# Robinhood Financial LLC X-17A-5 (2024-02-28) — Broker-dealer annual report - Company: Robinhood Financial LLC - Form: X-17A-5 - Filed: 2024-02-28 - Period: 2023-12-31 - Accession: 0001561014-24-000009 - CIK: 1561014 - File #: 8-69188 - Type: Broker-dealer - Material weakness: No - Auditor: Ernst and Young LLP - Auditor location: Los Angeles, CA - Contact: Daniel Kelati - Phone: 650-613-0685 - Email: kelati@robinhood.com - Website: robinhood.com - Signed by: Daniel Kelati (CFO and Principal Financial Officer) Original filing: https://www.sec.gov/Archives/edgar/data/1561014/000156101424000009/fy23rhfshort.pdf --- {0}------------------------------------------------ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 # ANNUAL REPORTS FORM X-17A-5 PART III | OMB APPROVAL | |---------------------------| | OMB Number: 3235-0123 | | Expires: Oct. 31, 2023 | | Estimated average burden | | nours per response:
12 | | | SEC FILE NUMBER 8-69188 FACING PAGE Information Required Pursuant to Rules 17a-5, 17a-12, and 18a-7 under the Securities Exchange Act of 1934 FILING FOR THE PERIOD BEGINNING 01/01/2023 MM/DD/YY AND ENDING 12/31/2023 MM/DD/YY A. REGISTRANT IDENTIFICATION NAME OF FIRM: Robinhood Financial, LLC TYPE OF REGISTRANT (check all applicable boxes): E Broker-dealer | | Security-based swap dealer | | Major security-based swap participant O Check here if respondent is also an OTC derivatives dealer ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use a P.O. box no.) 500 Colonial Center Parkway, Suite 100 | | (No. and Street) | | | | |--------------------------------------------------------------------------------------------------|------------------------------------------------------------|--------------------------------------------|------------|--| | Lake Mary | i | | 32746 | | | (City) | (State) | | (Zip Code) | | | PERSON TO CONTACT WITH REGARD TO THIS FILING | | | | | | Daniel Kelati | 650-613-0850 | daniel, kelati@robinhood.com | | | | (Name) | (Area Code - Telephone Number) | (Email Address) | | | | | B. ACCOUNTANT IDENTIFICATION | | | | | INDEPENDENT PUBLIC ACCOUNTANT whose reports are contained in this filing*
Ernst and Young LLP | | | | | | | (Name - if individual, state last, first, and middle name) | | | | | 725 S Figueroa Street | Los Angeles | CA | 90017 | | | (Address) | (City) | (State) | (Zip Code) | | | 10/20/2003 | | 42 | | | | (Date of Registration with PCAOB)(if applicable) | | (PCAOB Registration Number, if applicable) | | | FOR OFFICIAL USE ONLY \* Claims for exemption from the requirement that the annual reports of an independent public accountant must be supported by a statement of facts and circumstances relied on as the basis of the exemptlon. See 17 CFR 240.17a-5(e)(1)(ii), if applicable. Persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number. {1}------------------------------------------------ #### OATH OR AFFIRMATION I. Daniel Kelati swear (or affirm) that, to the best of my knowledge and belief, the financial report pertaining to the firm of Robinhood Financial LLC as of 12/31 2 023\_ j is true and correct. I further swear (or affirm) that neither the company nor any partner, officer, director, or equivalent person, as the case may be, has any proprietary interest in any account classified solely ![](_page_1_Picture_4.jpeg) Signature: Title: CFO and Principal Financial Officer Notary Public This filing\*\* contains (check all applicable boxes): - (a) Statement of financial condition. - (b) Notes to consolidated statement of financial condition. - O (c) Statement of income (loss) or, if there is other comprehensive in the period(s) presented, a statement of comprehensive income (as defined in § 210.1-02 of Regulation S-X). - [ (d) Statement of cash flows. - [ {e} Statement of changes in stockholders' or partners' or sole proprietor's equity. - [ {f) Statement of changes in liabilities subordinated to claims of creditors. - [ (g) Notes to consolidated financial statements, - [ (h) Computation of net capital under 17 CFR 240.15c3-1 or 17 CFR 240.18a-1, as applicable. - [ (i) Computation of tangible net worth under 17 CFR 240.18a-2. - □ {}} Computation for determination of customer reserve requirements pursuant to Exhibit A to 17 CFR 240.15c3-3. - [] (k) Computation for determination of security-based swap reserve requirements pursuant to Exhibit B to 17 CFR 240.15c3-3 or Exhibit A to 17 CFR 240.18a-4, as applicable. - (I) Computation for Determination of PAB Requirements under Exhibit A to § 240.15c3-3. - [ (m) Information relating to possession or control requirements for customers under 17 CFR 240, 15c3-3. - O (n) Information relating to possession or control requirements for security-based swap customers under 17 CFR 240.15c3-3(p)(2) or 17 CFR 240.18a-4, as applicable. - (o) Reconcliations, including appropriate explanations, of the FOCUS Report with computation of net capital or tangible net worth under 17 CFR 240.15c3-1, 17 CFR 240.18a-1, or 17 CFR 240.18a-2, as applicable, and the reserve requirements under 17 CFR 240.15c3-3 or 17 CFR 240.18a4, as applicable, if material differences