SEC flexes muscle as Reddit trading frenzy continues
The Reddit community is turning up the heat for the SEC and other regulators
As GameStop and other Reddit favorite stocks remain heavily shorted and subject to large swings, the Securities and Exchange Commission, on Tuesday, announced steps to speed up how it handles probes by senior officials by giving them more legal enforcement authority.
“This will empower senior officers to exercise the delegated authority of the Commission to authorize staff to subpoena documents and take sworn testimony. This delegation of authority will enable investigative staff to act more swiftly to detect and stop ongoing frauds, preserve assets, and protect vulnerable investors,” Acting Chair Allison Herren Lee said in a statement.
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While the SEC did not specify Reddit, GameStop or others by name it did note that the move “helps to ensure that investigative staff can work effectively to protect investors in an era when the pace of fraud – like the pace of markets themselves – is ever more rapid.”
The SEC did not respond to FOX Business' request for further clarification.
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Extreme trading in heavily shorted stocks such as GameStop, Bed Bath & Beyond, AMC and others prompted popular investing app Robinhood last month to restrict trading in certain names, sending the retail trading community into a frenzy of their own.
It also increased pressure on financial regulators, even becoming a daily question at the White House press briefings.
Just last week U.S. Treasury Secretary Janet Yellen, on short notice, summoned a meeting with the SEC and heads of the Federal Reserve, New York Federal Reserve and CFTC.
Following the meeting Yellen’s team, in a statement, noted.
“The SEC and CFTC are reviewing whether trading practices are consistent with investor protection and fair and efficient markets. Secretary Yellen believes it is imperative to uphold the integrity of these markets and ensure investor protection.”
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Former SEC Chair Harvey Pitt agreed the review of trading practices is a good first step but noted the challenges regulators are up against in cases like this.
"Unless there is clear evidence that someone was deliberately trying to influence the price of a stock, there is very little the government can do about this," he told FOX Business.
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Robinhood CEO Vlad Tenev, who has defended the firm's move to curtail trading in select names, is set to appear before Congress on February 18 to face questions about exactly what transpired over the past several weeks.
He is also advocating the adoption of a real-time settlement system.