U.S. House advances bills to address Archegos, GameStop turmoil
By Kathi on Jul 30, 2021 | 02:30 AM IST
Wealthy families that set up investment funds known as
“family offices” to manage their personal wealth would face stricter oversight
from U.S. regulators under a bill advanced by a U.S. congressional panel late
on Thursday.
The bill was among 11 that lawmakers hope will address
failings highlighted by March’s meltdown of family office Archegos Capital
which led to billions of dollars in losses for some banks and January’s GameStop
saga.
Whether they pass or not, the bills considered by the House
Financial Services Committee would increase the pressure on the U.S. Securities
and Exchange Commission (SEC) to take swift action, analysts said.
The legislation targets family offices with more than $750
million in assets, retail trading practices and short selling.
The bills also target January’s GameStop
meme stock saga during which retail investors trading on low-cost brokers like
Robinhood Markets Inc banded together to burn hedge funds that had bet against
the retailer.
One bill directs the SEC to study restricting “payment for
order flow” whereby brokers route orders to wholesale market makers in return
for a fee. Critics say the practice creates conflicts of interest that can push
up prices for retail investors.
Any changes to the model could hurt Robinhood, which had a
miserable stock market debut on Thursday, partly due to investor worries over
regulatory risks.
Another bill directs the SEC to require investors to
disclose their positions monthly instead of quarterly, and to include certain
derivatives and “short” bets that stocks will fall.
Several industry insiders said Wall Street will fight the
changes.
Thomas Handler, a partner at law firm Handler Thayer which
has over 300 family offices as clients, said the proposal for family offices to
register with the SEC would become an “intrusion of privacy.”