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29 jan 2021

SEC says it will ‘closely review actions’ as market craze around GameStop continues

The Securities and Exchange Commission (SEC) may take a closer look firms like Robinhood and their actions amid a period of elevated activity around stocks like GameStop (GME).

In a new statement from the U.S. securities regulator regarding recent market volatility, commissioners said they would "closely review actions taken by regulated entities that may disadvantage investors or otherwise unduly inhibit their ability to trade certain securities."

The SEC did not directly mention Robinhood in its statement, however, it alluded to the controversy surrounding the trading platform's decision to block retail traders from further purchasing GME. GME has been on a tear in recent days, trading above $300 at press time on the back of activity boosted by traders who have congregated on Reddit and other social media services. Some of that activity has bled into the crypto sector, with the meme-theme cryptocurrency dogecoin shooting to new highs (it's currently trading around $0.05 apiece.)

Robinhood blocked retail purchases of stocks like GameStop on Thursday, a move that came after days of eye-popping stock moves and reports of hedge funds with significant short positions on GME suffering significant losses and reaching out for reinvestments.

Critics called Robinhood's decision to freeze retail buying on particular stocks a form of market manipulation that catered to hedge funds. Robinhood cited ongoing volatility and undue platform risks for its actions.

In its statement, the SEC reiterated that issuers must ensure compliance with securities laws for any sales or offerings, but cautioned all market participants to also follow the rules of the road.

"We will act to protect retail investors when the facts demonstrate abusive or manipulative trading activity that is prohibited by the federal securities laws, said the statement. "Market participants should be careful to avoid such activity."

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