Former SEC Chair Jay Clayton says GameStop trading was not a pump-and-dump scheme and praises transparency from ‘Mr. Kitty’

GameStop millionaire Roaring Kitty
GameStop millionaire Roaring Kitty


Former SEC chairman Jay Clayton told CNBC on Friday that trading activity during the GameStop market frenzy was not a “pump and dump scheme,” and Thursday’s hearing demonstrated transparency from social media investors.

Clayton says the SEC will likely take a look at whether there was coordinated behavior to manipulate GameStop’s stock price that soared 1,022% during the January rally,  but “the quick answer is that “no pump and dump scheme was present. 

“The overall participation in this, it was fairly transparent what was going on here,” Clayton said. “I must admit to being entertained by Mr. Kitty. You saw that people were very transparent about what they were doing and why they were doing it, which was fairly interesting.” 

During Thursday’s hearing, Keith Gill, also known as “Roaring Kitty”, emphasized that his reasoning for buying GameStop stock and sharing his position was purely based on his belief that the company was dramatically undervalued, and he was clear explaining his fundamental case for buying GameStop to his social media followers. 

Gill told the House Financial Services Committee that he still likes GameStop’s stock and he would buy it at its current price of roughly $43. 

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SEC chief Jay Clayton says he is nervously eyeing retail-driven euphoria in the stock market

FILE PHOTO: Jay Clayton, Chairman of the U.S. Securities and Exchange Commission, speaks at the Economic Club of New York luncheon in New York City, New York, U.S.,September 9, 2019. REUTERS/Shannon Stapleton
FILE PHOTO: Jay Clayton, Chairman of the U.S. Securities and Exchange Commission, speaks at the Economic Club of New York luncheon in New York City

  • Chairman of the Securities and Exchange Commission Jay Clayton told CNBC on Thursday he’s concerned about stock market euphoria stemming from retail investors. 
  •  “When stocks run away… we do get concerned because it is a situation where professional investors understand this, I do worry that retail investors do not understand that trees don’t grow to the sky,” Clayton added. 
  • His concerns come as all three major indexes hovered around record highs on Friday.
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Chairman of the Securities and Exchange Commission Jay Clayton told CNBC on Thursday he’s concerned about stock market euphoria that’s stemming from retail investors.

“We are in a situation where with mobile communications, access, and the like, there is a new paradigm. There are more retail investors participating in the market than ever before,” Clayton said.

“One thing we don’t regulate directly…is euphoria and we’re seeing some euphoria here,” he added. 

His concerns echo those of Goldman Sachs CEO David Solomon, who said earlier this week he’s also worried about retail investors driving the market to dizzying new heights. Both pointed to the hot IPO market. Airbnb, for example, leaped 115% on its first day of trading. On Friday, all three major indices hit all-time highs.

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“When stocks run away… we do get concerned because it is a situation where professional investors understand this. I do worry that retail investors do not understand that trees don’t grow to the sky,” Clayton added.

His interview comes as the SEC charged Robinhood with misleading customers on the revenue from trades resulting in a $65 million settlement, as well as a complaint from the Massachusetts securities regulator stating that the trading app encouraged inexperienced investors to execute frequent trades.  

 

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