SEC fires warning shot at Robinhood for GameStop buy ban
29 January 2021 US
Image: Axel_Bueckert/adobe.stock.com
The US Securities and Exchange Commission (SEC) says it is “closely reviewing actions taken by regulated entities that may disadvantage investors or otherwise unduly inhibit their ability to trade certain securities”.
In a statement, the market watchdog outlined that it is acting to protect retail investors “when the facts demonstrate abusive or manipulative trading activity that is prohibited by the federal securities laws”.
The SEC has also stated that “market participants should be careful to avoid such activity”.
Yesterday, Robinhood briefly barred its several million-strong user base of retail investors from further purchases in a dozen stocks that had seen extreme volatility in recent weeks, including GameStock which briefly tipped the scales at a 2,000 per cent year-to-date increase.
In a blog post explaining the unprecedented move, Robinhood writes: “In light of recent volatility, we restricted transactions for certain securities to position closing only.
“These requirements exist to protect investors and the markets and we take our responsibilities to comply with them seriously, including through the measures we have taken today.”
The move was widely condemned by its users on social media, along with other outlets including Barstool Sports which has been covering the drama to date.
After the backlash, the US trading app has since allowed very limited stock purchases to resume.
Elsewhere, congresswoman Alexandra Ocasio Cortez, tweeted: "This is unacceptable. We now need to know more about Robinhood's decision to block retail investors from purchasing stock while hedge funds are freely able to trade the stock as they see fit."
Tesla CEO Elon Musk, an outspoken critic of short sellers, also took to social media to back Cortez and voice his disapproval regarding the GameStop market fiasco.
Elsewhere, the UK’s Financial Conduct Authority also warned that “UK investors should take care when trading shares in highly volatile market conditions that they fully understand the risks they are taking. This applies to UK investors trading both US and UK stocks."
The regulator adds: "Firms and individuals should also ensure they are familiar with, and abiding by, all regulations including the market abuse and short selling regimes in the jurisdiction they are trading in."
In a statement, the market watchdog outlined that it is acting to protect retail investors “when the facts demonstrate abusive or manipulative trading activity that is prohibited by the federal securities laws”.
The SEC has also stated that “market participants should be careful to avoid such activity”.
Yesterday, Robinhood briefly barred its several million-strong user base of retail investors from further purchases in a dozen stocks that had seen extreme volatility in recent weeks, including GameStock which briefly tipped the scales at a 2,000 per cent year-to-date increase.
In a blog post explaining the unprecedented move, Robinhood writes: “In light of recent volatility, we restricted transactions for certain securities to position closing only.
“These requirements exist to protect investors and the markets and we take our responsibilities to comply with them seriously, including through the measures we have taken today.”
The move was widely condemned by its users on social media, along with other outlets including Barstool Sports which has been covering the drama to date.
After the backlash, the US trading app has since allowed very limited stock purchases to resume.
Elsewhere, congresswoman Alexandra Ocasio Cortez, tweeted: "This is unacceptable. We now need to know more about Robinhood's decision to block retail investors from purchasing stock while hedge funds are freely able to trade the stock as they see fit."
Tesla CEO Elon Musk, an outspoken critic of short sellers, also took to social media to back Cortez and voice his disapproval regarding the GameStop market fiasco.
Elsewhere, the UK’s Financial Conduct Authority also warned that “UK investors should take care when trading shares in highly volatile market conditions that they fully understand the risks they are taking. This applies to UK investors trading both US and UK stocks."
The regulator adds: "Firms and individuals should also ensure they are familiar with, and abiding by, all regulations including the market abuse and short selling regimes in the jurisdiction they are trading in."
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After GameStop backlash, Citron Research will no longer release short reports
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