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Rep. Luetkemeyer and Rep. Foster Send a Letter on Market Volatility Attributed to Short Selling

Congressman Blaine Luetkemeyer (R-MO) and Congressman Bill Foster (D-IL) sent a letter to Chair Gary Gensler of the U.S. Securities and Exchange Commission (SEC) calling on the agency to investigate recent market volatility attributed to short selling.

“Short selling can support the integrity of markets and contribute to accurate price discovery,” the Congressmen said in the letter. “However, we are aware of assertions that some issuers have experienced falling stock prices due to market-moving information that was untrue. This information has been disseminated through traditional media, publishing sourced reporting, and over social media. The speed and pseudonymity of social media can frustrate the correction of inaccurate information while also facilitating concurrent, if not coordinated, investing by many retail investors. This presents new and growing challenges to the SEC’s market surveillance.”

The full letter from Congressmen Luetkemeyer and Congressman Foster to Chair Gensler can be found here.

Background: Increased market volatility, resulting from short selling, has had a dramatic impact on U.S. companies, particularly small, mid-sized, and regional financial institutions. In some instances, the integrity of markets has been jeopardized because of misleading or false information, often stemming from paid research, and amplified by social media. The bipartisan letter requests that the SEC monitor, address, and report back to Congress on market manipulation, particularly through short selling and the dissemination of potentially false information via social media. It also contains a request for Chair Gensler to identify the authorities granted to the SEC upon determining that short selling coincided with misleading information.

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