exist, or a statement that no material differences exist. - [p) Summary of financial data for subsidiaries not consolidated in the statement of financial condition. - [q] Oath or affirmation in accordance with 17 CFR 240.17a-5, 17 CFR 240.17a-12, or 17 CFR 240.18a-7, as applicable. - [] (r) Compliance report in accordance with 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. - [s) Exemption report in accordance with 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. - (t) Independent public accountant's report based on an examination of the statement of financial condition. - [u] Independent public accountant's report based on an examination of the financial statements under 17 CFR 240.17a-5, 17 CFR 240.18a-7, or 17 CFR 240.17a-12, as applicable. - [ (v) Independent public accountant's report based on an examination of certain statements in the compliance report under 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. - | {w} |ndependent public accountant's report based on a review of the exemption report under 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. - [x] Supplemental reports on applying agreed-upon procedures, in accordance with 17 CFR 240.15c3-1e or 17 CFR 240.17a-12, as applicable. - [] [y] Report describing any material inadequacies found to have existed since the date of the previous audit, or a statement that no material inadequacies exist, under 17 CFR 240.17a-12(k). - [z] Other: \*\* To request confidential treatment of certain portions of this filing, see 17 CFR 240.170-5(e)(3) or 17 CFR 240.180-7(d)(2), as applicable, {2}------------------------------------------------ ### **TABLE OF CONTENTS** | | PAGE NO. | |---------------------------------------------------------|----------| | Report of Independent Registered Public Accounting Firm | 4 | | | | | Financial Statement | | | Statement of Financial Condition | 5 | | Notes to the Statement of Financial Condition | 6 | {3}------------------------------------------------ ![](_page_3_Picture_0.jpeg) Ernst & Young LLP 725 S Figueroa Street Los Angeles, CA 90017 Tel: +1 213 977 3200 Fax: +1 213 977 3729 ey.com # Report of Independent Registered Public Accounting Firm To the Member and The Board of Managers of Robinhood Financial LLC ## Opinion on the Financial Statement We have audited the accompanying statement of financial condition of Robinhood Financial LLC (the Company) as of December 31, 2023 and the related notes (the "financial statement"). In our opinion, the financial statement presents fairly, in all material position of the Company at December 31, 2023, in conformity with U.S. generally accepted accounting principles. ### Basis for Opinion This financial statement is the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statement based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statement, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statement. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. We have served as the Company's auditor since 2017. February 28, 2024 {4}------------------------------------------------ ### **ROBINHOOD FINANCIAL LLC STATEMENT OF FINANCIAL CONDITION** | | As of | |---------------------------------------------|--------------| | | December 31, | | (In millions) | 2023 | | Assets | | | Cash | \$
204 | | Due from affiliated clearing broker-dealer | 91 | | Accrued interest receivables | 13 | | Other assets | 37 | | Total assets | \$
345 | | Liabilities and member's equity | | | Liabilities: | | | Accounts payable and other accrued expenses | \$
72 | | Due to Parent | 19 | | Deferred revenue | 3 | | Total liabilities | 94 | | Commitments and contingencies (Note 6) | | | Member's equity: | | | Total member's equity | 251 | | Total liabilities and member's equity | \$
345 | {5}------------------------------------------------ # **ROBINHOOD FINANCIAL LLC NOTES TO THE STATEMENT OF FINANCIAL CONDITION** #### **NOTE 1: ORGANIZATION AND NATURE OF BUSINESS** Robinhood Financial LLC (the "Company," "we," "our," "us," or "RHF") is a wholly owned subsidiary of Robinhood Markets, Inc. (the "Parent," or "RHM," and, together with its subsidiaries, "Robinhood"). We are registered with the U.S. Securities and Exchange Commission ("SEC") as a broker-dealer in securities under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). We are a member of the Financial Industry Regulatory Authority ("FINRA"), and the Securities Investor Protection Corporation ("SIPC"). Under our membership agreement with FINRA, we are exempt from Exchange Act Rule 15c3-3 pursuant to the exemptive provisions of subparagraph (k)(2)(ii) of such Rule pertaining to the possession or control of customer assets and reserve requirements. We are a fully disclosed non-exchange member broker-dealer who introduces retail users to various investment products and services through our platform. Robinhood Securities, LLC ("RHS"), a subsidiary of the Parent, is the affiliated clearing broker-dealer firm of record who clears equities and options trades for the retail users. We refer to our "users" and our "customers" interchangeably to refer to