Stephen Diamond spoke to Protocol about Robinhood’s citing of the First Amendment to the Securities and Exchange Commission (SEC) to defend the way the online brokerage communicates and engages with its users, after the SEC made an inquiry into the way brokerages engage with customers.
Robinhood’s free speech counterargument also comes across as misleading, said Santa Clara University law professor Stephen Diamond, who argued that the company is “attempting to recharacterize the SEC inquiry as an intrusion on speech.”
“The SEC release refers to ‘practices,’ which is not, of course, speech but, well, a practice,” he told Protocol. “It seems clear the SEC is understandably concerned about a set of new practices that are luring thousands of often inexperienced and young investors into the securities markets. That’s clearly in the strike zone.”
“The length of their letter is unusual,” Diamond told Protocol. “They also seem to be getting way ahead of the process. It is not clear how the SEC intends to regulate, if they do regulate. But Robinhood seems intent on throwing as many possible arguments at this effort as possible, perhaps in the hope — likely in vain — that this will discourage the SEC.”