SEC acting president Allison Herren Lee said the agency is working ’24 hours a day’ to eradicate any potential market manipulation
The Securities and Exchange Commission is analyzing social media publications for signs of potential fraud in the frantic trading of shares in GameStop and other companies, according to a new report
Analysis of online postings by the SEC is being done in conjunction with a review of commercial data to assess whether such postings were part of a manipulative effort to raise stock prices, Bloomberg News reported on Wednesday, citing people familiar with the subject matter.
The rise of meme stock driven by the Reddit WallStreetBets forum inflated the stock prices of several previously oppressed companies, including GameStop, which shot up 1,600% in January before eliminating 70% of its value this week.
GameStop’s shares closed a modest 2.7 percent on Wednesday at $ 92.41, but remain almost 80 percent below a peak of around $ 483 last week, at the height of the frenzy.
GameStop shares closed at a modest 2.7 percent on Wednesday at $ 92.41, but remain nearly 80 percent below its $ 483 peak last week
It was not immediately clear whether the target of the SEC’s investigation was the small investors who promoted GameStop in a battle against large hedge funds, or whether the agency suspects that large investors manipulate social media behind the scenes.
A SEC spokesman did not immediately respond to the request for comment.
Users of the WallStreetBets forum scoffed at the potential move by the SEC to investigate them, sometimes in crass terms.
‘To the SEC lawyer reading this: I like to cover myself with lubricant and pretend I’m a slug,’ wrote one.
‘Hello to all new SEC interns. I bought 11 more shares yesterday / today. I just like the stock, okay, ‘wrote another.
Experts say it is difficult to prove fraud against someone for publicizing a lawsuit, unless the person has lied about the company in some way.
Users of the WallStreetBets forum scoffed at the potential move by the SEC to investigate them, sometimes in crass terms
“It is not a crime to go on a website and say, ‘I think stocks will go up,'” Brad Bennett, former head of enforcement for the Financial Sector Regulatory Authority’s brokerage regulator, told Bloomberg.
“If people decide to follow you, none of this will be a violation or a crime,” he added.
Earlier this week, SEC acting president Allison Herren Lee said the agency is working ’24 hours a day’ to eliminate any 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 typical SEC work.
Users on the Reddit WallStreetBets forum have encouraged the purchase of GameStop, AMC and other stocks, causing an increase in short-term stocks.
GameStop’s stock rose nearly 400% last week and has since fallen about 80% from last week’s highs.
Lee will meet Yellen (above) and the heads of the Federal Reserve and the Commodity Futures Trading Commission, possibly on Thursday
An employee speaks to a customer at a GameStop store in New York City on Saturday
US securities law prohibits the spread of any false or misleading information intended to manipulate investors into buying or selling securities, and regulators are expected to explore whether Reddit was used to do so.
In the meantime, Lee will meet with Yellen and the heads of the Federal Reserve and the Commodity Futures Trading Commission, possibly on Thursday, a Treasury official told Reuters.
Yellen asked to discuss recent volatility and whether trade has been consistent with fair and efficient markets.
It was unclear whether a meeting could result in action, but experts hope the focus will also fall on the growing role played by non-bank companies, such as hedge funds in the financial markets, as small traders prepare for a confrontation.
‘Boss’s final fight. It will happen tomorrow with Yellen, SEC and Federal Reserve ‘, read a post on Wednesday on Reddit. “They are going to try to stop the party or are looking for money to pay us and not break everything at the same time.”