In my February 2, 2021, blog post, “Rupture Rapture: Should the GameStop?” I noted that a report in the Wall Street Journal for Saturday/Sunday, January 30-31, 2021, identified a 34-year-old former Massachusetts Mutual Life Insurance Co. (“Mass Mutual”) “marketing employee” as the on-line “influencer “ who triggered the interest surge in GameStop. It has now been revealed in the financial press that the employee, Keith Gill, was not just a marketing employee. He was a “financial-wellness education director” for Mass Mutual and was registered as a broker-dealer with the Financial Institutions Regulatory Authority (“FINRA”) and with the Commonwealth of Massachusetts, according to BrokerCheck, a FINRA website. According to the Wall Street Journal, Mr. Gill posted “dozens of videos or live streams over the past six months, most of them related to his view that GameStop shares were undervalued and would rise as others took notice.” It is further reported that Mr. Gill has owned 50,000 shares since early January when GameStop was trading at about $17 a share. GameStop shares reached a high of $483 per share on January 28. Mr. Gill is also reported to own options to buy GameStop at $12 per share.

Keith Gill and the GameStop Surge

A registered broker-dealer in Massachusetts, like Mr. Gill, is not to make securities recommendations unless they are in the “best interest” of clients as required by the Securities and Exchange Commission (“SEC”)’s Regulation Best Interest and a parallel Commonwealth regulation. Although Mr. Gill will argue that he did not make recommendations to clients, the level of communication between members of the Reddit Mob and Mr. Gill may be a sufficient basis to find him in violation of those regulations. In any event, a registered broker-dealer is constrained by regulations from engaging in the kind of ”boiler room”-like marketing effort that Mr. Gill is described as having done. Indeed, Mr. Gill’s “marketing activities” look very much like the front end of a traditional “pump and dump” operation, which is violative market manipulation. Moreover, he totally failed to inform his employer, Mass Mutual, of his activities on social media AND to provide it with copies of all relevant communications that might be deemed sent to clients OR potential clients. FINRA and the Office of William Galvin, Secretary of the Commonwealth (the location in the Massachusetts government of the State Securities Regulator) are reportedly actively investigating Mr. Gill and his activities, as well as the compliance of Mass Mutual. While not yet reported, one may confidently presume that the SEC, including its Enforcement Division, is also scrutinizing them.

In addition to Mr. Gill’s legal responsibilities, Mass Mutual has a duty to supervise the broker-dealers in its employ. Mr. Galvin’s Office has reputedly sent Mass Mutual a letter requesting Mass Mutual to detail its oversight, if any, of Mr. Gill’s activities on Reddit and YouTube, AND to explain why his social media presence was not reported as an outside business activity. Registered broker-dealer firms like Mass Mutual are required to review any planned outside business activity by a broker-dealer in its employ before it occurs, and to either approve it or forbid it. Additionally, Mass Mutual has been requested to state whether it monitors social media use by its broker-dealer employees. Both Mr. Gill and Mass Mutual are reported to have declined to comment to inquiries from the Wall Street Journal as to their respective responses to these inquiries. It is quite possible that Mr. Gill faces a suspension or even permanent loss of his registered status; he resigned from his employment with Mass Mutual on January 28, according to Massachusetts securities regulators. Mass Mutual may also face civil fines and other disciplinary requirements.

Inciting to Rupture

Over and apart from enforcement action by one or more regulators, Mr. Gill and Mass Mutual face potential civil claims from any of the GameStop “investors” who lost money in a market surge Mr. Gill incited. And the hedge funds, such as Melvin Capital, which lost billions of dollars in the short squeeze may be looking for recompense – from Mr. Gill for what he claimed in statements to the Wall Street Journal that he started, and from Mass Mutual for failing to supervise him. Thus, Mr. Gill who traded and proclaimed using the nickname “Roaring Kitty” on social media, may find that his GameStop “Kitty” must be applied to pay legal bills, regulatory sanctions, and civil liabilities. As Aeschylus wrote in “Agamemnon”:

And there they ring the walls, the young, the lithe. The handsome hold the graves they won in Troy, the enemy earth rides over those who conquered.