individuals who hold accounts on our platform. #### **NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES** #### *Basis of Presentation* The accompanying financial statement has been prepared in accordance with generally accepted accounting principles in the United States ("GAAP"). #### *Use of Estimates* The preparation of financial statement in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts in the financial statement and accompanying notes. We base our estimates on historical experience, and other assumptions we believe to be reasonable under the circumstances. Assumptions and estimates used in preparing our financial statement include those related to accrued and contingent liabilities. Actual results could differ from these estimates and could have a material adverse effect on our operating results. #### *Segment Information* Operating segments are defined as components of an enterprise for which separate financial information is evaluated regularly by the chief operating decision maker ("CODM") in deciding how to allocate resources and assess performance. We operate and report financial information in one operating segment as our CODM only reviews our financial information to allocate resources and assess performance. All of our revenues and assets are attributed to or located in the United States. #### *Concentrations of Credit Risk* We are engaged in various trading and brokerage activities in which the counterparties include our affiliated broker-dealer, banks, and other financial institutions. In the event our counterparties do not fulfill their obligations, we may be exposed to risk. The risk of default depends on the creditworthiness of the counterparty. It is our policy to review, as necessary, the credit standing of each counterparty. Additionally, the majority of our revenues is derived as a result of our relationship with RHS. #### *Cash* Cash includes interest and non-interest bearing deposits with banks. We maintain cash in bank accounts at financial institutions that exceed federally insured limits. We are subject to credit risk to the extent any financial institution with which we conduct business is unable to fulfill contractual obligations on our behalf. As we have not experienced any losses in such accounts and we believe that we have placed our cash on deposit with financial institutions which are financially stable, we do not have an expectation of credit losses for these arrangements. #### *Due From Affiliated Clearing Broker-Dealer* Due from affiliated clearing broker-dealer represents receivables from RHS primarily related to order routing revenues, margin interest revenue, and subscription revenue, net of payables to RHS primarily related to indemnification for unsecured user receivables, interest expense on users' margin balances, and clearing fees for clearing services provided by RHS. {6}------------------------------------------------ #### *Other Assets* Other assets primarily include deferred match incentives, prepaid expenses, and other receivables. We classify prepayments made under contracts as prepaid expenses and expense them over contract terms. These prepaid expenses include items such as prepayments on insurance. As of December 31, 2023, other assets primarily included \$29 million of deferred match incentives and \$5 million of prepaid expenses. #### *Loss Contingencies* We are subject to claims and lawsuits in the ordinary course of business, including arbitration, class actions and other litigation, some of which include claims for substantial or unspecified damages. We are also the subject of inquiries, investigations, and proceedings by regulatory and other governmental agencies. We review our lawsuits, regulatory inquiries and other legal proceedings on an ongoing basis and provide disclosures and record loss contingencies in accordance with the loss contingencies accounting guidance. We establish an accrual for losses at management's best estimate when we assess that it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. If the reasonable estimate is a range and no amount within that range is considered a better estimate than any other amount, an accrual is recorded based on the bottom amount of the range. We monitor these matters for developments that would affect the likelihood of a loss and the accrued amount, if any, and adjust the amount as appropriate. #### *Income Taxes* We are a single member limited liability company, which is treated as a disregarded entity for income tax purposes. All tax effects of our income or loss are included in the tax returns of the Parent. Therefore, no provision or liability for income taxes is included in the financial statement. No formal tax-sharing arrangement exists between us and the Parent and we have no obligation to fund any tax liability of the Parent with our earnings. #### **NOTE 3: RECENT ACCOUNTING PRONOUNCEMENTS** #### *Recently Issued Accounting Pronouncements Not Yet Adopted* In October 2023, the FASB issued Accounting Standards Update 2023-06, "Disclosure Improvements: Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative." This