Regulating Democratized Investing, 83
Ohio St. L.J.
Available at: https://repository.uclawsf.edu/faculty_scholarship/1960
Robinhood and its imitators activated millions of new investors. Perhaps we should applaud them for finally resurrecting the retail investor after a decades-long decline. There are, however, reasons for concern. Robinhood racked up record fines in the run-up to its IPO. Its users are young, inexperienced, and prone to speculating in risky investments. Given these concerns, this Article considers how to protect this new class of “ultra-retail investors” while also leaving regulatory breathing room for these new market participants. It concludes that many current regulatory approaches risk being ineffectual or stamping out ultra-retail investing altogether by targeting product features that were instrumental to Robinhood’s ascent. This Article therefore proposes a new approach that better balances paternalistic notions of investor protection, on the one hand, and investor access and choice, on the other hand. Specifically, this Article proposes a regulatory safe harbor for small accounts. Instead of trying to make investing safe, or excluding investors from investments deemed unsafe, the proposal maximizes investor choice and access within limits.
Ohio State Law Journal