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GameStop Corporation (NYSE: GME), according to Massachusetts securities regulator, Barron’s reported Tuesday.
What Happened: The Secretary of the Commonwealth of Massachusetts William Galvin told Barron’s that he has kept an eye on the stock.
“I’m concerned, because it suggests that there is something systemically wrong with the options trading on this stock.”
The publication is awaiting further clarification from Galvin on the specific nature of the problems in options trading.
GameStop shares soared over 134% in regular and after-hours trading and have risen over 678% since 2021 began fueled by a Reddit forum.
Why It Matters: Last month, Massachusetts Securities Division wrote a 24-page complaint alleging that the online securities broker Robinhood exposed investors to unnecessary trading risks. The state alleged Robinhood indulged in gamification of its platform.
Tiger King, and trading turnips on
Animal Crossing’s Stalk Market no longer has the same thrill.
Your phone pings. A friend has sent you a free stock on an app called Robinhood. You sign up. Flush with larger-than-usual unemployment checks and incentivized by zero-commission trades and endless in-app bells and whistles, you begin to trade. And trade. And trade. Your latest buy? GameStop.
For thousands of Americans last year, a version of this scene played out, sparking a retail investment renaissance that rivals that of the late ’90s, according to industry experts.
Professional investors were not pleased.
Criticizing Robinhood and its customers for outages and poor investment decisions became almost a sport for fintwiterati and industry experts alike in 2020.
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In February 2020, the Massachusetts Securities Division (the “MSD”) adopted a first-in-the-nation state fiduciary duty rule applicable to broker dealers and broker-dealer agents. Now, roughly three months after enforcement of the Fiduciary Rule began, the MSD has filed its first enforcement action, In the Matter of: Robinhood Financial, LLC (Docket No. E-2020-0047) (the “Administrative Complaint”). The Administrative Complaint represents an ambitious first step by the MSD which may have significant impact on the financial services industry including FinTech operators. While the Administrative Complaint consists only of allegations, a deeper assessment of the allegations, as well as the nuances of the Fiduciary Rule, presents important takeaways for broker-dealers and agents registered in Massachusetts.
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On December 17, 2020, the United States Securities and Exchange Commission (the “SEC”) announced that a fine of $65,000,000 had been assessed against Robinhood Financial, LLC (“Robinhood”), a leader in the FinTech industry. The SEC also announced that Robinhood had agreed to the entry of a cease-and-desist order (the “Order”) against it prohibiting certain practices including, most notably, failing to adequately disclose “order flow” payments going forward. This SEC action was just a part of a challenging week for Robinhood, which found itself on the receiving end of an Administrative Complaint filed by the Massachusetts Securities Division on unrelated matters (covered here by my colleague Anthony Leone).
On December 17, 2020, the United States Securities and Exchange Commission (the “SEC”) announced that a fine of $65,000,000 had been assessed against Robinhood Financial, LLC (“Robinhood”), a leader in the FinTech industry. The SEC also announced that Robinhood had agreed to the entry of a cease-and-desist order (the “Order”) against it prohibiting certain practices including, most notably, failing to adequately disclose “order flow” payments going forward. This SEC action was just a part of a challenging week for Robinhood, which found itself on the receiving end of an Administrative Complaint filed by the Massachusetts Securities Division on unrelated matters (covered here by my colleague Anthony Leone).