The US Securities and Exchange Commission in Washington, DC
Adam Jeffery | CNBC
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The Securities and Exchange Commission, the country’s top financial regulator, announced on Friday that it was reviewing recent trading volatility, which has seen GameStop, AMC Entertainment and other stocks soar.
In a statement, the SEC pledged to protect individual retailers and also pledged to investigate actions taken by brokers that “may disadvantage investors or otherwise unduly hinder their ability to trade certain securities”.
“We will act to protect retail investors if the facts show abusive or manipulative trading activity that is prohibited by federal securities laws,” the SEC said in a press release.
“The Commission is working closely with our regulatory partners, both in government and at FINRA and other self-regulatory organizations, including exchanges, to ensure that regulated companies meet their obligations to protect investors and identify and prosecute potential wrongdoing.” the controller added.
The explanation came as a handful of sharply shortened stocks rose on Friday, as stocks of soaring stocks like video game retailer GameStop, theater operator AMC and headphone maker Koss rose 50%, 53% and 43%, respectively.
The SEC’s promise to curb brokerage deals that may have “unduly” constrained clients’ tradability is likely good news for members of WallStreetBets Reddit and other retailers who have helped to reduce the ongoing “squeeze” of fund bets against severely curtailed Trigger shares.
Many individual trades went on Twitter and other social media platforms on Thursday to protest Robinhood’s decision to restrict access to the lofty names at the center of the controversy. The popular online broker later said it would allow limited buying in GameStop and other volatile stocks on Friday.
For the week, GameStop is up 420%, Koss is up 1,800%, and AMC is up 280%.
The sharp swings in such stocks, as well as Robinhood’s decision to restrict trading, have drawn the ire of politicians on both sides of the political aisle.
Senator Elizabeth Warren told CNBC Thursday that she blamed the SEC’s failure to act for the days of flash of market speculation.
“We need an SEC that has clear rules for market manipulation and then has the backbone to enforce and enforce those rules,” said the Massachusetts Democrat. “To have a healthy stock market, you have to have a cop on the beat.”
“That should be the SEC,” she added. “You have to step up and do your job.”
Rep. Patrick McHenry, senior member of the House Financial Services Committee, said Friday morning that he was concerned about unequal access to capital markets.
I want to “make sure that we don’t stop people from having additional access to markets and therefore leave them to activities like we’ve seen at GameStop and some other tradable securities,” the North Carolina Republican told Squawk Box.
“What I’m seeing here is this bigger case: average, everyday investors are excluded from the access that insiders like C-suite members get from corporations, and hedge funds and private equity get natural access,” he added. “And that the credit investor standard has turned our markets into an extremely prosperous lie.”