A Massachusetts judge on Thursday rejected Robinhood’s bid to block state regulators from moving forward with their enforcement action alleging that the online brokerage encourages inexperienced investors to place risky trades without limits.
Suffolk County Superior Court Judge Kenneth Salinger said Robinhood could continue challenging in court the validity of the state’s new fiduciary rule, which underlies Massachusetts Secretary of State Bill Galvin’s case against it.
But Salinger said it did not follow that he should in the interim block Galvin, who oversees the state’s securities division, from moving forward with his case, noting that some of the claims were not based on the new regulation.
“If the court were to strike down the challenged regulation, the division would still be entitled to press its separate claims that Robinhood’s alleged conduct was nonetheless unethical or dishonest,” Salinger wrote.
He requested further briefing on whether Robinhood’s challenge to the fiduciary rule should be put on hold pending the outcome of Galvin’s administrative case, though he said it would be “unusual” for a judge in his position to do so.
Debra O’Malley, a spokeswoman for Galvin, said he was pleased with the ruling. Menlo Park, California-based Robinhood had no immediate comment.
Massachusetts regulators expressed concern about Robinhood’s operations even