Gill didn’t face charges then, but this time could be different. The Massachusetts state securities regulator has already confirmed that it is Looking to Gill’s recent conduct, without giving details. It would appear that Gill is also aware of the risk of provoking an SEC investigation. On May 16, he posted a clip of a CNBC interview in which Jay Clayton, former chairman of the SEC, expressed the opinion that his conduct should not be tolerated. The SEC declined to comment on the existence of an investigation.
At the beginning of Gill’s livestream on YouTube, a long disclaimer scrolled up the screen like the opening crawl of Star Wars. “No opinion expressed on this YouTube channel (sic) should be treated as a specific incentive to make a particular investment or follow a particular strategy,” he said. As Gill joked with his YouTube viewers (all 600,000 of them), GameStop’s stock price briefly rose. “Shit, look at this. It’s going up,” he said. “Do I have to be careful with what I say here? I really do not know”.
It might seem evident that Gill’s posts, cryptic as they are, have caused an increase in the price of GameStop shares from which he, as a shareholder, will benefit. But absent a complete trading history for him, it’s difficult to assess whether he has actually violated securities laws, says Richard Schulman, a partner at the law firm Adler & Stachenfeld. “It’s never completely clear until the facts are fully formed,” he says.
But Gill has given regulators plenty to dig into. “Was his purpose to influence the movement of the stock price? Did it, in fact, affect the demand for shares? Will you benefit from these activities? These are the kinds of questions that a regulator will want to investigate,” says Schulman. The answers could determine whether Gill faces a formal investigation.
Specifically, Gill could find himself in trouble when his call options expire on June 21, leaving him with a decision: Should he sell his options at a profit, if the stock price remains high, or take delivery of the GameStop shares they represent? Having made his position public, Bragança says, Gill is required, under a little-understood facet of securities law, to notify his audience in advance of any sale, even if doing so would jeopardize profits. “The problem is when you change positions,” says Bragança. “Before selling, you better inform the market. Most people on social media don’t think that way. The initial (social) posts aren’t what’s going to get you in trouble – it’s the things we can’t see.”
Gill may wonder how his behavior is different from that of any other expert offering stock advice or a CEO who speaks highly of his company. And he might be right. To some extent Gill is flirting with gray areas in the securities rule book, devised long before anyone imagined an influencer in a position to spin the market with a single tweet.
But the SEC has typically maintained that the rules are malleable enough to allow mutations of ancestral violations to be addressed. “Market manipulation is not necessarily a rigid concept,” says Schulman. “The SEC is not used to trying to apply concepts to new situations in the world that has developed.”
The SEC has not made its thinking public, but former Chairman Clayton, in the CNBC interview, hinted that the agency will be eager to avoid further volatility in GameStop’s price, which risks imposing large-scale losses. to investors. One way to do this would be to bring cases against an individual who believes that he or she has exercised social influence illegally, with the aim of deterring others from doing the same. “It’s like Aesop’s fables,” says Bragança. “We are telling a story. You should draw a moral from it.”
