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Managing Compliance Concerns in the Wake of GameStop Corp. Stock Inflation

Sample reminder communication for investment advisers to send to their traders regarding recent market volatility

During the past week, investors have seen GameStop Corp. stock soar to extreme heights driven, in large part, by the concerted efforts of participants in the r/WallStreetBets forum on Reddit to rally the stock rather than any change in the fundamentals of GameStop. Investment advisers can send this letter to their traders to deter them from participating in such activities.

Compliance Considerations for Advisers

These developments create a number of significant risks for investment advisers, including:

Negative impact to the adviser’s position in a security that becomes subject to social media-driven volatility
The incentive for employees of the adviser to participate in forums like r/WallStreetBets in an effort to influence the price of a security
Legal questions around the use of web scraping and other types of alternative data to incorporate social media sentiment into the adviser’s research process

ACA has drafted a sample reminder communication for investment advisers to send to their traders regarding this issue. Download the communication template here.