(Adds details about market volatility, ethics memo)
WASHINGTON, February 2 (Reuters) – U.S. Treasury Secretary Janet Yellen is calling a meeting of key financial regulators this week to discuss market volatility driven by GameStop Corp’s retail trade and other stocks.
Yellen will bring together the heads of the Securities and Exchange Commission, the Federal Reserve, the Federal Reserve Bank of New York and the Commodity Futures Trading Commission, a Treasury official said on Tuesday.
Yellen asked for and received permission from ethics attorneys before calling the meeting, according to a document seen by Reuters, and to get involved in comprehensive issues in the financial services industry.
Yellen’s decision to seek the exemption came after a report here from Reuters that, because of the lecture fees that she was paid by a key player in the GameStop saga, the Citadel LLC hedge fund, she may need to seek an exemption ethics to deal with issues involving the company.
The Treasury official, who declined to be named, said the meeting would be held this week, possibly as early as Thursday.
“Secretary Yellen believes that market integrity is important and called for a discussion of recent volatility in financial markets and whether recent activities are consistent with investor protection and fair and efficient markets,” said Treasury spokeswoman Alexandra LaManna in a statement to Reuters.
Yellen’s move comes after days of fluctuations in the shares of video game retailer GameStop, driven by retail investors who have won or lost billions of dollars to hedge funds and other investors in recent weeks. Retail activity has also boosted silver prices in recent days.
GameStop’s shares fell more than half in value on Tuesday and silver prices retreated as the trading frenzy driven by Reddit that rocked the stock and commodity markets has eased, at least for now.
GameStop shares closed down 60% to $ 90. They are now worth less than a fifth of their $ 483 high last week.
The saga is likely to accelerate a regulatory review of the growing role played by non-banking companies in the financial markets, say regulatory experts.
Treasury ethics lawyers have given Yellen flexibility to work on any related issues that arise, with no limits on current or future markets, said the Treasury official.
In the memo granting Yellen permission to call the regulators’ meeting, a Treasury ethics officer, Brian Sonfield, said it would be “difficult, if not impossible” for Yellen to abstain from issues involving market volatility.
“You are the Secretary of the Treasury, whose roles require you to be involved in a wide range of issues focused on these sectors,” wrote Sonfield.
“Questions related to these sectors can arise at any time, without the opportunity to consult with the ethics office. These circumstances make it difficult, if not impossible, for you to refuse matters related to these sectors and also to argue in favor of prior authorization.
Reporting by David Lawder and Trevor Hunnicutt; Additional reporting by Andrea Shalal; Editing by Heather Timmons, Cynthia Osterman and Peter Cooney