Unlikely SEC will 'squash the little guy': Andrew McCreath on Reddit chats driving stocks higher
Canadian securities regulators are keeping a close eye on the impact of the Reddit-fuelled rally in a slate of stocks.
In a joint statement released Monday, the Canadian Securities Administrators (CSA) and the Investment Industry Regulatory Organization of Canada (IIROC) said they are closely monitoring any extreme price movements in stocks that may be increasing volatility on Canadian markets.
“With strong market oversight and surveillance infrastructure in place, Canadian regulators are working together closely to protect investors while ensuring that the markets operate in an orderly manner and with integrity,” the regulators said in the release.
“We are monitoring market activity in real-time to support healthy Canadian capital markets and to protect investors. Canada’s capital markets remain strong.”
The CSA and IIROC said they are in close contact with other regulatory bodies both at home and abroad. The statement comes in the wake of the U.S. Securities and Exchange Commission announcement Friday that it was launching a review into recent trading activity that sent shares of the likes of BlackBerry Ltd., GameStop Corp. and AMC Entertainment Holdings Inc. skyrocketing over the past week.
That rally was in part due to a group of Reddit users going all-in on those stocks, most of which were heavily shorted by institutional investors, exacerbating the wild price movements.
IIROC and the CSA said investors should be wary of information circulated through online message boards, given the at-times Wild West nature of online platforms.
"Online chat rooms are unregulated and may contain information that is inaccurate or inappropriate for some investors. Investors should always check the registration of any person or business trying to sell them an investment or give them investment advice,” they said.
In addition to monitoring the situation, the regulators added they will not hesitate to take “appropriate regulatory action” if they determine abusive or manipulative trading activity is taking place.
While regulators have the power to intervene in capital markets if unruly trading activity threatens the stability of the markets, the CSA and IIROC have been hesitant to bar investors from executing trades or entering short positions.
In April, the regulators declined to bar investors from initiating short positions in spite of the massive swoon in stocks, declaring that markets were continuing to operate in a “fair and orderly fashion.”