The U.S. Securities Exchange Commission (SEC) has fined popular investing app Robinhood for withholding information about the business' practices from investors. The withheld information was made publicly available in a best-selling book before the company withdrew it from the public.

According to the SEC's complaint, Robinhood engaged in "material misrepresentations and omissions" by Robinhood. Specifically, the company had omitted specific details on how it generated revenue from trading firms; following a practice that many other firms perform, Robinhood sells its orders to other firms that specialize in high-speed trading in order for customer orders to be carried out (which the SEC refers to as "payment for order flow").

"Robinhood's customer agreements and trade confirmations stated it 'may' receive payment for order flow, and Robinhood disclosed certain information about those payments as required in its SEC-mandated Rule 606 reports. However, in FAQs on its website describing how it made money, and in certain communications with customers addressing the same issue, Robinhood omitted payment for order flow when it described its revenue sources because it believed that payment for order flow might be viewed as controversial by customers," the SEC explained.

This form of trading is controversial with some experts and many consumers since these types of practices can cost investors a great deal of money, despite firms like Robinhood offering "commission-free" trading because of it. The practice and its ill effects were popularized by the 2014 book Flash Boys, which detailed how it affected markets and documented the business model. According to the SEC, the controversy that followed the revelations is why Robinhood decided to withhold information on its order-flow payments.

Even before the fine, Robinhood has been marred by controversy. The streamlined app, which outwardly makes investing more manageable for beginners, lacks many of the specialized features of apps used by high-volume traders, which limits the amount of research novice investors can do in-app. The app has also been accused of "gamifying" trading, which can drive young investors to pick up practices that might not be entirely beneficial for learning how to invest properly, such as trades made on a whim or not properly researching a company first.

"[Robinhood seems] to be more focused on making a cool app than having a broker-dealer that complies with securities laws that investors get the best available price when they trade," says Barbara Roper of the Consumer Federation of America.

Robinhood has plans go public in 2021, with the company reportedly picking Goldman Sachs (GS  ) to lead preparations, according to Reuters sources.