2.69 million logged for all of 2020 and includes expenditures by TD Ameritrade, which it acquired in October, according to Open Secrets. Schwab, which also has a self-directed platform, identifies PFOF among the issues on which its lobbyists are focused in its most recent disclosures filed with the Senate.
Regulatory and lawmakers’ scrutiny of order flow payments appears to concern some shareholders of Robinhood.
The company, which completed its initial public offering July 29, had 1,318 ‘inquiries,’ or questions that shareholders can file through the company’s SAY app in advance of its Wednesday-scheduled second quarter earnings call. Payment for order flow surfaced in 29 of the questions by press time.
“What’s next for Robinhood? If PFOF is regulated, what can you do?” one user asked in a question that was shared by 42,500 others.