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A House committee with more than 50 members held a hearing about GameStop and the meme-stock mania for five hours, featuring six witnesses. In the end, it was all about Robinhood. Vlad Tenev, the chief of the brokerage app, fielded the most questions, which often cast him as the villain of the saga.<\/p>\n
\u201cDon\u2019t you see and agree that something very wrong happened here?\u201d David Scott, Democrat of Georgia, asked Mr. Tenev. \u201cAnd that you are at the center of it?\u201d<\/p>\n
What we learned about Robinhood. <\/strong>Mr. Tenev apologized for his company\u2019s failings \u2014 without specifying which mistakes were made \u2014 but said his company broke no laws and didn\u2019t prioritize Wall Street business partners over retail users. \u201cWe don\u2019t answer to hedge funds,\u201d he said.<\/p>\n Lawmakers pressed Mr. Tenev on multiple fronts:<\/p>\n After he repeatedly asserted that Robinhood customers had made $35 billion in realized and paper investment gains, Jim Himes, Democrat of Connecticut, pushed him on more specifics, which Mr. Tenev ultimately declined to give. Thus, Robinhood\u2019s total assets under management remain a mystery.<\/p>\n When he said that Robinhood had curbed some customer trades because clearinghouses demanded more collateral from his firm, Alexandria Ocasio-Cortez, Democrat of New York, shot back that the brokerage may instead have failed to manage its own capital risks. Anthony Gonzalez, Republican of Ohio, pursued a similar line of attack, making it a bipartisan affair.<\/p>\n Several lawmakers criticized the Robinhood app\u2019s so-called \u201cgamification\u201d approach, where trades are celebrated with virtual confetti and made to feel more fun. \u201cYou are encouraging your customers to tap 1,000 times a day,\u201d said Ritchie Torres, Democrat of New York. Mr. Tenev responded, \u201cWe wanted to give our customers delightful features.\u201d<\/p>\n Sean Casten, Democrat of Illinois, accused the company of taking advantage of inexperienced traders, including a customer who died by suicide after believing he had run up huge losses via the Robinhood app. To make his point, he called Robinhood\u2019s automated help line: A message told users to email for support, and then the call ended. Here\u2019s a clip of the hearing\u2019s most noteworthy exchange.<\/p>\n What else happened.<\/strong> Robinhood wasn\u2019t quite <\/em>the only thing discussed (although it often seemed like it):<\/p>\n Ken Griffin<\/strong> faced harsh questions about Citadel Securities\u2019 practice of paying brokers like Robinhood to execute their orders, but was frequently cut off when trying to explain the intricacies of the business. The billionaire stressed that his hedge fund had nothing to do with Robinhood halting trading in GameStop and other stocks.<\/p>\n Gabe Plotkin<\/strong> of Melvin Capital said his fund had been short GameStop for years, and the losses it suffered from the rise in the stock last month were big but manageable. Citadel\u2019s investment in his firm during the frenzy was not a bailout, Mr. Plotkin said.<\/p>\n Steve Huffman<\/strong> of Reddit said there were no signs of market manipulation on the site\u2019s forums where meme-stock traders gather, and asserted that the investment advice posted on Reddit is \u201cprobably among the best.\u201d<\/p>\n Keith Gill<\/strong>, the day trader who goes by \u201cRoaring Kitty\u201d on YouTube, got the most sympathetic treatment, and seemed to be enjoying it, slipping meme-inspired jokes (\u201cI am not a cat\u201d) into his testimony. He said he remained bullish on GameStop\u2019s stock, in exchanges which may come up again in a class-action lawsuit filed this week that alleges he \u201cincited\u201d the rally via his social media channels.<\/p>\n Over to you, Gary.<\/strong> The committee chair, Maxine Waters of California, said that she planned to hold more hearings, one of which will feature the S.E.C., the agency at the forefront of any regulatory response to the market frenzy. Gary Gensler, President Biden\u2019s nominee for S.E.C. chair, is expected to bring a tough enforcement stance on everything from investor protections to oversight of the arcane financial plumbing that came up in questions to Robinhood, Citadel and Melvin.<\/p>\n The Senate is aiming for a confirmation hearing in early March for Mr. Gensler and the C.F.P.B. chair, Rohit Chopra, DealBook hears. (Nothing is final and the timing may slip.)<\/p>\n Uber suffers a big defeat in Britain.<\/strong> The company\u2019s drivers must be classified as employees, entitled to a minimum wage and vacation, instead of independent contractors, the country\u2019s Supreme Court ruled. It may set a precedent for gig-economy workers in the British market and beyond.<\/p>\n President Biden reportedly concedes that there won\u2019t be an increase in the minimum wage soon.<\/strong> \u201cDoesn\u2019t look like we can do it,\u201d he told a group of governors last week, according to Politico. He\u2019s prioritizing his $1.9 trillion stimulus proposal instead. Separately, Walmart raised wages for hourly workers, with about half reaching at least $15 an hour, the level proposed by the White House.<\/p>\n The U.S. and Novavax make big contributions to a global vaccination effort.<\/strong> The White House said it would make good on a pledge to donate $4 billion to a campaign aimed at making and distributing Covid-19 vaccines worldwide, while the drug maker Novavax committed to selling 1.1 billion doses to an alliance that aims for equitable global distribution of vaccines.