amendment will impact various disclosure areas, including the statement of cash flows, accounting changes and error corrections, earnings per share, debt, equity, derivatives, and transfers of financial assets. The amendments in this guidance will be effective on the date the related disclosures are removed from Regulation S-X or Regulation S-K by the SEC, and will no longer be effective if the SEC has not removed the applicable disclosure requirement by June 30, 2027. Early adoption is prohibited. We are currently evaluating the impacts of the amendment on our financial statement. There are no recently adopted accounting pronouncements that would materially impact our financial statement and related disclosures for the year ended December 31, 2023. #### **NOTE 4: ACCOUNTS PAYABLE AND ACCRUED EXPENSES** Accounts payable and accrued expenses consisted of the following for the period indicated: | | December 31, | |---------------------------------------------|--------------| | (In millions) | 2023 | | Accrued legal expenses | \$
57 | | Accounts payable and other accrued expenses | 10 | | Accrued IT expenses | 3 | | Accrued market data expenses | 2 | | Total | \$
72 | {7}------------------------------------------------ #### **,NOTE 5: RELATED PARTY TRANSACTIONS** The amount of revenue earned from affiliates may not be reflective of revenues that could have been earned on similar levels of activity with unaffiliated third parties. The amount of expenses allocated to us may not be reflective of expenses that would have been incurred by us, if we used third party service providers. We have an expense sharing agreement with the Parent, and pursuant to the agreement, we reimburse the Parent for payroll, technology, information services, occupancy, and other expenses. The Parent also pays certain direct expenses on our behalf and cash settles monthly with allocated expenses. At December 31, 2023, the balance due to the Parent was \$19 million. During the year ended December 31, 2023, we distributed \$550 million back to the Parent. We have a revolving, committed and unsecured credit line for \$25 million with the Parent. Interest on this line of credit is based on the applicable federal rate as determined by Internal Revenue Service. The credit line has no maturity date and remains in effect until terminated by either party. There were no outstanding borrowings against the line of credit at December 31, 2023 and we did not utilize the credit line during the year. There are no covenants to the lines of credit with the Parent. Pursuant to the clearing agreement with RHS, we introduce our users to RHS on a fully disclosed basis and utilize RHS to clear and facilitate trades. As of December 31, 2023, due from affiliated clearing broker-dealer in our statement of financial condition consisted of cash held at our proprietary account at RHS of \$8 million and the balance due from RHS of \$83 million. #### **NOTE 6: COMMITMENTS AND CONTINGENCIES** We are subject to contingencies arising in the ordinary course of our business, including contingencies related to legal, regulatory, non-income tax and other matters. We record an accrual for loss contingencies at management's best estimate when we determine that it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. If the reasonable estimate is a range and no amount within that range is considered a better estimate than any other amount, an accrual is recorded based on the bottom amount of the range. If a loss is not probable, or a probable loss cannot be reasonably estimated, no accrual is recorded. Amounts accrued for contingencies in the aggregate were \$61 million as of December 31, 2023. In our opinion, an adequate accrual had been made as of December 31, 2023 to provide for the probable losses of which we are aware and for which we can reasonably estimate an amount. #### *Legal and Regulatory Matters* The securities industry is highly regulated and many aspects of our business involve substantial risk of liability. In past years, there has been an increase in litigation and regulatory investigations involving the brokerage and cryptocurrency industries. Litigation has included and may in the future include class action suits that generally seek substantial and, in some cases, punitive damages. Federal and state regulators, exchanges, or other state and self-regulatory organizations ("SROs") investigate issues related to regulatory compliance that may result in enforcement action. We are also subject to periodic regulatory audits and inspections that have in the past and could in the future lead to enforcement investigations or actions. We have been named as a defendant in lawsuits and from time to time we have been threatened with, or named as a defendant in arbitrations and administrative proceedings. The outcomes of these matters are inherently uncertain and some may result in adverse judgments or awards, including penalties, injunctions, or other relief, and we may also determine to settle a matter because of the uncertainty and risks of litigation. With respect to