Is Robinhood a Scam? Is Robinhood Safe and Legitimate Broker? Is Robinhood Account Free and Insured?

Is Robinhood a Legitimate Broker

Robinhood Financial offers investing with absolutely no commissions to the user. The broker and its biggest competitor, , allow everyone from the kid looking to break into the stock market to the grizzled investor with thousands to invest the opportunity to do so at no cost. So is Robinhood app a scam? Read on to find out.

Is Robin Hood Safe and Legitimate Brokerage Firm?

Being a broker of all types of securities, Robinhood Financial is regulated and monitored by the Securities and Exchange Commission (SEC). The SEC's goal is to ensure that all publicly traded securities and the firms offering these securities adhere to the laws and rules governing the stock and bond markets.

Robinhood Financial is a member of the Financial Industry Regulatory Agency (FINRA). According to FINRA's website, the agency is "an independent, not-for-profit organization authorized by Congress to protect America's investors by making sure the securities industry operates fairly and honestly." This means member firms such as Robinhood are willing to submit to scrutiny of their operations, comply with FINRA's rules, and promote market transparency and investor education. In this respect, Robinhood is as safe and as legitimate as any other brokerage in the country.

Robin Hood Promotion

Up to $200 in FREE stock + transfer fee reimbursement.

Is Robin Hood a Scam?

Scam is a loaded term because one person's cry of "Scam" is another person's claim of "Buyers beware." Unscrupulous people are found in all businesses, and scams are certainly more prevalent where large sums of money are involved, such as investing.

Checking several online complaint-oriented websites showed that Robinhood Financial overall has a positive reputation with individual investors from that perspective.

Is Robin Hood SIPC/FDIC Insured?

The quick answer is "yes": investor accounts are insured by the Securities Investor Protection Corporation (SIPC) up to $500,000 per account. This means that if Robinhood were to go bankrupt or fail for some reason, SIPC guarantees each account up to that limit, with $250,000 of investors cash protected within that account. This is very similar to FDIC rules. What SIPC does not guarantee that any investment will generate a positive return, so investors are always at risk for a company they own stock in to fail and render their investment worthless.

Is Robinhood FDIC insured? No. FDIC insurance applies only to bank accounts. Since Robinhood does not offer any banking services, it is not insured by FDIC.

Robin Hood BBB (Better Business Bureau) Rating

Robinhood Financial has a "B" Better Business Bureau rating. In the past 3 years, there are 276 Robinhood complaints on the website. The firm's BBB page lists 22 negative reviews and 2 positive reviews on the company. See all the details on Better Business Bureau website.

Our Own Opinion

Since most of online brokers now offer $0 commission stock and ETF trades along with impressive suites of services, it makes no sense to use Robinhood anymore. We would much rather invest with two major $0 commission brokers - Firstrade or - and take advantage of everything these companies offer.