Elizabeth Warren Asks SEC to Address Market Manipulation, GameStop
(Bloomberg) -- Senator Elizabeth Warren on Friday asked the acting chair of the U.S. Securities and Exchange Commission to explain how the agency plans to address market manipulation in response to the recent surge in share prices of companies like GameStop Corp.
“I am deeply concerned that these casino-like swings in the value of GameStop and other company shares are yet another example of the gamesmanship that interferes with the ‘fair, orderly, and efficient’ function of the market,” Warren wrote in the letter to acting SEC Chair Allison Herren Lee.
These developments are “raising obvious questions about public confidence in the market and those trading in it,” Warren said, adding that the agency must “act to ensure that markets reflect real value, rather than the highly leveraged bets of wealthy traders or those who seek to inflict financial damage on those traders.“
The Massachusetts Democrat, a member of the Senate Banking Commitee, asked the SEC to review its existing securities rules and find ways to “improve its enforcement capabilities.” She gave the agency until Feb. 5 to respond to her questions.
‘Extreme Price Volatility’
The agency is “closely monitoring the extreme price volatility of certain stocks’ trading prices over the past several days,” the SEC said in a statement released earlier Friday.
The SEC said it was also reviewing “actions taken by regulated entities that may disadvantage investors or otherwise unduly inhibit their ability to trade certain securities.”
Lawmakers from both parties on Thursday questioned why platforms like Robinhood Markets Inc. curbed trading in some of the companies whose share price surged after being touted on social media.
Warren questioned whether the GameStop frenzy could indicate broader instability in the market and U.S. financial system. She expressed concern at the fluctuations in the stock market at a time where millions of Americans continue to suffer as a result of the coronavirus pandemic.
“The manipulation of share prices may exacerbate inequality and the impacts of the ongoing pandemic-related economic collapse,” she wrote. “While investors work to outmaneuver each other in search of short-term profits, working families continue to suffer, underscoring the growing disconnect between the stock market and the real economy.”
Democratic Senator Sherrod Brown, incoming chair of the Senate Banking Committee, and Representative Maxine Waters, chair of the House Financial Services Committee, have both pledged to hold hearings on the matter. Neither panel has announced a date for those sessions.
New York Representative Alexandria Ocasio-Cortez, a member of the Financial Services Committee, said on Twitter she supports holding a hearing and questioned why Robinhood decided to “block retail investors from purchasing stock while hedge funds are freely able to trade the stock as they see fit.”
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