‘Meme Stock’ report calls for policy changes

U.S. Rep. Maxine Waters, chair of the Financial Services Committee, and Rep. Al Green, chair of the Oversight and Investigations Subcommittee, released a report Friday (June 24) on the “meme stock” phenomenon involving GameStop and its impact on the economy.

Meme stocks became popular in January 2021, during which many retail investors bought huge amounts of them, making things much more volatile for institutional investors betting against stocks.

Waters wanted to take a “deep dive” into this area, which is now complete. Some of the key findings included that brokerage app Robinhood used “troublesome” business practices and had a corporate culture that put rapid growth above stability.

It also found that the brokers that looked into the most serious concerns were those that put in place the most extensive trading restrictions.

Additionally, many companies the committee spoke to do not have explicit plans to change their policies on how they will meet requirements in the event of extreme market volatility, or how they will adopt restrictions. commercial if they must.

“Last year’s meme trading frenzy raised important questions about the fairness of our financial markets, the gamification of trading, the treatment of retail investors, and much more,” Waters said in a press release. from the room. “In response to these events, my committee held several hearings – including the first with CEOs of Robinhood, Citadel Securities and many others – to get to the bottom of the role these companies have played in the market volatility and disruption. in January 2021.”

Going forward, the committee recommended policy changes designed to help regulators better understand the massive amounts of new retail traders. He also recommended better oversight of retail-facing superbrokers, as well as adding capital and liquidity requirements and oversight.

PYMNTS wrote last year that the Securities and Exchange Commission (SEC) had begun trying to crack down on gamification, which online brokers have used to attract subscribers.

Read more: The SEC extends its investigation to the gamification of stock market transactions

At the time, SEC Chairman Gary Gensler said the regulator wanted to examine how investors might be misled by projections of what they would do with these brokerages – in which the risk is higher. higher than the companies claim.

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About: PYMNTS’ survey of 2,094 consumers for The Tailored Shopping Experience report, a collaboration with Elastic Path, shows where merchants are succeeding and where they need to up their game to deliver a personalized shopping experience.

Sallie R. Loera