matters discussed below, we believe, based on current knowledge, that any losses (in excess of amounts accrued, if applicable) as of December 31, 2023 that are reasonably possible and can be reasonably estimated will not, in the aggregate, have a material adverse effect on our business, financial position, operating results, or cash flows. However, for many of the matters disclosed below, particularly those in early stages, we cannot reasonably estimate the reasonably possible loss (or range of loss), if any. In addition, the ultimate outcome of legal proceedings involves judgments and inherent uncertainties and cannot be predicted with certainty. Any judgment entered against us, or any adverse settlement, could materially and adversely impact our business, financial condition, operating results, and cash flows. We might also incur substantial legal fees, which are expensed as incurred, in defending against legal and regulatory claims. Described below are certain pending matters in which there is at least a reasonable possibility that a material loss could be incurred. We intend to continue to defend these matters vigorously. {8}------------------------------------------------ #### Best Execution, Payment for Order Flow ("PFOF"), and Sources of Revenue Civil Litigation Beginning in December 2020, multiple putative securities fraud class action lawsuits were filed against RHM, RHF, and RHS. Five cases were consolidated in the United States District Court for the Northern District of California. An amended consolidated complaint was filed in May 2021, alleging violations of Section 10(b) of the Exchange Act and various state law causes of action based on claims that we violated the duty of best execution and misled putative class members by publishing misleading statements and omissions in customer communications relating to the execution of trades and revenue sources (including PFOF). Plaintiffs seek unspecified monetary damages, restitution, disgorgement, and other relief. In February 2022, the court granted Robinhood's motion to dismiss the amended consolidated complaint without prejudice. In March 2022, plaintiffs filed a second consolidated amended complaint, alleging only violations of Section 10(b) of the Exchange Act, which Robinhood moved to dismiss. In October 2022, the court granted Robinhood's motion in part and denied it in part. In November 2022, Robinhood filed a motion for judgment on the pleadings, which the court denied in January 2023. #### State Regulatory Matters Certain state regulatory authorities have conducted investigations regarding RHF's options trading and related customer communications and displays, options and margin trading approval process, the March 2020 Outages, and customer support prior to June 2020. RHF reached settlements with several state regulators including the Alabama Securities Commission, the California Department of Financial Protection and Innovation, the Colorado Division of Securities, the Delaware Department of Justice - Investor Protection Unit, the New Jersey Bureau of Securities, the South Dakota Division of Insurance, and the Texas State Securities Board, under which we paid a monetary penalty of \$200,000 per state. RHF has reached additional state settlements and anticipates reaching more as part of a multi-state settlement related to these issues totaling up to approximately \$10 million. FINRA previously conducted an investigation and reached a settlement with RHF regarding many of these issues. The New York Attorney General is conducting an investigation into brokerage execution quality. We are cooperating with this investigation. #### Brokerage Enforcement Matters FINRA Enforcement staff are conducting investigations related to, among other things, the delays in notification from third parties and process failures within our brokerage systems and operations in connection with the handling of a 1-for-25 reverse stock split transaction of Cosmo Health, Inc, in December 2022; RHF's compliance with FINRA registration requirements for member personnel; marketing involving social media influencers and affiliates; collaring the prices of certain trade orders; RHF's compliance with best execution obligations; RHF's compliance with regulations governing the delivery of required documents; and matters related to the RHF's supervision of technology. RHF has also received requests from the SEC Division of Enforcement and FINRA Enforcement staff related to its compliance with recordkeeping requirements, including requests regarding off-channel communications. We are cooperating with these investigations. #### Account Takeovers, Anti-Money Laundering, and Cybersecurity Matters FINRA Enforcement and the SEC Division of Enforcement are investigating account takeovers (i.e., circumstances under which an unauthorized actor successfully logs into a customer account), as well as anti-money laundering compliance and cybersecurity issues, including the November 2021 Data Security Incident. The SEC's Division of Enforcement is also investigating issues related to compliance with the Electronic