Gamestop Short Seller Wants Freedom Of Speech For 'Millions' Having Stock Market Conversations, Questioning SEC On 'What Protects Honest Opinions?'

Activist short seller, Andrew Left, who is the founder and editor of Citron Research has filed a petition with the U.S. Securities and Exchange Commission arguing for a stronger protection for free speech in online stock market discussions.

What Happened: The petition comes amid Citron’s concerns that the current regulatory climate stifles honest commentary from a wide range of market participants, including retail investors and short sellers.

Dynamis LLP, a litigation boutique, on behalf of Andrew and Citron, called on the SEC to clarify rulemaking and the legality of trading by investors who publicly comment on securities.

The petition urged, “the SEC to protect freedom of speech for millions engaged in stock market conversation,” and asked “What protects honest opinions?”

Claiming that Left does not “manipulate” the stock prices the petition said that he is followed on social media “because of his long history of success in predicting the trajectory of stock prices based on his own research.”

It explained how the SEC lawsuit did not accuse Left of making any false statements about any security. “Instead, the SEC accused Left of, publishing truthful information about securities and “trading those securities in a manner that apparently contradicted his public statements.”

Citron Research suffered significant financial losses in 2021 due to the GameStop Corporation GME short squeeze. This event, which saw the stock price of GameStop surge dramatically, resulted in billions of dollars in losses for short sellers, including Left.

Why It Matters: In July 2024, the SEC charged Left with multiple counts of fraud. Authorities accused him of defrauding investors by making misleading statements about his positions in companies like Nvidia Corporation NVDA, Tesla Inc TSLA, and Meta Platforms Inc META. The SEC and Department of Justice scrutinized discrepancies between Left’s public commentary on these stocks and his actual trading activity.

This year, Left appeared on CNBC's Squawk Box on Jan. 10 and said that his actions were a part of “risk management”.

“Anyone who trades stocks for a living know, if you have a position on, you might trim it. You might put stop-loss orders in, you might put limit orders if you're making money," he added.

He also clarified that SEC had accused him of trading “immediately” after posting his views on social media, to which he said that he may have traded immediately for just one day, however it was six or four days in other cases.

Key Issues Raised In The Petition: "The SEC's recent enforcement actions create a dangerous chilling effect on free speech and market participation," said Eric S Rosen, founding partner of Dynamics LLP and one of Left's attorneys.

The petition also sought SEC guidance on key issues:

Trading Windows: Establishing clear rules for permissible trading activity following public commentary on a security.

Disclaimer Safe Harbor: Determining whether disclaimers can effectively shield investors from legal repercussions for disclosing trading intentions.

Scope of Trading Restrictions: Clarifying whether trading restrictions apply to all investors or only those with significant market influence.

First Amendment Rights: Ensuring adequate protection for the First Amendment rights of individuals who publicly discuss securities.

Dynamis LLP's partner, Michael B Homer, said, "The SEC itself has repeatedly stated that public commentary regarding securities increases price efficiency and deters corporate fraud."

Accordingly, the petition requested that the SEC take immediate steps to establish clear and practical guidelines.

Photo Courtesy: Shutterstock.com

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