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19 Duke L. & Tech. Rev. 43 (2020-2021)
Consumers Beware: How Are Your Favorite "Free" Investment Apps Regulated?

handle is hein.journals/dltr19 and id is 43 raw text is: CONSUMERS BEWARE: HOW ARE YOUR
The proliferation of free or low-cost investment apps has
disrupted the financial industry in recent years. Major brokerage
firms have been pressured to go to zero fees due to intense
competition from their fintech counterparts. While these apps
have extended their products and services to those underserved by
traditional brokers, some of their practices raise consumer
protection concerns. Namely, the practice of payment for order
flow, which helps fintech startups sustain a zero-commission
model, could lead to subordinating customers' best interest to
market makers who acquire their retail orders from these fintech
startups. Further, cash management accounts, newly popular
among fintech startups with an ambition to compete with
chartered banks raise questions about the use of idle customer
assets and the protections afforded to these accounts in case of
liquidation. This Note considers the products and services of these
investment apps in the context of existing U.S. regulations and
regulators for broker-dealers, investment advisors, and chartered
banks. To illustrate this, this Note analyzes the potential consumer
financial protection issues arising out of these fintech-based
investment platforms' distinctive business models and the services
they provide.
Robinhood, Acorns, Betterment, Stash, and other free or low-cost
investment apps make it easier than ever for every smartphone user to
invest on the go, with zero experience and little more than pocket change.
These kinds of apps are exploding right now, appealing mainly to young
people because of their low barriers to entry, automation and familiar tap-
swipe-buy, Tinder-style interface.2 For almost all of these apps, all users
have to do is first download the app, then set up a profile that lets the
company behind the app know the best kinds of investment suitable for
the user's risk averseness and return expectations, and finally connect a
bank account to give access to some funds and be done.
t Duke University School of Law, J.D. expected, May 2021; Peking University,
L.L.B., July 2018.
2 Jennifer Jolly, Micro Investing Apps Have Been Popular during the Stock
Market's Rise. Do They Work When It Dives? USA TODAY (Mar. 8, 2018),
apps -have-been-popular-during-stock-markets-rise-do-they-work-when-

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