Funds Transfer Act. We are cooperating with these investigations. #### Massachusetts Securities Division ("MSD") Matter In December 2020, the MSD filed an administrative complaint against RHF, which stems from an investigation initiated by the MSD in July 2020. The complaint alleged three counts of Massachusetts securities law violations regarding alleged unethical and dishonest conduct or practices, failure to supervise, and failure to act in accordance with the Massachusetts fiduciary duty standard, which became effective on March 6, 2020 and had an effective enforcement date beginning September 1, 2020. Among other things, the MSD alleged that our product features and marketing strategies, outages, and options trading approval process constitute violations of Massachusetts securities laws. MSD subsequently filed an amended complaint that seeks, among other things, injunctive relief (a permanent cease and desist order), censure, restitution, disgorgement, appointment of an independent consultant, an administrative fine, and revocation of RHF's license to operate in Massachusetts. If RHF were to lose its license to operate in Massachusetts, we would not be able to acquire any new customers in Massachusetts, and we expect that our current customers in Massachusetts would be unable to continue utilizing any of the services or products offered on our platform (other than closing their positions) and that we may be forced to transfer such customers' accounts to other brokerdealers. Additionally, revocation of RHF's Massachusetts license could trigger similar disqualification or proceedings to restrict or condition RHF's registration by other state regulators. A revocation of RHF's license to operate in Massachusetts would result in RHF and RHS being subject to statutory disqualification by FINRA and the SEC, which would then result in RHF needing to obtain relief from FINRA subject to SEC review in order to remain a FINRA member and RHS possibly needing relief from FINRA or other SROs.. {9}------------------------------------------------ In April 2021, RHF filed a complaint and motion for preliminary injunction and declaratory relief in Massachusetts state court seeking to enjoin the MSD administrative proceeding and challenging the legality of the Massachusetts fiduciary duty standard. In September 2021, the parties filed cross-motions for partial judgment on the pleadings. In March 2022, the court ruled in favor of RHF, declaring that the Massachusetts fiduciary duty regulation was unlawful. In August 2023, the Massachusetts Supreme Judicial Court reversed the decision of the Massachusetts Superior Court. In January 2024, we settled this matter with the MSD related to supervision of certain product features and marketing strategies, the March 2020 Outages, and our options trading approval process, as well as the November 2021 Data Security Incident, under which we paid a \$7.5 million fine and agreed to engage an independent consultant to review, among other things, implementation of the FINRA independent's recommendations, policies and procedures regarding certain application features, and cybersecurity measures. RHF has dismissed its state court action. #### Text Message Litigation In August 2021, Cooper Moore filed a putative class action against RHF alleging that RHF initiated or assisted in the transmission of commercial electronic text messages to Washington State residents without their consent in violation of Washington state law. The complaint seeks unspecified total statutory and treble monetary damages, injunctive relief, and attorneys' fees and costs. The case is currently pending in the U.S. District Court for the Western District of Washington. RHF filed a motion to dismiss the complaint. In February 2022, Moore and Andrew Gillette filed an amended complaint, which RHF again moved to dismiss. In August 2022, the court denied RHF's motion to dismiss. The parties have reached a settlement in principle to resolve this matter and the court has granted preliminary approval. #### Early 2021 Trading Restrictions Matters Beginning on January 28, 2021, due to increased deposit requirements imposed on RHS by the NSCC in response to unprecedented market volatility, particularly in certain securities, RHS temporarily restricted or limited its customers' purchase of certain securities, including GameStop Corp. and AMC Entertainment Holdings, Inc., on our platform (the "Early 2021 Trading Restrictions"). A number of individual and putative class actions related to the Early 2021 Trading Restrictions were filed against RHM, RHF, and RHS, among others, in various federal and state courts. In April 2021, the Judicial Panel on Multidistrict Litigation entered an order centralizing the federal cases identified in a motion to transfer and coordinate or consolidate the actions filed in connection with the Early 2021 Trading Restrictions in the United States District Court for the Southern District of Florida (the "MDL"). The court subsequently divided plaintiffs' claims against Robinhood into three tranches: federal antitrust