A screenshot from Roaring Kitty’s YouTube Page
In an interview, earlier this year with the Wall Street Journal, one of the key figures of January’s “Game Stop” trading frenzy, Keith Gill (“Roaring Kitty”) of Brockton divulged that he was a Chartered Financial Analyst, a former Product Management Director and, a Director of Education and Wellness with the Massachusetts Mutual Life Insurance Co. Mr. Gill, by the time of the interview, was a nationally-known social media star who allegedly garnered almost $40 million on his Game Stop investment of $57,000. He pushed his vision of crowdsourcing stock buying of Game Stop shares with the handles of “Roaring Kitty” to his 522,000 YouTube subscribers and “DeepF***ingValue” to 9.8 million readers on Reddit’s “WallStreetBets” forum.
In his interview, Mr. Gill gave the Journal an in-depth account of the events leading up to his becoming one of the most influential stock advisors on social media and very rich. This interview and the extensive media coverage about Mr. Gill and his stock advice triggered questions about MassMutual’s oversight of the security advice that Mr. Gill was hyping on social media to Massachusetts consumers.
Mass. Securities Division decides to investigate “Roaring Kitty” and MassMutual
In response to the aftermath of Roaring Kitty’s influence and its effect on Wall Street trading, the Massachusetts Secretary of State’s Securities Division began an investigation into the question of whether MassMutual, as Roaring Kitty’s employer from 2019 until January 28, 2021, failed in its duty to actively monitor him and other registered broker-dealer agents it employed as required by law. In two consent orders signed by MassMutual in September, it appears that Securities Division determined that the answer to that question was “Yes.”
MassMutual’s MML Investor Services failed to “detect and monitor the social media activity of its broker-dealer agents”
According to the facts outlined in one of the Consent Orders, “Roaring Kitty” was employed with the MassMutual subsidiary MML Investors Services, LLC (“MMLIS”). MMLIS has been a registered “broker-dealer” in the Commonwealth since 1982. In 2019, “Roaring Kitty” first joined MMLIS as a Product Manager Director. He subsequently became the Director of Education and Wellness for a d/b/a of MMLIS entitled “In Good Company.” Throughout his entire employment with MMLIS, Roaring Kitty remained a registered dealer broker of the entity.
The Securities Division noted that certain employees of In Good Company who were registered broker-dealers, were categorized as “home office” registered representatives and were subject to regulatory supervision requirements versus non-registered employees, who were exempt. As a result, under Massachusetts law, MMLIS had a duty to implement policies and procedures to monitor its broker-dealer’s use of social media accounts unaffiliated with MMLIS in order to achieve compliance with the Act and Regulations.
According to the results of its investigation, the Securities Division stated that MMLIS failed in its duty to monitor “Roaring Kitty’s” activities on social media, which included the following:
- Over 250 hours or 10-days worth of YouTube videos detailing investment strategies
- At least 590 tweets involving securities related information
- Additional posts on other social media platforms, including 45 posts on the Subreddit community WallStreetBets.
- A failure to detect the 1,700 trades Roaring Kitty completed “in the accounts of other individuals”
- MMLIS let Roaring Kitty “run rampant” allowing him to utilize at least six social media platforms to discuss securities-related information.
- Even when finally aware of Roaring Kitty’s activities in violation of its social media policies as of January 18, 2021, the company took no immediate action against him.
- When Roaring Kitty tendered his resignation on January 29, 2021, no one at MMLIS, including Roaring Kitty’s Broker-Dealer Supervisor of Record, questioned him about his resignation.
- In total, the Securities Division stated that while a registered broker-dealer of MMLIs, Roaring Kitty effectuated approximately 1,700 trades in the accounts of three individuals, of which two he was a listed beneficiary.
While Roaring Kitty is the most notable example of MMLIS’s failure to detect and monitor its registered dealer-broker, the Securities Division noted that his case was not unique and that the failures were “systemic.” e.g., as agreed in one of the consent orders, MMLIS “was informed at least sixty-three (63) times by the Division between January 1, 2017, and March 21, 2019, that supervisors must be registered as agents in Massachusetts.” As a result of the investigation, the Securities Division found that the conduct of MMLIS violated the Massachusetts Uniform Securities Act, M.G.L. c. 110A and the regulation promulgated under this statute.
MMLIS agrees to a multi-million dollar fine to resolve the allegation
The result of the investigation led to two different Consent Orders against MMLIS for the above actions of its broker-dealer and its failure to properly monitor such activities. In addition to being censured by the Division, agreeing to a comprehensive review of its regulations and policies regarding broker-dealers, and an agreement to conduct an annual compliance review for three years, the company also agreed to pay a combined fine of $4.75 million.