The YouTuber known as Roaring Kitty, who became the face of GameStop’s stock market frenzy and worked until last week as a broker, could have legal issues over possible violations of federal rules governing brokers’ communications. with the public.
Keith Gill, 34, bet heavily on GameStop stocks more than a year ago and shared his ideas on online stocks during the months leading up to the “meme stock” bubble.
But his comment may create a problem for Massachusetts Mutual Life Insurance Co., which occupied him and had a duty to oversee him.
Keith Gill, the YouTuber known as Roaring Kitty, faces regulatory scrutiny
Massachusetts securities regulators are said to be investigating Gill and his previous job as director of education about the financial well-being of insurance company MassMutual.
The company told regulators it was unaware of Gill’s YouTube videos promoting GameStop’s actions and that if it had known, it would have asked it to stop or fire it, according to the New York Times.
While it did not advise specific clients on investments or insurance, it was not exempt from regulations that strictly regulate the conduct of brokers, stock lawyers have suggested to the Wall Street Journal.
The YouTuber, once obscure, has become an unlikely celebrity in the clash between small investors and large hedge funds, and is seen by some as a popular hero and others as a dangerous market disruptor.
Gill first promoted GameStop as a potential investment more than a year ago
The financial industry regulatory authority (Finra) might be looking closely at Gill
After the shares of the struggling video game retailer soared 1,600 percent in January, when small investors inspired by the WallStreetBets message board on Reddit shut down the shares to punish the hedge funds betting on them, the bubble fall this week and fell more than 70 percent since Monday.
Gill worked as a “director of financial welfare education,” but was a registered agent. He already charged more than $ 13 million in his trades and was insured with other gains of $ 7.6 million as of Wednesday, according to a screenshot of his brokerage account he posted on Reddit. In the midst of a frenzy last week, his account was worth nearly $ 48 million.
Gill gave his notice to MassMutual on Jan. 21, but technically continued to work on it until Jan. 28 as the GameStop frenzy approached its peak, the company told regulators.
Gill left his job at MassMutual on January 21 when GameStop shares exploded
He is a licensed stockbroker and licensed professionals have an obligation to inform their employers about their outside activities, said William Galvin, the Commonwealth Secretary of Massachusetts.
On Friday, Galvin’s office sent a letter to MassMutual asking for information about Gill’s employment and whether the company was aware of his outside activities.
“I don’t try to inhibit anyone’s ability to access the market,” Galvin said. “The issue here is transparency.”
Over the past six months, Gill has released dozens of videos, most related to his view that GameStop shares were undervalued and would increase as others became aware of them.
Some videos examined Gamestop’s past performance and forecasts, but even posting online under a pseudonym does not absolve it of regulatory obligations, said attorney Susan Light.
Gill is seen last week at his rental home in Massachusetts, where he lives with his wife and two-year-old daughter
Shares of GameStop, which shot up 1,800 percent in January in a speculative bubble driven by small investors, have fallen nearly 84 percent in the first four days of this month
“An average Joe can go to a website and say, ‘I like XYZ shares.’ A broker can’t. It would make sense for the Financial Industry Regulatory Authority (Finra) to be interested in studying it.” .
“If you have a registered person who trades securities outside the company and makes recommendations to the general public, it’s potentially a major lack of oversight,” Brad Bennett, Finra’s former chief executive, told the Journal.
“After 40 years in the industry, I have no doubt that if you are a registered representative [of a brokerage firm], you shouldn’t communicate with anyone on Reddit, “said regulatory defense attorney Bill Singer.” That’s the safest thing to do. ”
Gill’s videos included a disclaimer that said investors should consult with a financial advisor before making any investment decisions and “should not treat any opinion expressed on this YouTube channel as a specific incentive to make a private investment “.
Roaring Kitty continued to create topical memes regarding the high stock price
Andrew Calamari, a lawyer for Finn Dixon & Herling and a former director of the New York Securities and Exchange Commission office, told the Times it was too early to determine whether Gill had violated any securities regulations.
But he said Gill could have broken the company’s rules on MassMutual if he didn’t get permission for his posts on Reddit and YouTube.
“Companies don’t allow employees to go out and make predictions about stocks,” he said about employees other than analysts.
Gill has not posted any posts on YouTube since Jan. 22 and on Wednesday announced on Reddit that it would stop providing daily updates on its GameStop position there.
He remained silent on the controversy, apart from an interview with the Wall Street Journal last week.
“I didn’t expect it,” he said. “This story is much bigger than me … I support these retail investors, their ability to make statements.”
Gill made an initial investment in GameStop of about $ 53,000 in June 2019. He later added to the investment, plowing a total of $ 745,991.
A five-day view of the stock price of GameStop shows the sharp decline from its peak last week
The stock price of GameStop is seen in a one-year view, showing stocks rising and falling
In his latest YouTube videos, filmed in the basement, he celebrated his success with up to 200,000 fans, wearing sunglasses and a belt to hold his hair up to his shoulders and dipping tender chicken (the pet food of the his followers) to Prosecco.
Gill gained notoriety on the Reddit trading forum WallStreetBets while posting regular updates to his’ YOLO [You Only Live Once]trade from 2019 with the username DeepF *** ingValue.
But Gill told The Journal that her original decision to buy (initially ridiculed on WallStreetBets before she was revered) was based on fundamentals about the company.
“People were making a quick catch, saying GameStop was the next blockbuster,” he said, referring to the video store, but destroyed by the decline in retail and increased broadcast services.
“It seemed like a lot of people weren’t going deep. It was a big miscalculation of the opportunity,” he said.