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SEC takes shots at meme stocks, retail trading, and crypto bros in a PSA. Reddit responds that it’s victim blaming

June 2, 2022, 9:48 PM UTC

The Securities and Exchange Commission just revealed that it thinks meme stocks are a joke—and took some shots at crypto bros while it was at it. Retail trading communities on the internet are saying they feel scapegoated.

The financial watchdog released an unusual video as part of a campaign dubbed “Investomania” to educate the public to do careful research before making investment decisions, themed like a game show, with one 30-second video spot and three others at 15 seconds apiece. In the longest clip, a contestant named Brad starts with negative $5,250 and buzzes in “meme stocks” from a game board of investment options. Among the other categories are “stock tips from your uncle,” “crypto to the moon,” and “timing the market.”

A red X covers the screen as Brad loses even more money and gets pied in the face. The other contestant, Julie, decides she will conduct research first. With his face coated in whipped cream, Brad asks, “We can do research?” to audience laughter. Another video has Brad choosing to buy stocks on margin, the practice of borrowing money from a broker to purchase securities or shares. “I don’t even know what that is,” he tells the host. 

When Julie selects “Celebrity Endorsements” in a third video, a mock celebrity tells her, “You should buy crypto, trust me—I’m an actor.” The SEC has previously fined celebrities, including professional boxer Floyd Mayweather Jr. and music producer DJ Khaled, for promoting initial coin offerings to their fans and failing to disclose they were endorsements. 

All the public service campaign’s videos close with the same voiceover message: “Investing is not a game” before connecting the viewer to resources on the SEC website.

The campaign is intended to reach “existing, new, and future investors of all ages,” the SEC wrote in a press release Wednesday. It urges potential investors to consider the risks of so-called meme stocks, celebrity-endorsed cryptocurrencies, investments promising guaranteed returns, and margin trading. 

“As technology evolves, we’re seeing a growing number of investors enter our financial markets,” SEC Chair Gary Gensler said in the statement. “With the growing access to markets, it’s as important as ever for investors to take time to educate themselves.”

But the videos drew criticism from users on Reddit and Twitter, the same forums where retail traders had gathered during the meme stock craze of early 2021.

“Insulting the very investors it’s supposed to be protecting”

On the WallStreetBets subreddit, which first coined the term “meme stocks,” a Redditor claimed the “entire market is a meme stock” and demanded the SEC issue a televised apology. The post, titled “A Message to the SEC,” received over 7,000 upvotes.  

Dave Lauer, CEO of artificial intelligence agency Urvin AI, tweeted that the video was unproductive and deflected blame onto victims of get-rich-quick schemes. 

“The SEC is insulting the very investors it’s supposed to be protecting and educating,” Lauer wrote. “Instead of calling out brokers with completely conflicted business models who put trick clients into signing up for margin accounts, this video calls retail investors idiots.” 

Other users considered the timing of the campaign to be market manipulation. The SEC posted it on its YouTube channel a day before GameStop released its first-quarter earnings report on June 1. 

When reached for comment on the criticisms, an SEC spokesperson said the campaign was “designed to generate conversation about the importance of independent, non-biased research in making investment decisions.”

“We’ve seen the real risks of investing on margin, following celebrity endorsements, and investing based on promises of guaranteed returns, and we’re happy to see that investors are talking about these things,” the spokesperson said. “We will also, where appropriate, bring enforcement actions designed to deter wrongdoers from defrauding the investing public.”

The SEC did not respond to an inquiry about the cost of producing the campaign. 

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