claims, federal securities law claims, and state law claims. In July 2021, plaintiffs filed consolidated complaints seeking unspecified monetary damages in connection with the federal antitrust and state law tranches. The federal antitrust complaint asserted one violation of Section 1 of the Sherman Act; the state law complaint asserted negligence and breach of fiduciary duty claims. In August 2021, we moved to dismiss both of these complaints. In September 2021, plaintiffs filed an amended complaint asserting state law claims of negligence, breach of fiduciary duty, tortious interference with contract and business relationship, civil conspiracy, and breaches of the covenant of good faith and fair dealing and implied duty of care. In January 2022, the court dismissed the state law complaint with prejudice. In August 2023, the United States Court of Appeals for the Eleventh Circuit affirmed the district court's order. In November 2021, the court dismissed the federal antitrust complaint without prejudice. In January 2022, plaintiffs filed an amended complaint in connection with the federal antitrust tranche and Robinhood moved to dismiss the amended complaint. In May 2022, the court dismissed the federal antitrust complaint with prejudice. Plaintiffs have appealed the court's order to the United States Court of Appeals for the Eleventh Circuit. In November 2021, plaintiffs for the federal securities tranche filed a complaint alleging violations of Sections 9(a) and 10(b) of the Exchange Act. The complaint seeks unspecified monetary damages, costs and expenses, and other relief. In January 2022, we moved to dismiss the federal securities law complaint. In August 2022, the court granted in part and denied in part Robinhood's motion to dismiss. In November 2023, the court denied Plaintiffs' motion for class certification without prejudice. RHM, RHF, RHS, and our Co-Founder and CEO, Vladimir Tenev, among others, have received requests for information, and in some cases, subpoenas and requests for testimony, related to investigations and examinations of the Early 2021 Trading Restrictions from the United States Attorney's Office for the Northern District of California ("USAO"), U.S. Department of Justice, Antitrust Division, the SEC's Division of Enforcement, FINRA, the New York Attorney General's Office, other state attorneys general offices, and a number of state securities regulators. Also, a related search warrant was executed by the USAO to obtain Mr. Tenev's cell phone. There have been several inquiries based on specific customer complaints. We have also received requests from the SEC Division of Enforcement and FINRA related to employee trading in certain securities that were subject to the Early 2021 Trading Restrictions, including GameStop Corp. and AMC Entertainment Holdings, Inc., during the week of January 25, 2021. These matters include requests related to whether any employee trading in these securities may have occurred after the decision to impose the Early 2021 Trading Restrictions and before the public announcement of the Early 2021 {10}------------------------------------------------ Trading Restrictions on January 28, 2021. We are cooperating with these investigations. FINRA Enforcement has also requested information about policies, procedures, and supervision related to employee trading generally. In January 2023, approximately 4,700 jointly represented customers filed a statement of claim with FINRA to initiate arbitration of individual claims against RHF and RHS arising out of the Early 2021 Trading Restrictions. A motion to sever the arbitration was granted in July 2023 and any customer seeking to proceed with a claim is required to file a separate individual arbitration. #### **NOTE 7: NET CAPITAL REQUIREMENTS** We are subject to the SEC's uniform net capital rule (Exchange Act Rule 15c3-1). Advances to affiliates, dividend payments and other equity withdrawals are subject to certain notification and other provisions of the net capital rule of the SEC and other regulatory bodies. We have elected to use the alternative method permitted by the rule, which requires the maintenance of minimum net capital equal to the greater of \$0.25 million or 2% of the Rule 15c3-3 aggregate debit balances arising from customer transactions, as defined. Rule 15c3-1 also provides that equity capital may not be withdrawn or cash dividends paid if the resulting net capital ratio would exceed 10 to 1. Our net capital balance changes day to day, but on December 31, 2023, we had net capital of \$196.0 million which was \$195.8 million in excess of our required net capital of \$0.25 million. #### **NOTE 8: SUBSEQUENT EVENTS** We have evaluated events subsequent to the date of the statement of financial condition for items requiring recording or disclosure in the financial statement. The evaluation was performed through February 28, 2024, the date the financial statement was available to be issued. No event took place that requires recording or disclosure in our financial statement. Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.