SEC's Peirce Says Agency is Trying to Play Corporate Manager

Robinhood Hits Back at SEC, Warns of Threat to Zero-Commission Trading

In Robinhood’s first extended comments about the SEC’s proposals since their release in December, two company executives, in an interview with The Wall Street Journal, called the agency’s plan a backdoor attempt to ban payment for order flow, or PFOF. That is a practice in which electronic trading firms known as wholesalers pay brokers a share of their profits from executing investors’ orders.

Payment for order flow is a crucial part of the business model of Robinhood, which is set to report fourth-quarter results Wednesday. Critics of the practice, including SEC Chair Gary Gensler, say it poses a conflict of interest for brokers. But PFOF makes it possible for firms such as Robinhood to make money without charging commissions, and it opened the door to zero-commission trading, which brought millions of new investors into the stock market during the pandemic.

“If you think about the ramifications of these proposals, you’re essentially shutting the door and saying we liked it better when it was the old boys’ club,” Robinhood Chief Brokerage Officer Steve Quirk said.

Dissent by SEC Commissioner Hester M. Peirce | The SEC Levels Up: Statement on In re Activision Blizzard

It is also difficult to see where the logic of this Order stops. When the SEC gets this granular, the limits are not clear. If workplace misconduct must be reported to the disclosure committee, so too must changes in any number of workplace amenities and workplace requirements, and so too must any multitude of factors relevant to other risk factors. The requirement cannot be that a company’s disclosure controls and procedures must capture potentially relevant, but ultimately—for purposes of disclosure—unimportant information. As I read it, in this Order, the SEC once again has sat down at the gaming console to play its new favorite game “Corporate Manager.” Using disclosure controls and procedures as its tool, it seeks to nudge companies to manage themselves according to the metrics the SEC finds interesting at the moment. For Activision Blizzard, today, that metric is workplace misconduct statistics, but other issues will follow. In this level of the enforcement game, the SEC has added $35,000,000 to its point total despite the Order not identifying any investor harm….

Defendants Ishan and Nikhil Wahi’s Motion to Dismiss

This case is about the rule of law and whether the most powerful entity in our society—the United States Government—must abide by the law when it brings its power to bear against a person. In this case, the Securities and Exchange Commission (“SEC”) is trying to seize broad regulatory jurisdiction over a massive new industry via an enforcement action against a 32-year- old former Coinbase employee and his kid brother. An enforcement action against individual people—particularly ones who are already occupied with federal criminal proceedings at the other end of the country—is not how major questions of law that loom over entire industries should be resolved. Yet that is how the SEC has chosen to proceed....

Musk Gets Away With MischiefBut is that right? The case was actually about whether investors bought Tesla stock at inflated prices because they were deceived by Musk’s tweets, and in evaluating that question you might want to think about what Twitter is, and who Elon Musk is. If Tim Cook had put out an Apple Inc. press release in 2018 saying “we are thinking of acquiring Tesla and have proposed a price of $420 per share, funding secured,” the price of Tesla would have gone up to, like, $410, because people would have taken that very seriously, because Tim Cook does not sit around saying nonsense in press releases all day. But Elon Musk really does sit around tweeting nonsense all day, so you can’t take him that seriously. Does that mean that the rules that apply to Tim Cook (and pretty much every other public company CEO) don’t apply to Musk? Ehh, I guess? Sorry?….

Crypto firms ditch Super Bowl commercials this year after FTX meltdown

Crypto dominated the conversation at last year’s Super Bowl, with four firms — FTX, Coinbase, Crypto.com and eToro — plunking down millions of dollars for 30 seconds of ad time and spending millions more on star-studded commercials featuring the likes of comedian Larry David and NBA superstar LeBron James.

But this Sunday’s broadcast of Super Bowl LVII won’t feature a single crypto ad as embattled firms contend with a wave of layoffs, bankruptcies and unprecedented legal scrutiny. The arrest of disgraced FTX founder Sam Bankman-Fried, who is accused of bilking customers out of billions, was a key factor.