One day after a number of trading platforms, including popular financial services broker Robinhood, restricted trading on stocks like GameStop, AMC, Nokia, and others, the U.S. Securities and Exchange Commission (SEC) pledged to review actions by entities that inhibit trading ability.
"The Commission is working closely with our regulatory partners, both across the government and at FINRA and other self-regulatory organizations, including the stock exchanges, to ensure that regulated entities uphold their obligations to protect investors and to identify and pursue potential wrongdoing," the SEC's acting chair Allison Herren Lee and its three commissioners said in a statement released Friday. "The Commission will closely review actions taken by regulated entities that may disadvantage investors or otherwise unduly inhibit their ability to trade certain securities."
"In addition, we will act to protect retail investors when the facts demonstrate abusive or manipulative trading activity that is prohibited by the federal securities laws," the statement continued. "Market participants should be careful to avoid such activity. Likewise, issuers must ensure compliance with the federal securities laws for any contemplated offers or sales of their own securities."
When asked about it in a White House press briefing, Press Secretary Jen Psaki referred questions to the SEC, saying, "We, of course, respect the role of regulatory agencies. They are closely monitoring the situation, but it’s under their purview at this point in time."
GameStop stock has rocketed from below $20 earlier this month to close around $350 Wednesday as a volunteer army of investors on social media challenged big institutions who had placed market bets that the stock would fall.
Robinhood on Thursday limited trading in a number of stocks, including AMC Entertainment, Bed Bath & Beyond, Blackberry, Nokia, Express Inc., Koss Corp., American Airlines, Tootsie Roll, and Trivago.
"We continuously monitor the markets and make changes where necessary," the company wrote blog post Thursday. "In light of recent volatility, we are restricting transactions for certain securities to position closing only, including $AMC, $BB, $BBBY, $EXPR, $GME, $KOSS, $NAKD and $NOK. We also raised margin requirements for certain securities."
Popular trading app WeBull has also halted the ability to buy GameStop, AMC, and Koss Corporation, but later lifted its restrictions on those stocks. Charles Schwab, TD Ameritrade, and Interactive Brokers also limited options trading in certain funds.
At least one lawsuit was filed Thursday in U.S. District Court in New York claiming Robinhood manipulated the market by restricting investors’ access to trading GameStop.
The move by Robinhood has caused widespread backlash online, with notable figures from rapper Ja Rule to Barstool Sports' Dave Portnoy encouraging investors to hold their positions in the various stocks.
Prominent lawmakers also announced that they will take action to investigate the incident.
Sen. Elizabeth Warren (D-MA), who set up the Consumer Financial Protection Bureau under former president Barack Obama, sent a letter to the SEC asking for them to "explain what exactly it's doing to prevent market manipulation."
Progressive Rep. Alexandria Ocasio-Cortez called for an investigation into Robinhood's move to restrict purchases.
"This is unacceptable," she wrote. "We now need to know more about @RobinhoodApp’s decision to block retail investors from purchasing stock while hedge funds are freely able to trade the stock as they see fit. As a member of the Financial Services Cmte, I’d support a hearing if necessary."
"Inquiries into freezes should not be limited solely to Robinhood," she continued. "This is a serious matter. Committee investigators should examine any retail services freezing stock purchases in the course of potential investigations - especially those allowing sales, but freezing purchases."
Ocasio-Cortez's position drew a surprising ally – Sen. Ted Cruz (R-TX), who said in a retweet that he "totally" agrees with her sentiment.
Sen. Sherrod Brown (D-OH), who is set to become chairman of the Senate Banking Committee, announced that he will hold a hearing on the GameStop situation. Rep. Maxine Waters (D-CA) also announced a hearing in the House Financial Services Committee.
Democratic Rep. Ro Khanna, whose California district sits in Big Tech’s Silicon Valley, said the GameStop episode “has demonstrated the power of technology to democratize access to American financial institutions, ultimately giving far more people a say in our economic structures.”
In a statement Thursday, Khana called for “more regulation and equality in the markets,” and accused Wall Street of spending billions to “crush” GameStop and “put workers out of business” instead of investing in future technology.
Rep. Rashida Tlaib (D-MI) also called for an investigation into Robinhood's actions: "They're blocking the ability to trade to protect Wall St. hedge funds, stealing millions of dollars from their users to protect people who've used the stock market as a casino for decades."
Meanwhile, gobal stock prices tumbled Friday amid worries about rising coronavirus cases, Wall Street volatility and U.S. economic aid plans.
The U.S. markets could see more volatility surrounding video game vendor GameStop and other stocks that have become favorites of smaller investors who’ve pushed some of the companies to dizzying heights given their business prospects. In premarket trading, GameStop shares jumped 76%, movie theater operator AMC Entertainment rose 40% and headphone Koss gained 57%.
On Wall Street, the S&P 500 on Thursday rose out of the red for the year as investors watched wild swings in GameStop, which skidded 44.3%. Cinema chain AMC and other stocks that have become targets for online traders also gyrated.
Several fell after Robinhood and other trading platforms restricted trading, causing an outcry by some customers. Robinhood has restored some trading in the shares Friday, which prompted their gains in the premarket.
The Associated Press contributed to this report.