Several U.S. senators sent a letter to regulators raising concerns over Robinhood Markets Inc.'s recent product launch.
On Dec. 13, the Silicon Valley-based startup announced that it would launch a checking and savings account backed by the Securities Investor Protection Corp. A day later, SIPC President and CEO Stephen Harbeck said his organization does not insure cash deposited for anything other than purchasing securities. Robinhood pulled the announcement, scrubbed all references to the checking and savings account from its website and social media, and rebranded it as a cash management program.
Robinhood's rebranding of the product "may simply be a way to circumvent regulatory scrutiny without offering full transparency to its customers," Sen. John Kennedy, R-La., said in a letter to the SEC, the SIPC and the Federal Deposit Insurance Corp.
Sens. Jack Reed, D-R.I.; Robert Menendez, D-N.J.; Mark Warner, D-Va.; Brian Schatz, D-Hawaii; Jerry Moran, R-Kan.; and Doug Jones, D-Ala., joined Kennedy in sending the letter.
More than 800,000 people have signed up on the waitlist for Robinhood's latest offering. The senators claim some may have signed up before the company retracted its claim that deposits would be SIPC-insured.
"Marketing an investment account as a traditional checking or savings account can be misleading and confusing for consumers," they said. The senators called for the two regulators and SIPC, a non-governmental and member-funded organization, to update Congress on how they "monitor fintechs who, intentionally or not, blur financial products for a competitive advantage."
They have asked for a response by Jan. 31, 2019.