The typical RH customer... the one that invests spare change, purchases fractions of a share, and thinks they can get rich off a $100 investment, is not going to know these nuances.

There's good reasons the traditional brokerages have so many rules...

The facts seem to be RH saw a opportunity to prey on uninformed individuals by making investing seem "cool" and "stupid easy".

RH deliberately did not do a good job of A) Putting limits on newbies (like no margin!) so they do not get themselves into trouble and B) Explaining the more complicated concepts behind what RH was allowing literally any mirror-fogging human being to do.

Plenty of people trading for 10k at Schwab don't know either. Plenty of people don't know the details of their bank account, too. I do blame RH but not for this..

People are always going to be uninformed about some things, yes we should minimize that but we shouldn't make services available only to the rich because of it.

I'm not aware of any other institution that allows to to take on debt by accident.

You've never heard of a reversed PayPal or bank transaction that leaves users with a negative balance?

Banks (overdraft)

Also, not having enough money in the bank, getting charged by the bank to hold on to what little you have, eventually getting charged into negative dollars.

All banks offer overdraft protection when you open your account, and they clearly explain what it would mean for your account to go negative.

Definitely not a good comparison.

RH also explains it. Some people don't bother paying attention to that in both cases.

ING does too. I've been bitten by that.

> RH deliberately did not do a good job of A) Putting limits on newbies (like no margin!) so they do not get themselves into trouble

But someone who has initiated a money transfer and then used that pending money to buy stock, technically on margin, is not getting themselves into margin-related trouble. There is no good reason for there to be limits here.

Uh no, as defined by Reg T, brokers are free to let cash accounts immediately buy with unsettled funds. It's only a violation if you sell a security before the funds used to purchase it settle.

Margin accounts have a different legal definition and regulations.

Robin Hood is actually pretty unique in that its cash accounts are always restricted to settled funds; instead they decided to optimize for margin accounts that don't allow for increased leverage. Which is not something other brokers optimize for that I've seen.