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

Susan Light, Michael J. Lohnes, Hannah O. Koesterer, Carrie M. Stickel and Conor Mcdonough
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Susan Light: Partner, Katten Muchin Rosenman LLP, USA
Michael J. Lohnes: Partner, Katten Muchin Rosenman, USA
Hannah O. Koesterer: Associate, Katten Muchin Rosenman, USA
Carrie M. Stickel: Associate, Katten Muchin Rosenman, USA
Conor Mcdonough: Litigation Associate, Katten Muchin Rosenman, USA

Journal of Financial Compliance, 2021, vol. 5, issue 2, 102-114

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.

Keywords: Regulatory scrutiny; game stop; broker-dealers; multidistrict litigation; trading rules; payment for order flow; meme stocks; frenzy (search for similar items in EconPapers)
JEL-codes: E5 G2 K2 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:aza:jfc000:y:2021:v:5:i:2:p:102-114

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