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What does it all meme? An exploration of meme stock litigation, regulatory scrutiny and defences for broker-dealers

Author

Listed:
  • Light, Susan

    (Partner, Katten Muchin Rosenman LLP, USA)

  • Lohnes, Michael J.

    (Partner, Katten Muchin Rosenman, USA)

  • Koesterer, Hannah O.

    (Associate, Katten Muchin Rosenman, USA)

  • Stickel, Carrie M.

    (Associate, Katten Muchin Rosenman, USA)

  • Mcdonough, Conor

    (Litigation Associate, Katten Muchin Rosenman, USA)

Abstract

US financial market regulators have taken a renewed interest in retail trading and brokerdealer practices following the January 2021 ‘meme stock’ extreme market volatility. In this paper, the authors examine broker-dealer practices and trading rules that are the subject of pending litigation. Specifically, this paper examines areas of potential regulatory interest in the aftermath of the trading frenzy, including payment for order flow and related customer disclosures. It also examines the rationale for certain trading restrictions implemented by some broker-dealers during the period of extreme volatility. It then analyses legal defences for broker-dealers in pending investor litigation. Lastly, this paper discusses potential criminal and regulatory liability for amateur traders active on social media and online forums.

Suggested Citation

  • Light, Susan & Lohnes, Michael J. & Koesterer, Hannah O. & Stickel, Carrie M. & Mcdonough, Conor, 2021. "What does it all meme? An exploration of meme stock litigation, regulatory scrutiny and defences for broker-dealers," Journal of Financial Compliance, Henry Stewart Publications, vol. 5(2), pages 102-114, December.
    • Handle: RePEc:aza:jfc000:y:2021:v:5:i:2:p:102-114
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    More about this item

    Keywords

    Regulatory scrutiny; game stop; broker-dealers; multidistrict litigation; trading rules; payment for order flow; meme stocks; frenzy;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • K2 - Law and Economics - - Regulation and Business Law

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