SEC fines broker $125,000 for halting GameStop trades for 10 minutes, then denying it happened
pcgamer.comThe 2021 GameStop stock surge(opens in new tab) seems to have acquired a new lease of life in recent weeks. First, one of the hedge funds that took a big short position against the stock announced it was to close(opens in new tab). And now, the US Securities and Exchange Commission (SEC) has concluded an investigation(opens in new tab) into an online brokerage and its co-founder—and slapped them with a combined $125,000 in fines for a ten-minute restriction on trading so-called meme stocks.
The SEC charged broker-dealer TradeZero America Inc. and co-founder Daniel Pipitone with «falsely stating to the firm’s customers that they didn’t restrict the customers’ purchases of meme stocks when in fact they did.» And how!
The investigation found that, on January 28, 2021, many brokers were restricting investors' ability to buy meme stocks: the stocks in question here being GameStop, AMC Entertainment Holdings, and Koss Corporation. On this day, TradeZero was told by its clearing broker to halt purchases of these stocks through its platform.
What happened next is pretty wild, according to the SEC's report(opens in new tab). Essentially, on January 28 2021, TradeZero refused to implement the clearing broker's instruction to cease trading, for two hours. Then, under increasing pressure, TradeZero's board of directors (including Pipitone) decided to do what they were told and cease trading in the meme stocks.
Ten minutes later, a representative of the clearing broker phoned Pipitone and told him that the restrictions were being lifted. That is: now meme stocks were fine.
TradeZero had resisted the pressure to roll over for two hours, then rolled over, and ten minutes later was told to roll back. Pipitone's solution to this was
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