The YouTuber known as Roaring Kitty, who became the face of the GameStop stock frenzy and also worked as a broker until last week, could run into legal trouble over possible violations of federal rules governing brokers’ communications with the public.
Keith Gill, 34, placed a huge bet on GameStop stock over a year ago, sharing his ideas about the stock online in the months leading up to the ‘meme stock’ bubble.
But his comments could pose a problem for Massachusetts Mutual Life Insurance Co., which employed him and had a duty to supervise him.
Keith Gill, the YouTuber known as Roaring Kitty, is being overseen by the regulatory authorities
Massachusetts securities regulators would investigate Gill and his former job as director of financial welfare education at insurance company MassMutual.
The company told regulators that it was unaware of Gill’s YouTube videos promoting GameStop stock and that it would have asked him to quit or fire him, according to the New York Times.
While he did not advise specific clients on investments or insurance, he was not exempt from regulations that strictly regulate broker behavior, securities attorneys have suggested to the Wall Street Journal.
The once obscure YouTuber has become an unlikely celebrity in the clash between small investors and large hedge funds, seen by some as a folk hero and by others a dangerous disruptor of markets.
Gill first mentioned GameStop as a potential investment over a year ago
The Financial Industry Regulatory Authority (Finra) may want to take a closer look at Gill
After the struggling video game retailer’s shares skyrocketed 1,600 percent in January, when small investors inspired by the WallStreetBets message board on Reddit scooped up the stock to punish hedge funds betting against it, the bubble collapsed this week and it’s down more than 70 percent since Monday.
Gill worked as a ‘director of financial welfare’ but was a registered broker. He has already paid out more than $ 13 million on his trades and was on an additional $ 7.6 million in profit as of Wednesday, according to a screenshot of his trading account he posted on Reddit. At the height of the frenzy last week, his account was worth nearly $ 48 million.
Gill gave his call-up to MassMutual on Jan. 21, but was still technically working there until Jan. 28, when the GameStop frenzy was nearing its peak, the company told regulators.
Gill quit his job at MassMutual on January 21 when GameStop’s stock exploded
He is a licensed stockbroker and licensed professionals have an “obligation” to inform their employers of their outside activities, said William Galvin, the Massachusetts Commonwealth Secretary.
On Friday, Galvin’s office sent a letter to MassMutual asking for information about Gill’s employment and whether the company was aware of his outside activities.
“I’m not trying to prevent anyone from accessing the market,” Galvin said. “This is about transparency.”
Over the past six months, Gill posted dozens of videos, the majority of which related to his view that GameStop stock was undervalued and would rise as others noticed.
Some videos looked at Gamestop’s past performance and predictions, but even posting it on the Internet under a pseudonym does not relieve him of legal obligations, attorney Susan Light said.
Gill was seen last week in his rented home in Massachusetts, where he lives with his wife and their two-year-old daughter
Shares of GameStop, which rose 1,800 percent in January in a speculative bubble sparked by small investors, are down nearly 84 percent in the first four days of this month
An average Joe can go to a website and say, “I like XYZ stock.” A broker cannot. It would make sense if the Financial Industry Regulatory Authority (Finra) were interested in this. ‘
“If you have a registered person who trades securities outside the company and makes recommendations to the general public, that may be a big mistake for the regulator,” said Brad Bennett, a former Finra enforcement director of the Journal.
‘After 40 years in the industry, I have no doubts whether you are a registered sales representative [of a brokerage firm]”You shouldn’t communicate with anyone on Reddit,” said Bill Singer, a regulatory defense attorney. “That’s the safest thing to do.”
Gill’s videos contain a disclaimer stating that investors should consult a financial advisor before making an investment decision and “should not consider an opinion on this YouTube channel as a specific inducement to make any particular investment.”
Roaring Kitty continued to make topical memes about the stock’s rising price
Andrew Calamari, a lawyer with Finn Dixon & Herling and a former director of the New York Securities and Exchange Commission office, told the Times it was too early to determine whether Gill had violated any securities regulations.
But he said Gill could have violated corporate rules at MassMutual had he not been allowed to post on Reddit and YouTube.
“Companies don’t allow employees to stock up and make predictions,” he said of employees other than analysts.
Gill hasn’t posted on YouTube since January 22, and on Wednesday announced on Reddit that he would be relinquishing daily updates on his GameStop position there.
He was largely silent on the controversy, aside from an interview with the Wall Street Journal last week.
“I didn’t expect this,” he said. “This story is so much bigger than me … I support these private investors, their ability to make a statement.”
Gill made an initial investment in GameStop of approximately $ 53,000 in June 2019. He later added the investment and plowed a total of $ 745,991.
A five-day review of GameStop’s stock price shows the sharp drop from last week’s peak
GameStop’s stock price is seen in an annual review, with the stock peaking and falling
In his latest YouTube videos, filmed in his basement, he celebrated his success with a whopping 200,000 fans, wearing sunglasses and a sweatband to hold back his shoulder-length hair and chicken tenders (the mascot food of his followers) in Prosecco.
Gill shot to fame on the Reddit trading forum WallStreetBets when he regularly posted updates to his’ YOLO [You Only Live Once]Trading will begin in 2019 under the username DeepF *** ingValue.
But Gill told the Journal that his original decision to buy – first ridiculed in WallStreetBets before it was honored – was based on the company’s fundamentals.
“People took a quick try and said GameStop was the next Blockbuster,” he said, referring to the video store nearly destroyed by the decline in retail and the rise of streaming services.
It seemed that a lot of people just weren’t digging deeper. It was a gross misclassification of the opportunity, ”he said.