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Jason Zweig - New SEC Rule Designed to Protect Small Investors May Have Opposite Effect

edited October 11 in Other Investing
“Never take liquidity for granted. The ability to convert securities into cash promptly, at a price close to the last trade, isn’t a permanent property of markets; it’s a privilege that can disappear almost instantly at the worst possible time. Like water itself, market liquidity can evaporate in an instant. Many traders learned that in January when Robinhood and other brokerages restricted trading in such hot stocks as GameStop Corp. GME 0.33% and AMC Entertainment Holdings Inc. AMC -2.49% Liquidity also dried up instantly during the “flash crash” of May 6, 2010. In the financial crisis of 2008-09, even ultrasafe money-market funds temporarily suspended giving shareholders their money back on demand. …..

“A rule from the Securities and Exchange Commission went into effect at the end of September, generally preventing brokers from providing public price quotations on securities issued by companies that don’t release current financial information. Ladenburg, acquired by privately held Advisor Group Inc. in early 2020, no longer provides financial statements to the general public …

“ ‘If [small investors] were not paying attention to that rule change, they’d better be happy with what they own, because they may be stuck with it for a very long time,” says Robert Forster, a former hedge-fund portfolio manager who sometimes trades over the counter. “You owned a publicly traded security; now you’re a private-equity holder. Congratulations! You own it forever.’ “

Article appeared in today’sWall Street Journal and it appears you may link to entire article Here


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