Why Robinhood Is Not a Fiduciary

Abstract

This Note examines the theoretical and practical limitations of regulating broker-dealers under a fiduciary-duty paradigm. Drawing on a recent example of fiduciary regulation of broker-dealers in Massachusetts, as well as recent literature on the theoretical underpinnings of fiduciary relationships, this Note argues that fintech broker-dealers like Robinhood lack the elements of “discretion” and “best interest” necessary to establish a fiduciary relationship. Beyond theoretical coherence, there are also practical reasons to seek an alternative to a fiduciary standard. These include the need to preserve the distinct market-making functions of broker-dealers and to address infrastructural problems beyond the scope of a recommendation. This Note proposes an alternative to fiduciary regulation: expanding Regulation Systems Compliance and Integrity to include brokers like Robinhood.