What Happens If Robinhood Goes Under?
If you’re worried about Robinhood’s stability and financial strength, this article has the answers. We’ve done the research on this broker and here’s what you should know:
Robinhood’s History
Robinhood entered the brokerage industry in 2013 with a mobile app offering zero commissions on U.S.-listed stocks and ETFs. This bold move disrupted the market and forced other brokers to adopt commission-free trading.
The plan worked for Robinhood, and it quickly grew. Today, it has around 26 million funded accounts. Over time, it expanded its offerings to include options, cryptocurrencies, and website-based trading.
Problems at Robinhood
Despite its growth, Robinhood has faced many controversies. In December 2019, FINRA fined the company for not ensuring customers received the best prices on equity trades.
In July 2019, hackers gained access to customer data and assets after Robinhood admitted it had stored passwords incorrectly.
In 2020, the SEC fined Robinhood $65 million for not properly disclosing that it sold client orders to high-frequency trading firms.
These are just some of the issues the company has faced.
Robinhood’s Financial Performance
Robinhood went public in 2021 under the ticker symbol HOOD. As a public company, it must report financial results, making it easier to track its performance.
Robinhood Promotion
Up to $200 free stock + 3% IRA match + transfer fee refund at Robinhood.
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Protection of Robinhood Accounts
Robinhood is a member of SIPC, which insures U.S. securities accounts. However, SIPC does not cover cryptocurrencies.
SIPC provides up to $500,000 of coverage per customer, including up to $250,000 for uninvested cash. This protection guarantees the number of shares but not their market value. Cryptocurrencies are excluded.
Robinhood also carries secondary coverage through Lloyd’s of London. This insurance covers up to $10.5 million per customer, including $1.75 million for cash, with a $100 million firmwide limit. Like SIPC, it covers missing securities but not market declines.
If both policies were exhausted, no additional protection would apply. Missing securities are rare, but that is the specific situation these policies are meant to cover.
What Happens If Robinhood Goes Out Of Business?
If Robinhood filed for bankruptcy, customer assets such as securities and cryptocurrencies would still belong to account holders and not to Robinhood itself. They would not be subject to creditor claims. If assets were missing, it would be considered a crime, and regulators like the SEC and FBI would step in, alongside SIPC coverage.
A brokerage earns money from assets in customer accounts, even if it doesn’t own them. If Robinhood couldn’t generate enough revenue from its accounts, it could eventually go out of business. In that case, another brokerage would likely acquire its accounts.
For example, in 2016, OptionsHouse accounts were sold and transferred to E*Trade after the company closed. Similarly, in 2017, Scottrade accounts were transferred to Charles Schwab after its closure. In both cases, customers simply began using the acquiring firm without disruption.
If Robinhood were acquired, it would announce the timeline and details of the transfer. Customers could choose to move their accounts elsewhere before the automatic transfer if they preferred. If no firm acquired Robinhood’s accounts, customers could transfer accounts themselves via the ACATS system. Robinhood currently charges $100 for outgoing transfers.
Read
Robinhood Review.
Robinhood Promotion
Up to $200 free stock + 3% IRA match + transfer fee refund at Robinhood.
Open Robinhood Account
Charles Schwab as an Alternative
If you’re uneasy about Robinhood, you could switch to Charles Schwab. Founded in 1971, Schwab is far more established and offers a
wider range of assets, including bonds, forex, futures, and mutual funds.
Although Robinhood charges $100 for outgoing transfers,
Charles Schwab reimburses ACATS fees. You just need to provide a Robinhood statement showing the fee.
To move a Robinhood account to Charles Schwab, simply open an account at Schwab and start the transfer on their site. Note that cryptocurrencies cannot be transferred.
Schwab also has a stronger reputation for customer service. Robinhood has faced frequent complaints in this area, while Schwab has maintained a positive record.
In addition, Schwab offers advanced platforms like
thinkorswim, which has powerful charting and screening tools that go beyond Robinhood’s website capabilities.
Finally, Schwab has far more account types than Robinhood, including retirement, custodial, corporate, and educational accounts.
Read
Charles Schwab Review.
Charles Schwab Promotion
Satisfaction guarantee, ACAT reimbursement, and $0-fee trades at Charles Schwab.
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Updated on 9/5/2025.
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