Accounting Regulator Had Climate of Fear and Distrust, Report Says

Link: https://www.wsj.com/articles/accounting-regulator-had-climate-of-fear-and-distrust-report-says-11624918488

Excerpt:

The January report by former SEC Chairman Harvey Pitt lays bare deep divisions within the Public Company Accounting Oversight Board, which oversees the audits of companies valued in total at trillions of dollars.

It also alleges organizational dysfunction. There were no records documenting the rationale for several staff firings, and confusion about the roles of the PCAOB’s board members has “created some dysfunctional behavior” by them, the report found.

Current SEC Chairman Gary Gensler this month ousted William Duhnke as PCAOB chairman and is replacing the rest of the five-member board.

A PCAOB spokeswoman didn’t return a request for comment. An SEC spokesman declined to comment. Mr. Duhnke said he hasn’t seen the report and cannot comment on it.

Author(s): Jean Eaglesham, Dave Michaels

Publication Date: 28 June 2021

Publication Site: WSJ

GameStop Frenzy, Archegos Meltdown May Prompt New SEC Rules, Chairman Says

Link: https://www.wsj.com/articles/sec-studying-whether-new-rules-are-needed-for-apps-that-gamify-trading-chairman-says-11620239971

Excerpt:

In testimony prepared for the House Financial Services Committee, Securities and Exchange Commission Chairman Gary Gensler says brokerages that “gamify” trading — by using appealing visual graphics to reward a user’s decision to trade, for instance — may encourage frequent trading that results in worse outcomes for investors. Some Democratic lawmakers have blamed gamification for the boom in individual trading that helped drive the rise in GameStop shares.

Mr. Gensler, who will appear before lawmakers on Thursday, also said the SEC would study regulatory changes in response to the March blowup of Archegos Capital Management, an unregulated family-investment vehicle of hedge-fund veteran Bill Hwang whose leverage-fueled bets led to more than $10 billion in losses at major global banks.

Author(s): Dave Michaels, Alexander Osipovich

Publication Date: 5 May 2021

Publication Site: Wall Street Journal

GameStop Mania Is Focus of Federal Probes Into Possible Manipulation

Link: https://www.wsj.com/articles/gamestop-mania-is-focus-of-federal-probes-into-possible-manipulation-11613066950?mod=djemwhatsnews

Excerpt:

The Justice Department’s fraud section and the San Francisco U.S. attorney’s office have sought information about the activity from brokers and social-media companies that were hubs for the trading frenzy, the people said. Prosecutors have subpoenaed information from brokers such as Robinhood Markets Inc., the popular online brokerage that many individual investors used to trade GameStop and other shares, the people said.

GameStop shares surged from about $20 to $483 over a period of two weeks in January. The stock has since fallen to around $50. It was fueled by an army of bullish individual traders exhorting one another on Reddit to buy the shares and squeeze hedge funds that bet the price would fall. Traders who bet stock prices will decline are known as short sellers.

Author(s): Dave Michaels

Publication Date: 11 February 2021

Publication Site: Wall Street Journal

GameStop Frenzy Is Tough Call for Regulators Focused on Transparency

Link: https://www.wsj.com/articles/gamestop-frenzy-is-tough-call-for-regulators-focused-on-transparency-11612693802

Excerpt:

One reason regulators might be stymied is a lack of political will to limit trading by small investors. When Robinhood temporarily blocked its customers from trading GameStop shares during the frenzy, a cry went up about market access. The big losses those little guys inflicted on some hedge funds by bidding up the stock was seen as a democratization of the market. Any effort to derail that could be criticized as protection for Wall Street.

“Most people believe that middle-class people, working people, should be able to take their chances on the stock market,” Rep. Maxine Waters (D., Calif.), who leads the House Financial Services Committee, said in an interview.

The consensus among regulators so far is that the episode didn’t expose major problems with the market’s plumbing. The Treasury Department said Thursday that regulators believe the market’s “core infrastructure was resilient.” The department said the SEC is reviewing “whether trading practices are consistent with investor protection and fair and efficient markets,” and is expected to release a report on the factors that influenced it.

Author(s): Paul Kiernan and Dave Michaels

Publication Date: 7 February 2021

Publication Site: Wall Street Journal