SEC chief prepares “wake-up call” rules and plans to reduce market “gamification” – –

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SEC chief prepares “wake-up call” rules and plans to reduce market “gamification” – –


Securities and Exchange Commission Chairman Gary Gensler on Friday unveiled an ambitious list of proposed reforms, including guidelines for ‘awake’ corporate disclosures and rules to restrict ‘gamification’ on Wall Street as ‘he begins his tenure as Wall Street’s best cop.

The SEC’s “Agency Rules List” released today includes 49 decisions that are in three stages – pre, intermediate, or final – for full commission review. The long laundry list reflects Gensler’s publicly stated priorities for regulating both Wall Street and US businesses.

Perhaps most interesting – but not so surprising given Gensler’s progressive views – is that decisions come in the form of non-traditional disclosures that would be of interest to left-wing politicians such as Senator Elizabeth Warren, D-Mass.

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Two of these proposed rules involve the obligation to disclose information on issues such as climate change and board diversity.

The list also includes a move that could potentially restrict what Gensler has called the ‘gamification’ of trading by discount brokers who offer incentives that Gensler said would entice first-time retail investors to essentially gamble their money on the stock market. .

Given the frenzy around so-called memes stocks that have traded at scale this year, there is genuine concern from a regulatory standpoint that small investors could lose all of their money. This could happen if stocks in stocks like GameStop and AMC – both of which have risen more than 1,000% this year alone – begin to reflect more normal valuations.

Teleprinter security Last Changer Changer %
AMC AMC ENTERTAINMENT HOLDINGS INC 49.40 +6.59 +15,39 %
GME STOP GAME 233.34 +12,95 +5.88%

The agenda also discusses possible irregularities committed by short sellers who make money when stocks fall. Some investors believe that short sellers are improperly manipulating company stocks down in order to make a profit.

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In order to make a decision, the full five-member SEC must have majority approval with Gensler as the casting vote. Given its progressive tendencies, many of the proposed decisions, including diversity and environmental changes, could be approved along party lines.

An SEC spokesperson did not immediately comment.

Disclosures about climate change and diversity will likely be pushed back by key Senate Republicans such as Sen. Pat Toomey of Pennsylvania. Toomey, who will be retiring soon, believes it is not the SEC’s job to demand that companies support issues that are political in nature and that are not directly beneficial to shareholders.

“Securities laws are not the appropriate vehicle for regulating the climate, nor for correcting racial injustice, nor for intimidating companies over political spending,” Toomey said at Gensler’s confirmation hearing in March. Toomey sits on the Senate Banking Committee that oversees the SEC.

The diversity proposal, which the website calls the decision on “board diversity,” implies that the commission is proposing a new rule that “would improve registrants’ disclosures on the diversity of board members and of candidates ”.

The climate change proposal is to make changes to the rules to speed up business disclosures about their climate change risks. The gamification proposal calls on companies to consider behavioral prompts, predictive analytics, and differential marketing.

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The platforms, especially Robinhood, the user-friendly trading platform loved by millennials, are known for their sleek design and easy-to-use features that entice clients to spend money on stock trading. The app is known to offer cash bonuses to new traders and distribute free shares. Critics, including Gensler, believe that these characteristics encourage investors to trade more, which fosters a gambling mentality. The decision to “gamify” is relatively new and is only in its early stages or “pre-release stage. rule, ”according to the website.

“We created Robinhood in response to the growing wealth divide so that millions of people previously left behind could access the US stock market,” said a spokesperson for Robinhood. “People who have been systematically excluded from wealth creation are now revolutionizing the way we invest. We celebrate this transformation. “

Meanwhile, the short sale disclosure proposal would ask the Commission to establish rules for the additional disclosure of short sale information such as issuer name, title, category and amount. total number of short sales of each security. Some security experts claim that greater disclosure would help eliminate irregularities in short selling such as naked short selling where a trader is allowed to hold a short position indefinitely, which in many cases goes to against SEC regulations.

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