A ringleader's videos draw regulator's scrutiny

New York

MOONLIGHTING under the name Roaring Kitty, Keith Gill became something of an online folk hero for his dedication to GameStop, the struggling video game retailer at the centre of a trading frenzy that sent its share price into the stratosphere.

But now a regulator in Massachusetts wants to know more about Mr Gill, a registered securities broker, and his former day job as a financial wellness education director at an insurance company based in Boston.

Inspired in part by Mr Gill's cheerleading, thousands of small investors pushed stock in GameStop to as high as US$483 a share and made Mr Gill fabulously rich on paper. A picture he posted last week on the Reddit WallStreetBets forum showed his GameStop investment was worth US$48 million, though his actual returns could not be independently verified.

But Mr Gill's former employer, MassMutual, has told securities regulators in Massachusetts that it was unaware that Mr Gill had spent more than a year posting about GameStop on social media, online message boards and YouTube. The insurer also told regulators that had it known about Mr Gill's outside activities, it would have asked him to stop or possibly fired him.

MassMutual, officially known as Massachusetts Mutual Life Insurance Co, also informed regulators that Mr Gill gave his notice on Jan 21 but was technically still an employee of the firm and its securities and investment advisory arm, MML Investors Services, through Jan 28 - the week when GameStop shares surged the most.

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In particular, the Massachusetts regulator is investigating whether Mr Gill or MassMutual broke any rules.

Licensed professionals have an "obligation" to inform their employers about their outside activities, said William Galvin, the Massachusetts secretary of the commonwealth.

On Friday, Mr Galvin's office sent a letter to MassMutual's general counsel seeking information about Mr Gill's employment status and whether the company was aware of his outside activities promoting GameStop. The letter also sought details about the firm's "process for identifying undisclosed business activities" and for monitoring an employee's use of social media.

Debra O'Malley, a spokeswoman for Mr Galvin's office, said much of MassMutual's response was confidential because the inquiry is open. But she confirmed the date of Mr Gill's departure and reiterated the company's contention that it was unaware of his activities. Ms O'Malley said MassMutual had told securities regulators that it previously denied a request by Mr Gill to perform side work managing an investment portfolio for a family friend after he joined the company in April 2019.

Paula Tremblay, a MassMutual spokeswoman, said in an emailed statement that Mr Gill was no longer employed by the company and that the matter was under review. She declined to comment further.

Mr Gill, 34, did not respond to messages seeking comment. He has been mostly silent other than speaking to The Wall Street Journal. In its article, published Friday, The Journal described Mr Gill as having recently worked in marketing for MassMutual.

Mr Gill had not posted on his YouTube channel since Jan 22, but he still posts on the Reddit WallStreetBets forum. On Wednesday, his account posted an image that put the value of his GameStop holdings at more than US$8.6 million. The image also showed cash holdings of nearly US$14 million.

GameStop's stock has lost more than two-thirds of its value since closing at US$347 on Jan 27. The stock was up nearly 3 per cent on Wednesday and closed above US$92.

The financial services industry in recent years has adopted a number of regulations and policies about the use of social media by financial professionals.

The Financial Industry Regulatory Authority - the securities industry's main self-regulatory organisation - says financial services professionals must avoid making "false, misleading claims, exaggerated statements and material omissions" on social media. FINRA's guidelines require brokers and other financial services firms "to supervise the business-related content" that employees post.

Mr Gill's Roaring Kitty videos did include a disclaimer saying investors should consult with a financial adviser before making any investment decision and "should not treat any opinion expressed on this YouTube channel as a specific inducement to make a particular investment".

It's unclear if MassMutual has any regulatory issues itself. Firms can be liable for failing to supervise employees, but if Mr Gill circumvented the firm's processes for monitoring employees' use of social media, then it may not be at fault. NYTIMES

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