The U.S. Securities and Exchange Commission in Washington, D.C.
Adam Jeffery | CNBC
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The Securities and Exchange Commission, the nation’s top financial regulator, said on Friday that it is reviewing recent trading volatility that has led to a meteoric rise in GameStop and AMC Entertainment and other stocks.
In a statement, the SEC vowed to to protect individual, retail traders and also promised to scrutinize actions taken by brokerages that may “disadvantage investors or otherwise unduly inhibit their ability to trade certain securities.”
“We will act to protect retail investors when the facts demonstrate abusive or manipulative trading activity that is prohibited by the federal securities laws,” the SEC said in a release.
“The Commission is working closely with our regulatory partners, both across the government and at FINRA and other self-regulatory organizations, including the stock exchanges, to ensure that regulated entities uphold their obligations to protect investors and to identify and pursue potential wrongdoing,” the regulator added.
The statement came as a handful of heavily shorted equities soared on Friday, as shares of high-flying stocks like videogame retailer GameStop, theater operator AMC and headphone maker Koss rallied 50%, 53% and 43%, respectively.
The SEC’s pledge to clamp down on brokerages that may have “unduly” limited customers’ ability to trade in the speculative names likely comes as good news to members of WallStreetBets Reddit and other retail traders who helped spark the ongoing “squeeze” of funds betting against heavily shorted stocks.
Many individual trades took to Twitter and other social media platforms on Thursday to protest Robinhood’s decision to restrict access to the high-flying names at the center of the controversy. The popular online brokerage later said it would allow limited buying in the GameStop and other volatile stocks on Friday.
For the week, GameStop is up 420%, Koss is up 1,800% and AMC is up 280%.
The violent swings in such stocks, as well as Robinhood’s decision to restrict trading, has drawn the ire of politicians on both sides of the political aisle.
Sen. Elizabeth Warren told CNBC on Thursday that she blamed the SEC’s failure to act for the dayslong blitz of market speculation.
“We need an SEC that has clear rules about market manipulation and then has the backbone to get in and enforce those rules,” Warren said. “To have a healthy stock market, you’ve got to have a cop on the beat.”
“That should be the SEC,” she added. “They need to step up and do their job.”