SEC Chairman Allison Herren Lee said agency is working ‘around the clock’ to eradicate possible market manipulation
The Securities and Exchange Commission is assessing social media posts for signs of possible fraud in frenzied trading in GameStop and other companies’ stocks, according to a new report
The SEC’s investigation of online reports is being done in conjunction with a review of trading data to assess whether such reports were part of a manipulative attempt to boost stock prices, Bloomberg News reported Wednesday, citing people familiar with the matter.
The meme stock rally, sparked by the Reddit forum WallStreetBets, boosted the stock prices of a number of previously oppressed companies, including GameStop, which skyrocketed 1,600 percent in January before wiping out 70 percent of its value this week.
GameStop stock closed a modest 2.7 percent on Wednesday, at $ 92.41, but remains nearly 80 percent lower than their peak around $ 483 last week at the height of the frenzy.
GameStop shares closed a modest 2.7 percent at $ 92.41 on Wednesday, but remain nearly 80 percent lower from their peak around $ 483 last week
It was not immediately clear whether the purpose of the SEC investigation was the small investors who promoted GameStop in a battle against large hedge funds, or whether the agency suspects larger investors of manipulating social media behind the scenes.
A SEC spokesman did not immediately respond to the request for comment.
Users of the WallStreetBets forum scoff at the SEC’s possible move to investigate them, sometimes in crude terms.
“To the SEC attorney reading this: I like to cover myself in lube and pretend I’m a snail,” wrote one.
Hello to all new SEC interns. I bought 11 more shares yesterday / today. I just like the stock ok, ‘wrote another.
Experts say it is difficult to prove fraud against anyone talking about a stock unless the person lied about the company in some way.
WallStreetBets forum users scoff at the SEC’s possible move to investigate, sometimes in crude terms
It’s not a crime to go on a website and say, ‘I think the stock is going to go up,’ Brad Bennett, a former head of enforcement for the brokerage firm’s Financial Industry Regulatory Authority, told Bloomberg.
“If people choose to follow you, it is not an offense or crime,” he added.
Earlier this week, the SEC’s acting chairman, Allison Herren Lee, said the agency is working “ around the clock ” to eradicate potential market manipulation in market volatility.
Lee said in an interview with National Public Radio earlier this week that the current situation could be “a little more challenging” than the SEC’s typical work.
Users of the Reddit forum WallStreetBets have encouraged buying GameStop, AMC and other stocks, which caused a rise in the stock in the short term.
Shares of GameStop were up nearly 400 percent last week and have since fallen about 80 percent from last week’s highs.
Lee will meet with Yellen (above) and the heads of the Federal Reserve and the Commodity Futures Trading Commission possibly as soon as Thursday.
An employee talks to a customer at a GameStop store in New York City on Saturday
United States securities laws prohibit the distribution of false or misleading information designed to manipulate investors into buying or selling securities, and regulators are expected to investigate whether Reddit has been used for this purpose.
Meanwhile, Lee Yellen will meet with the heads of the Federal Reserve and the Commodity Futures Trading Commission, possibly as early as Thursday, a treasury official told Reuters.
Yellen has asked to discuss recent volatility and whether trading has been consistent with fair and efficient markets.
It was not clear whether a meeting could trigger action, but experts expect that attention will also turn to the growing role of non-bank companies such as hedge funds in financial markets, as small traders brace for a confrontation.
Final boss fight. It will happen tomorrow with Yellen, SEC and Federal Reserve, ”read a Wednesday post on Reddit. “They’re going to try to stop the party or they’re looking for money to pay us and not crash everything at once.”