NEW THIS AM: Warren Calls on the SEC to Address Stock Market Gamesmanship Amid Volatile GameStop Trades
"The recent chaos reveals a clear distortion in securities markets, with benefits accruing to investors that do not clearly benefit the company's workers, consumers, or the broader economy."
"To protect and restore public trust in sound securities regulation and enforcement, the Commission must identify gaps in existing securities laws and rules and ways in which the Commission can improve its enforcement capabilities."
Washington, DC -- United States Senator Elizabeth Warren (D-Mass.); a member of the Senate Committee on Banking, Housing, and Urban Affairs; today sent a letter to Acting Securities and Exchange Commission (SEC) Chair Allison Herren Lee requesting that the agency provide Congress and the public information on how they will address the dramatic swings in market valuation of GameStop and other companies and respond to her questions about how the SEC will crack down on years of distortion in securities markets that have allowed the wealthy few to artificially inflate and deflate share prices and reap short-term profits while exacerbating wealth inequality.
"These wild fluctuations are just the latest indication that many private equity firms, hedge funds, and other investors, big and small, are treating the stock market like a casino, giving little consideration to the companies, communities, workers, and consumers that may be affected by these risky bets," Senator Warren wrote in her letter to the SEC. "The recent chaos reveals a clear distortion in securities markets, with benefits accruing to investors that do not clearly benefit the company's workers, consumers, or the broader economy."
In her letter, Senator Warren called on the SEC, which has a mandate to ensure the "fair, orderly, and efficient" function of the stock market, to review the recent trades and practices, fully and clearly define market manipulation rules and real enforcement standards, and relay to the public what the SEC will do to mitigate these unfair practices going forward.
"The Commission must review recent market activity affecting GameStop and other companies, and 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," Senator Warren wrote in her letter to the SEC. "To protect and restore public trust in sound securities regulation and enforcement, the Commission must identify gaps in existing securities laws and rules and ways in which the Commission can improve its enforcement capabilities."
Senator Warren asked the SEC to respond to her questions by February 5, 2021. Incoming Senate Banking Committee Chair Sherrrod Brown (D-Ohio) has announced that the Senate Banking Committee will be holding hearings on this matter.
Yesterday, Senator Warren appeared on CNBC to discuss the recent volatility and on Wednesday made the following statement:
"With stocks soaring while millions are out of work and struggling to pay bills, it's not news that the stock market doesn't reflect our actual economy. For years, the same hedge funds, private equity firms, and wealthy investors dismayed by the GameStop trades have treated the stock market like their own personal casino while everyone else pays the price. It's long past time for the SEC and other financial regulators to wake up and do their jobs - and with a new administration and Democrats running Congress, I intend to make sure they do."
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