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SEC

Robinhood Fined $65 Million for Misleading Customers

On December 17, 2020, the Securities and Exchange Commission (“SEC”) charged Robinhood Financial, LLC (“Robinhood”) with material misrepresentation and misleading its users about its revenue sources, specifically Robinhood’s receipt of payments from certain principal trading firms for routing its customer orders to them. The SEC charges against Robinhood also relate to certain statements about the execution quality Robinhood achieved for its customers’ orders and Robinhood’s failure to satisfy its duty of best execution. Robinhood agreed to pay $65 million to settle the charges.

One of Wall Street’s Hottest Trends: The SPAC

SPACs have been around for decades and often existed as last resorts for small companies that would have otherwise had trouble raising money on the open market. But they’ve recently become more prevalent because of the extreme market volatility caused, in part, by the global pandemic.

While many companies chose to postpone their IPOs due to the pandemic, others chose the alternate route to an IPO by merging with a SPAC. A SPAC merger allows a company to go public and get a capital influx more quickly than it would have with a conventional IPO.

How a Failing Video Game Store Exposed the Fragility of the Market

Failing video game company, Gamestop has broken the internet this week, but not for anything that they intended to do. Their stock has been the center of controversy after a group of internet investors banded together to outsmart hedge funds at their own game. By causing a hedge fund to short squeeze their investment in Gamestop offerings, they have brought to light the possible need for regulation in the market.

Bitcoin, Tesla, and GameStop: Regulatory Challenges Posed by the New Retail Investor

GameStop started 2021 with a stock price below $20 but saw its stock price skyrocket to well above $300 a share towards the end of January.  The rally would be hard to explain by solely relying on the company’s financial reports or underlying fundamentals.  Instead, the rally has to be explained through a combination of external factors involving a popular fintech company’s app, manic speculation by retail investors, and Reddit.  Although at first glance this may seem like a new phenomenon, the same factors have been at play for years with a huge interest in Tesla and Bitcoin – and they pose a risk to the markets that regulators and Wall Street together can’t ignore.

Is Zoom Doomed?

There is no doubt that working from home has become a new normal for millions of employees worldwide, and for some, this may be the future of their employment. When the workforce made the shift to remote work and online meeting navigation, Zoom Video Communications, Inc. (“Zoom”) quickly became the frontrunning platform. Many companies flocked to Zoom because of its alleged higher levels of security and encryption capabilities. However, a recent lawsuit against Zoom, by nonprofit group Consumer Watchdog, reveals that Zoom may not actually be as safe for users as it once claimed to be. Other lawsuits allege privacy concerns including Zoom sending user data to Facebook. Most recently, the FTC filed a suit against Zoom on November 9th for allegations of unfair, deceptive, or abusive acts or practices (“UDAAP”) related to encryption, cloud storage, third-party safeguards, and failure to disclose information to users. Though various privacy concerns arise, the platform’s popularity continues to increase given its newfound necessity.

The Death of Neutral Corporations

The current social and political climate, as well as our planet’s environmental climate, have shown the new role that corporations play in society. The pandemic and the current social upheaval seen worldwide have increased the need for real and meaningful corporate commitment to social responsibility.

The New SEC Whistleblower Rules and their Impact on Whistleblower Litigation

Whistleblowers are crucial to the Securities and Exchange Commission’s (SEC) ability to enforce regulatory standards. Because of their knowledge, they can help the SEC protect investors and capital markets, as well as hold those performing unlawful conduct accountable. Through Section 21F of the Exchange Act the SEC has power to award whistleblowers for the information they provide. Last month, an amendment was added to this section altering the rules of whistleblower award allocations.

High-Frequency Trading and its Need for Increased Regulation

With the rapid innovation of technology penetrating our lives comes the need for increased regulation on the industries that are being impacted, and the stock market is no different. In the late nineties, the Securities and Exchange Commission (SEC) approved the use of an electronic stock exchange system and by 1998, they authorized the use of High- Frequency Trading (HFT). HFT is a method of electronic stock trading where the trader uses high powered technology to complete automated trading at a large volume and speed. Because these trades are not made by people, but instead computers, they can be executed within millionths of a second. As the speed that HFTs have allowed for stocks to be traded at has decreased over time, their popularity has increased. By 2012, it was estimated that HFT accounted for almost 50 percent of all U.S. equity trades. Their popularity is contributed to HFT’s ability to allow traders to ensure they have the most up to date information on the market and ensure that they get the lowest price. This gives traders the power to buy and sell at high speeds, increasing liquidity in the market.

Financial Regulation During COVID-19

Coronavirus (COVID-19) has shaken the world economy, not the least of which the financial industry.  As the financial industry has adapted to work-from-home life under the coronavirus pandemic, industry regulators such as the SEC and the Financial Industry Regulatory Authority (FINRA) have been forced to adapt rules to changing circumstances and shift their enforcement priorities to pandemic related fraud. 

Agencies Approve Notice of Proposed Changes to Volcker Rule

At the end of January, the Federal Reserve Board, the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the U.S. Securities and Exchange Commission, and the U.S. Commodity Futures Trading Commission (the “Agencies”) approved a notice of proposed rulemaking (“Proposed Rule”) to amend the “covered fund” provisions of section 13 of the Bank Holding Company Act, also known as the “Volcker Rule” (the “Rule”).  The Volcker Rule is a regulation that generally prohibits banks from certain investment activities with their own accounts and limits their dealings with private equity and hedge funds, also known as “covered funds.”