US Securities and Exchange Commission investigates Robinhood, Reddit and GameStop affair

The SEC fears that the fiasco surrounding the trading of GameStop shares may have shaken confidence in the market.

The American Securities and Exchange Commission wants to investigate the Robinhood, GameStop and Reddit affair

In a corresponding announcement , the „Securities and Exchange Commission“ (SEC) expresses its concern over the „extreme volatility of certain stocks in recent days“.

Although the regulator does not explicitly use the names „GameStop“, „Robinhood“ and „Reddit“, it is more than clear that they are referring to the recent controversy surrounding them. The case has already caused a stir in politics , which makes it all the more likely that the agency will also deal with it. The SEC writes:

„The exchange supervisory authority will carefully examine the actions of registered companies that are to the detriment of investors and otherwise limit their ability to participate in trading.“

This paragraph is ambiguously aimed at the Robinhood trading platform, because the SEC-registered financial company had stopped trading with it for private investors in the course of the incidents involving the GameStop (GME) shares . However, sales were still possible during this time, which led observers to the assumption that the platform is taking this measure to protect some of its major customers and investors who had to accept massive losses by trading with the GME.

These losses were in turn brought about by the Reddit sub-forum r / WallStreetBets, in which its users jointly bought the shares of GameStop and thus triggered a short squeeze that was fatal for some hedge funds. The forists are however accused of having made themselves guilty of market manipulation. Marc Powers, a professor of blockchain regulation at the International University of Florida who previously worked for the SEC, shares this stance. But he wants to avoid punishing private investors.

Powers argues about this:

“Rather than prosecuting individuals, we should issue market-wide guidelines that help new investors understand the SEC’s perspective on market manipulation. Similar to what the SEC did in 2017 during the hype about token sales (ICOs). “

Powers is alluding to the way the stock exchange regulators deal with so-called Initial Coin Offerings (ICOs), which were touted in 2017 as a new form of capital procurement for companies. At that time, the authority did not take drastic action against these token sales, but first published guidelines. Only subsequent ICOs were then strictly regulated .

It is considered unlikely that the new US government under the aegis of Joe Biden will now take a hard hand against small private investors, but Robinhood will probably have to answer.