Is Robinhood Safe, Legit, and Trustworthy for Investing With?
When it comes to investment platforms, security should always be a priority. After all, these services are handling your hard-earned money, so you want to be sure that your funds aren’t exposed to various threats. Robinhood is an example of a popular investment platform that deals in both traditional tender and cryptocurrency. But is it safe? Can you trust Robinhood with your money and private data?
Is Robinhood Safe?
To determine whether Robinhood is truly safe, let’s first go through the security features offered by the platform.
How does Robinhood protect your funds? It ensures that all securities are protected up to $500,000, and cash is protected up to $250,000, as Robinhood is a member of the Securities Investor Protection Corporation (SIPC). So, if something goes wrong on your Robinhood account, you know your funds aren’t lost forever.
All Robinhood securities are also regulated by the Securities and Exchange Commission (SEC). This regulation can protect you against financial crimes, such as fraud. On top of this, Robinhood is a member of the Financial Industry Regulatory Authority, or FINRA, meaning that brokers on Robinhood must be legitimate and licensed.
Robinhood also offers two-factor authentication to its users. With this feature, you can ensure that any logins to your Robinhood must be verified through another medium, such as email. This extra layer of security ensures that a malicious individual cannot directly access your account with just your login credentials.
You can also use Robinhood’s Device Monitoring feature to protect your account further. With Device Monitoring, you can view and manage every device that is logged into your Robinhood account. This allows you to remain aware of your account logins and activity, so that you can more easily pick up on suspicious activity.
What’s more, Robinhood uses Transport Layer Security (TLS) to encrypt your sensitive data before it is stored, making it very difficult for an attacker to access and steal such information by hacking your account. Your passwords are also hashed by Robinhood using the BCrypt algorithm, again making them that much harder to steal.
Though these security features are certainly useful, Robinhood is by no means perfect. Let’s get into why.
You may assume that Robinhood is unsafe because the company has been the subject of controversy in the past.
Firstly, Robinhood hit the headlines when it was charged a fee of $65 million by the SEC for not fully disclosing how its profits were being generated.
On top of this, the SEC brought charges against the company when it was found that it wasn’t offering its users the best prices when trading stocks. Giving users the best trade execution prices is a duty that Robinhood had to follow under SEC regulation, but chose not to, which is certainly concerning.
But this isn’t where the controversy ends. In January 2021, Robinhood found itself in hot water when the platform froze all GameStop trades amid the exponential growth of GameStop’s share price. Users looked to make an easy buck by investing in GameStop shares as the price rose, but were suddenly unable to do so on Robinhood.
This naturally stirred assumptions that Robinhood was attempting to cut its losses by making investments in GameStop and sales of its shares impossible. The company stated that they had to do this due to the volatility of the share price, but this didn’t do much to mitigate the backlash.
In fact, this somewhat sleazy move on Robinhood’s part soured many of its users, and gave the company a shady reputation for some time afterwards.
Robinhood Offers Adequate Security but Has a Problematic Past
While Robinhood does offer its users some solid security features, things don’t end there. It’s important to know the legal and moral past of an investment platform before you invest, and there’s no doubt that Robinhood has seen its fair share of controversies over the past few years. So take note of this before deciding where to put your funds.
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September 17, 2022 at 06:04AM