<\/p>\n A standoff between Steve Schwarzman and his \u201cscholars.\u201d<\/strong> Current and former participants in a master\u2019s program funded by the Blackstone C.E.O. called on him to cut ties with lawmakers who objected to certifying the 2020 presidential election results, The Times\u2019s Kate Kelly reports. Mr. Schwarzman has refused.<\/p>\n North America\u2019s first Bitcoin exchange-traded fund pops in its debut. <\/strong>Nearly 10 million shares in the Purpose Investments E.T.F., which gives investors exposure to the cryptocurrency without needing to hold it themselves, were exchanged yesterday, making it one of the most active stocks in Toronto.<\/p>\n In U.S. history, very few top financial regulators have been Black. Chris Brummer, a professor at Georgetown Law, spoke at an African American History Month event at the S.E.C. this week and called for an overhaul of the recruitment and appointment process for regulators, highlighting his own research on the lack of diversity in those ranks. Regulators write the rules of capitalism, he noted, and diversity helps ensure a wider perspective on the impact of policies.<\/p>\n Less than 2 percent of all financial regulatory leaders in the U.S. have been Black. <\/strong>Specifically, that\u2019s only two of the 129 heads of major agencies since the founding of the Federal Reserve in 1913, Mr. Brummer said. Things have been no better at the upper levels of the agencies, in positions that serve as steppingstones to leadership roles, he pointed out. According to Mr. Brummer\u2019s research, there have only ever been two Black division heads at the S.E.C., which was founded in 1934, and none at the C.F.T.C. since its founding in 1975.<\/p>\n \u201cWall Street is more diverse than the leadership of our regulatory agencies,\u201d <\/strong>Mr. Brummer said. \u201cOne or two appointments even at the highest levels of leadership won\u2019t begin to change the overall level of representation.\u201d<\/p>\n Mr. Brummer, who is Black, is reportedly under consideration to lead the C.F.T.C. He was nominated for that position by President Obama, but the Trump administration withdrew his candidacy.<\/p>\n \u2014 Rose Macario, the former chief executive of Patagonia, <\/em>on her unexpected departure<\/em> from the unconventional clothing company.<\/em><\/p>\n Next month, the Supreme Court hears arguments in a case pitting Goldman Sachs against investors led by a pension fund for teachers in Arkansas. The dispute centers on aspirational statements made by the bank that investors say they relied on \u2014 and that ended up costing them.<\/p>\n The case has been bumping along for a decade,<\/strong> mostly tied up in fights over whether the plaintiffs can proceed as a group. The investors claim that Goldman misled them with corporate statements ahead of a 2010 S.E.C. fraud case against the bank that hit its stock price (Abacus, \u201cFabulous Fab\u201d and all that). Lower courts say the plaintiffs count as a class based on a presumption that all investors indirectly rely on company statements when making decisions to buy a stock. Goldman contends that was wrong and warned that companies would face an onslaught of litigation if the justices don\u2019t reverse the decision.<\/p>\n The case could have \u201ca severe chilling effect\u201d on company openness,<\/strong> depriving stakeholders of information about \u201ca broad range of issues, from corporate governance reforms, to environmental and societal goals,\u201d wrote the Society for Corporate Governance in a \u201cfriend of the court\u201d brief. The society noted that businesses are under increasing pressure to speak out on a wide range of issues; if this opens them up to litigation, it sets a trap that could discourage transparency.<\/p>\n In other briefs, former securities regulators and law professors warned of \u201cdraconian practical consequences\u201d during the pandemic in particular, when corporate statements \u201chave already been weaponized,\u201d citing a new case against AstraZeneca based on setbacks in the Covid-19 vaccine. The Chamber of Commerce and other trade groups foresaw \u201crunaway liability and mounting financial pressure for companies and their shareholders to pay on alleged misstatements that had no market impact.\u201d<\/p>\n \u201cThe parade of horribles that petitioners invoke\u201d is unfounded,<\/strong> attorneys for the S.E.C. and Justice Department argued in their recent brief, which took neither side of the case. The government refuted Goldman\u2019s claims that reasonable investors don\u2019t rely on aspirational statements, but agreed that there were questions about the relevance of Goldman\u2019s generic statements.<\/p>\n Deals<\/strong><\/p>\n Volkswagen is said to be weighing a spinoff of Porsche. (Bloomberg)<\/p>\n Millennium Management has invested $4.4 billion in SPACs, making it the biggest hedge fund investor in blank-check companies. (FT)<\/p>\n Politics and policy<\/strong><\/p>\n The U.S. Chamber of Commerce and tech industry trade groups sued Maryland over the state\u2019s new digital advertising tax. (NYT)<\/p>\n Why the office of comptroller of the currency is so sharply dividing Democrats. (The Atlantic)<\/p>\nHERE\u2019S WHAT\u2019S HAPPENING <\/span><\/h3>\n
Who writes the rules?<\/h2>\n
\u201cA lot of C.E.O.s stay a little too long at the fair. I think it\u2019s good for companies to have new leadership.\u201d<\/h2>\n
How seriously should investors take company statements?<\/h2>\n
THE SPEED READ <\/span><\/h3>\n