Abstract
SEC guidelines and Federal Courts have stated, and recently upheld, that brokerdealers do not owe a fiduciary duty to retail investors if they do not provide them with investment advice, but this opens up retail investors to significant and costly mistreatment by financial institutions with no avenue for recourse. Using payment for order flow, gamification, and click-wrap agreements by broker-dealers creates a conflict of interest between themselves and the retail investors they act on behalf of. This article argues that retail investors should have an avenue of recourse against financial institutions when they breach their duty to these investors by failing to act in their best interest. This article will focus on the Robinhood shutdown, the recent Best Interest regulation, and how the practices mentioned above can harm retail investors if misused. Additionally, this article will explore the current SEC standing on these practices and certain financial institutions’ perceptions of them. Lastly, it will pose the implementation of a broad fiduciary duty on those financial institutions and brokers that use these practices.
Recommended Citation
Taylor, Justin M.
(2023)
"The Perfect Storm: A Look at the Robinhood Shutdown and the Shady Security Practices of Payment for Order Flow, Gamification, and Clickwrap Agreements,"
University of Massachusetts Law Review: Vol. 18:
Iss.
2, Article 3.
Available at:
https://scholarship.law.umassd.edu/umlr/vol18/iss2/3