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Home Latest News Policy and regulation The SEC is analyzing the handling of GameStop trade by Robinhood

The SEC is analyzing the handling of GameStop trade by Robinhood

The U.S. securities regulator says it is looking into the Robinhood fiasco, worrying that recent delistings and instability "undermine market confidence,"

The U.S. Securities Watchdog is investigating the connection between Robinhood and the Redditors.

A joint statement was made by the Securities and Exchange Commission on Friday expressing alarm about the “extreme price volatility of certain stocks’ trading prices over the past several days.”

Although the commission did not use the words “GameStop,” “Robinhood,” or “Reddit,” it is clear that the current chaos involving the three is what the commission is talking about. It’s also attracted considerable regulatory pressure. However, the SEC did specify: “The Commission will closely review actions taken by regulated entities that may disadvantage investors or otherwise unduly inhibit their ability to trade certain securities.”

Robinhood, already the target of a major backlash from its customers, is obviously in the sights of this announcement, as it is the “regulated entity” i.e. the broker-dealer at the center of the story. It’s not unusual for Robinhood to close down trade on GME and other stocks, but the shutdown of sales but not transactions caused mass ire from buyers and casual observers.

As cointelegraph.com reported, around the same moment, as an example of classic market fraud or other violations of securities law in a digital media venue, many point to r/WallStreetBets, the Reddit community united in purchasing and keeping Gamestop. This opinion was defended by Marc Powers, formerly of the SEC enforcement office and currently an adjunct professor of blockchain law at Florida International University, but he suggested alternatives to conventional enforcement: 

“Another way of approaching this issue, rather than going after individuals, is to issue a 21(a) report as a way of providing guidance to the marketplace and these generally newer investors as to the SEC’s view on market manipulation and other laws that may have been applicable to the situation, similar to what the SEC did with the issuance of the DAO report involving ICO in July 2017.”

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