Adam Aron’s latest stock sale rattles AMC, and Finra might be rattling E-Trade and everyone else

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Adam Aaron will no longer sell his AMC Entertainment to AMC,
-9.07%
share, ok? Because $42 million worth in three months is enough for him and his bankers, right?

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That’s probably not going to go well for AMC’s loyal retail investment “apps.”

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after the company filed Form 4 On Wednesday, with the Securities and Exchange Commission alerting investors that its Maylord chief executive had sold 312,500 more of his shares on January 11, Aaron took to Twitter to reassure its social-media base that it would Down with pre-arranged share sale bonus. Now there’s a $42.12 million profit for the man who turned AMC’s meme stock buzz into a full-fledged “Planet of the Apes.”

As Aaron said in the tweet, he told everyone this might have been happening during AMC’s most recent earnings call, but it still didn’t appear to calm the nerves of some hodling AMC shares as the stock closed down 9%. Happened.

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And Aaron’s opponents weren’t going to keep quiet even with this warning.

“It wasn’t like he wasn’t quite ready to be a millionaire 1%er. Most here’s poor or broken,” lamented one user on the subreddit r/amcstock. “He did not need the cash and still handed over the paper. He took profit from the monkeys. we caught. Trust no suit!!!!!!”

“He used to be CEO of 76ers and Carnival cruise ships. If he spent all that money and really needed AMC for cash then he is a terrible choice as CEO,” declared another. I’m very angry.”

And Aaron apparently got something out of his outspoken critics on Twitter, too:

But there were also plenty of Aaron supporters who remained loyal to their “Silverback”.

“He’s about to retire,” lectured another r/AMCStock user. “We know this. Haters can shut down FUD.”

“Our CEO said he was going to sell some shares during the summer, now he’s selling time to go back to business,” said another. “AMC to the moon. I’m in.”

The apps also showed their support on Twitter.

The timing of Aaron’s final sale was also a nice gift for some GameStop GMEs,
-4.36%
the apes, who have come to express their displeasure over the association of the two biggest meme stocks and told that their Silverback — chairman Ryan Cohen — joined as an active investor a year ago and has never sold its stock, focusing on GameStop’s debt and bottom line.

Cohen, who marked his Gamestop anniversary your way on tuesday, received some social-media support in the wake of Aaron’s most recent sale on Thursday.

Gamestop stock, however, ultimately didn’t do much better than AMC on Thursday.

FINRA trying to protect e-trade from itself

The Financial Industry Regulatory Authority is getting E-Trade (or it’s now called “e-Trade” from Morgan Stanley) to be fined $350,000 for failing to properly oversee the platform, leaving customers allowed to engage in manipulative trade.

In a memorandum of understanding signed by E-Trade and FINRA, the trading platform has been insufficient in preventing clients from engaging in practices such as wash trading and close marking, both of which are illegal strategies used to manipulate the prices of shares through purchases. is done for. in quantity.

Whereas “wash trading” is using multiple brokers to buy and sell the same stock to create the appearance of action – it’s like the financial equivalent of passing a ball between your hands so fast that it seems That’s more than a ball – “marking off” is loading up on a stock at a higher price at the end of the trading day to make things pop in the morning.

According to the letter, E-Trade failed to see both of these and did so on “under-traded stocks”.

It consists in the fact that it happened between February 2016 and November 2021, and we may be seeing a new wrinkle in the meme stock movement.

Specifically with this little extra bit about “other potentially manipulative activity”:

,E*TRADE did not have a properly designed surveillance to detect trades that
an increase or decrease in the price of an artificially under-traded stock, such as when a
The client attempts to artificially influence the price of the security by effecting a series of purchase transactions within a short period of time in order to create a false appearance of trading interest and activity in the security, followed immediately by transactions on the opposite side of the market. To profit from artificially inflated prices.
,

Now, it seems a lot like an algorithmic trader running massively through e-Trade may have played up the rise and fall of the meme as well, as Hertz’s bizarre journey in the summer of 2020 is made of small steps. Using a zero-commission broker on stocks to crate the big guys that no one was really paying attention to.

And it could also speak to a broader trend that market watchers have been picking up on for some time.

“We have seen recently that the volatility at the end of the day has been much higher than it was on the same day,” said Joshua Mitts, a capital markets expert and professor at Columbia Law School. “This raises the question, are there trading algorithms executing strategies for late in the day momentum reversal?”

While some it’s crappy and fine this little big wave ain’t gonna make [unless you’re a relieved Morgan Stanley
MS,
-0.49%
or a cheap thrill-seeking Robinhood
HOOD,
-5.85%
happy to see Finra picking on someone else for a change] It may also be something that other regulators don’t find interesting immediately to go away.

FINRA is like a paid babysitter for brokers who enter into an agreement to protect them from themselves, identifying issues that the SEC may look into before they even see the SEC. And in most environments, that may be the case, but the SEC is under the guidance of Gary Gensler, who is heavily concerned with the market structure inefficiencies that underpin mem stocks and still, according to many Beltway insiders, a key point. Looking for some villain in the whole matter.

In this new reality, Gensler may be interested by such FINRA wrist slaps, and due to the relatively new – and very mysterious – FINRA rule, it may be able to provide Gensler with some weapons.

“Finra’s ability to monitor trades has really grown,” explains Mitt. “They can do customer-level analysis with CAT (Consolidated Audit Trail).”

CAT has just become an industry-wide regulation that forces borrowers to self-report and gives FINRA a holistic view of individual orders placed by individual traders when they place orders as they are filled. And then whatever happens. It also tracks which broker-dealer handled them along the way, so even if E*Trade or Robinhood or someone else fails to see someone wash the trade on Blackberry BB,
-2.83%
Stocks at the end of 2020, if that’s what FINRA wants to see.

But again, FINRA only watches to make sure her clients know they are in danger of getting a slap on the wrist from a large fish, and incorporating the above “baby” analogy, FINRA often uses a babysitter. Chill with your boyfriend instead of watching the kids’ kids instead of Netflix.

“FINRA is well-suited to protect brokers from themselves, it is not appropriate to look at and build on specific examples and then bring a case,” Mitts explained. “That’s what the SEC is meant to do.”

And now that online brokerages are seeing the potential drawbacks of creating their own that allow for some very pesky goods on the stock, FINRA wants to shut down “Emily in Paris” and allow the kids to come to bed and pretend. Could tell to sleep, because Gary Gensler just pulled into the driveway.

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