The SEC Has Referred to GME, AMC as “Meme Stocks” in Legal Documents
The US Securities and Exchange Commission (SEC) has recently used wording in a legal document suggesting GME and AMC are “meme stocks.” Separately, the agency has also produced and published a video mocking retail investors and warning against meme stocks.
SEC “Mocks” Retail Investors in New Video
As part of its newly-launched Investomania campaign, which features “informational videos” intended to educate investors, the SEC earlier this week released a 30-second video with reference to meme stocks. The video suggested that investors who put their money in meme stocks without research will lose all of their capital, though there is no definition of meme stocks or reference to specific stocks in the video.
The video has sparked a huge backlash among retail traders on subreddits like “WallStreetBets” and “Superstonk,” who have claimed it was insulting and even hypocritical.
In a thread entitled “A Message to the SEC,” Reddit user u/Thorbeans suggested that the SEC should be putting its attention to dark pools and algorithmic market makers instead of chasing meme stocks. The user also argued that the government agency labeling “small-mid cap stocks” as meme stocks could be market manipulation. The anonymous individual wrote:
“To label small-mid cap stocks as meme stocks is manipulation in itself through fomentation. If the SEC did any research, they would know that most of the “meme stocks” were pump and dump via Silicon Valley algorithms and hedge funds to regain liquidity from their short position losses and risky bets.”
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SEC Suggests GME, AMC are ‘Meme Stocks’ in Official Documentation
Just a week before releasing the Investomania video targeting meme stocks, the SEC seemingly recognized GME and AMC as “meme stocks”. In an order filed on May 24, the SEC said GME and AMC were “later dubbed meme stocks” due to their extreme price volatility. The agency said:
“In late January 2021, extraordinary trading volume in multiple securities (later dubbed “meme stocks”) led to extreme price volatility in these issues, which included GameStop Corp. (GME), AMC Entertainment Holdings, Inc. (AMC), and Koss Corporation (KOSS).”
The filings were aimed at brokerage firm TradeZero, which was charged with violating securities rules. Back in 2021, during the GME and AMC trading mania, the company had halted purchases in some stocks for a matter of minutes while claiming that it didn’t restrict investors’ trading.
GME and AMC were heavily shorted by corporate short-sellers back in 2021. However, an army of retail traders, who largely used Reddit to gather forces, aped in and purchased the stocks, triggering a short squeeze that delivered billions in losses to hedge fund managers.
The incident has changed the trading strategy of many big players. As reported, more than 85% of hedge funds are now monitoring retail traders on social media in order to make sure they do not fall on the “wrong side of meme-stock plays.”
Do you believe the SEC referring to GME and AMC as “meme stocks” while also mocking meme stock investments, is a form of market manipulation? Let us know in the comments below.