US senators are asking regulators to check whether Robinhood has misled customers into launching their new investment accounts. The investment application revealed last week new accounts for checking and savings accounts with a huge interest rate of 3%. Check prices are barely above zero in many banks. But after the announcement, Securities Protection Corporation, a non-profit organization in the industry, said the product may not be insured. Since then, Robinhood has been able to transform the service into a Cash Management Program. “We are concerned that Robbenoth’s original announcement of cash management may be just a way of circumventing regulatory oversight without giving full transparency to its clients,” seven Republican and Democratic lawmakers said in a letter dated Thursday. The memo requires the Securities and Exchange Commission and the Federal Deposit Insurance Corporation to provide an “update” on how these agencies will “closely monitor technology trends that intentionally or not blind the financial products to gain a competitive advantage.” It was signed by Sen. John F. Kennedy, Jack Reid, Robert Mendes, Mark Warner, Brian Shats, Jerry Moran and Doug Jones. Robinhood did not immediately respond to the request for comment. The letter states that senators do not look along with existing banks, but wish to ensure adequate supervision on the fintechs. “Competition with traditional employees such as banks and credit unions can ultimately benefit consumers, but we must continue to maintain the integrity of our financial system with the expansion of the digital revolution,” he reads. Robin Hood has made waves in the financial services industry, prompting many major banks and brokerage firms to start offering low-cost investment accounts. The company’s founder, Vlad Tanayev, wrote in a blog in October that Robinhood has more than six million customers. But the introduction of the new “cash management” accounts was a major stumbling block. “As a licensed dealer, we are very organized and take clear communications very seriously,” said Teniv and Baigo Bhatt, another co-founder of the company, in a blog posted last week. They admitted that “the announcement has caused some confusion.” They added that Robinhood will “work closely with regulators” as the application prepares the Cash Management Program. They said the company was working on renewing its marketing materials and would give it a new name.
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