The Securities and Exchange Commission said it will scrutinize brokerages’ moves to block investors from trading certain stocks — as the White House Friday continued to remain mum on the Reddit-fueled market frenzy.
White House press secretary Jen Psaki deferred to the SEC when asked about the historic market volatility, saying the Biden administration “respect[s] the role of regulatory agencies.”
“They are closely monitoring the situation and it’s under their purview at this point in time,” Psaki told reporters at a Friday morning briefing. “I guess part of our education can be conveying to people that the SEC is the regulatory body that would oversee this and can speak to it further.”
In its most detailed statement on the matter to date, the SEC said it’s working with other regulators and US stock exchanges “to identify and pursue potential wrongdoing” related to the extreme swings in several companies’ share prices.
The agency also indicated it will scrutinize the restrictions that brokerages such as Robinhood placed on trades of GameStop, AMC Entertainment and other stocks pumped up by rookie investors on Reddit’s “WallStreetBets” forum.
“The Commission will closely review actions taken by regulated entities that may disadvantage investors or otherwise unduly inhibit their ability to trade certain securities,” acting SEC chair Allison Herren Lee said in a joint statement with the agency’s three other commissioners.
“In addition, we will act to protect retail investors when the facts demonstrate abusive or manipulative trading activity that is prohibited by the federal securities laws,” they added.
The comments came after Robinhood blocked investors from buying GameStop shares on Thursday as the video-game chain’s stock price soared to mind-boggling heights, sending the company’s market cap from around $1 billion to more than $23 billion in a matter of weeks.
Robinhood said it didn’t have the capital to cover the trades if they went sour and eased the restrictions Friday after raising more money.
Still, the move provoked outrage among retail traders and lawmakers including Democratic Rep. Alexandria Ocasio-Cortez and Republican Sen. Ted Cruz, who fueled populist rage by complaining that Wall Street and Main Street play by different rules.
Robinhood — which offers no-fee trading, compounding its capital woes — is now allowing investors to buy runaway stocks like GameStop but capping the number of shares and options contracts users can buy.