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The GameStop phenomenon has hit American businesses in the coffers this week. On September 16, MassMutual paid a fine of $ 4 million to settle a dispute with Massachusetts securities regulators, according to a Wall Street Journal report.
The financial services firm was arrested for failing to properly supervise Keith Gill, the 34-year-old MassMutual and YouTuber employee, who called himself “Roaring Kitty” on social media. Gill has earned a cult following among retail investors on Reddit for posting million dollar earnings from owning shares of GameStop (GME).
During his time as an employee of MassMutual, Gill worked as a Program Director and later as Director of Education and Wellness. On his social media accounts, he told his followers why he thought buying shares in video game retailer GameStop was one of the best opportunities in the stock market; He posted 10 days of YouTube videos detailing investment strategies and at least 590 securities-related tweets on Twitter, according to the SEC order. Gill’s actions violated MassMutual’s social media policy for licensed brokerage agents.
“I think it’s pretty straightforward. MassMutual should have been much clearer with their employees in terms of what they could and couldn’t do, ”said Anthony Chukuma, senior equity analyst at Loop Capital who has previously covered GameStop and understands the enthusiasm of retail investors. sparked by Reddit for action. .
“And frankly, it’s not like Gill is in a financial advisor role,” Chukuma added. “I guess it never even crossed his mind that what he was doing was even in a legal gray area. Much less, you know, strictly prohibited.” Although Chukuma is not a securities lawyer , he noted that the fine likely caused many corporate compliance departments to reconsider what they should allow their employees to do on social media.
Joshua Mitts, a law professor who teaches a class on securities regulation at Columbia University, said this type of lawsuit, which “revolves around the enforcement of [the] Broker’s own policies, ”could be the first in a series of lawsuits following such growth in retail trade in the stock market over the past year. In this case, Mass Mutual acted as licensed broker.
“The SEC does not have the power to directly regulate much of the social media activity related to trading, and there is no rule that prevents brokers from using social media. The consent order makes it pretty clear that this was a violation of policy, ”Mitts said. According to Mitts, this suggests the case isn’t just about licensed financial brokers breaking their rules. Instead, “it suggests that any employee violating their company’s social media policies could engage their employer’s liability when that employer’s failure to enforce those policies is a regulatory, contractual or other violation.”
“A direct target against retail traders”
An individual investor who spoke to Yahoo Finance said the fine imposed on MassMutual “is definitely a direct target against retail traders.”
“This whole Masquerade of Mass Mutual being continued will likely force retail traders to anonymously post the shares they own on social media for fear of being fired by their employers,” Tom Abruzzo, who goes by the Twitter handle . @StockMarketHatsYahoo Finance said.
Abruzzo says he trades stocks and sells stock commodities in his spare time. His employer is not in finance, but he wouldn’t be surprised if “other employers, especially those related to finance, would be very suspicious and would likely institute greater restrictions on what employees can do in this regard. trading and also on social networks. ”
Yahoo Finance has contacted Keith Gill and has not received a response.
MassMutual said in a statement that the company “is happy to put this case behind us, avoiding the expense and distractions associated with protracted litigation.”
Ines Ferre is a reporter covering the stock market. David Hollerith is a journalist covering cryptocurrencies and stocks.
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