Robinhood CEOVlad Tenev released his testimony ahead of Thursday's Congressional hearing.- The House asked Tenev to testify for Robinhood's role in January's
GameStop frenzy. - Tenev denied helping hedge funds and called to modify SEC trading rules.
The House Committee on Financial Services just released the prepared remarks from Robinhood CEO Vlad Tenev ahead of his testimony at a Thursday hearing regarding GameStop's recent stock rally.
Tenev was called to testify after Robinhood briefly blocked purchasing on GameStop stock during an unexpected late-January rally. Individual investors caused GameStop shares to soar, in part, they said, to burn institutional investors who bet against the stock.
Many individual investors, like those on the Reddit forum r/WallStreetBets, used Robinhood to buy GameStop for its commission-free platform. But following Robinhood's decision to block purchases, the app's users revolted against the app.
In his prepared remarks, Tenev said the firm blocked payments to meet "regulatory deposit requirements" defined by the Securities and Exchange Commission. Robinhood initially said it restricted trading on January 28 to "help customers stay informed" amid market volatility, but later clarified that the decision was due to deposit requirements from clearinghouses registered with the Securities and Exchange Commission.
The executive denied reports that Robinhood blocked purchases at the request of hedge funds.
"Any allegation that Robinhood acted to help hedge funds or other special interests to the detriment of our customers is absolutely false and market-distorting rhetoric," he said. "Our customers are our top priority, particularly the millions of small investors who use our platform every day to invest for their future."
Tenev said in his testimony that Robinhood users are made aware the app has "sole discretion [to restrict trading] and without prior notice" when signing up for the service.
The CEO added the SEC released an investor alert on January 30 making clear broker-dealers had the right to restrict trading "for legal, compliance, or risk management reasons."
Tenev used the end of his testimony to speak out against the rule that requires equities transactions to clear over two days. Robinhood said it takes several days to process trade transactions due to an SEC rule. The Robinhood executive instead asks Congress to consider settling trades in real-time to allow investors to make purchases faster and allow brokers to clear up proprietary cash.
"Millions of new investors have entered the market for the first time as technology transforms the world," he said. "It is time for the financial system to catch up."
Tenev will join executives from Reddit and hedge funds Melvin Capital and Citadel for the Thursday midday Congressional hearing.