Stonks! @vim_dzl and @amandamoore1012 Asked if I could do a legal explainer about all the Robinhood locking people out of GME activity.

As they say on Wall Street, when the ducks quack, feed 'em! So I'm going to do a quick primer thread on all the potential legal players 1/

2/ But first, you knew it was coming . . .

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3/ So first let's lay out some legal history. Warning I'm doing this from memory an with a glass a wine by my side, so reader be ware if you're cribing for your college term papers.

4/ Back before the Black Friday market crash of 1929, the U.S. Capital Markets were a hot mess of Wild, Wild West action. Firms, owned by partners (not public shareholders), took companies public on exchanges. People gathered in person to buy and sell.

5/ The markets had very few -- if any -- safeguards. There weren't really any diligence standards for a company to list on an exchange. It was basically like 2001 with Web 1.0 companies, but like 100 years earlier.

6/ Things ended badly for lots of folks. The market crashed on Black Friday in October of 1929. People apparently jumped out of buildings. White shoes got scuffed. Shit got real (pardon my French).

7/ Quick side note that things in the Wall Street Orbit back then got called "white shoe" because wealthy Christians at Ivy League schools wore some suede shoes that were nick-named "White Shoes"

8/ The term was basically OG institutional racism, primarily against jewish and other non-Christian folks. So called "white shoe" banks and law firms didn't allow jews.

9/ If you can't beat em, start your own casino (or I think that's the saying). Non-Christians started their own firms - underwriting houses like Goldman Sachs. And law firms like Skadden Arps.

10/ Back to the legal stuff -- so rich people, poor people and Congress were all pretty pissed about Black Friday and the market crash and poorly underwritten companies. So they did something novel.

They passed laws to police the bad conduct!

11/ Admittedly it took a few years. The first law was the Securities Act of 1933. If you ever wonder why it takes companies so long and so many lawyers and accountants to go public - this is the big reason.

12/ The law -- known as the "33 Act" -- sets standards for shareholder disclosures. Today the law and its related rules span initial listings (the S-1), quarterly disclosures (10-Q), Annual (10-K) and ad hoc (8-K).

13/ The law also contains various exemptions. If you're one of those folks who wonders why some folks can be angel investors and others can't -- it's due in part to the exemptions in the 33 Act from requirements to register a securities offering.

14/ The main ones are if someone is a qualified something or other (buyer, purchaser) and another is if you're selling to non-U.S. persons. A lot of asset-based transactions will live here, because you don't need to bother getting an SEC registered shelf to get funding.

15/ Interestingly (to like maybe three of you) -- the 33 Act actually predates the creation of the SEC. So the primary purpose of the Act was to set a strict liability standard so all those WASPy dicks at White Shoe firms would do their job and stop screwing regular folks.

16/ So the SEC comes along in 1934 with the Securities Exchange Act of 1934. That law creates the SEC and also sets up a bunch of standards for secondary market trading.

Secondary markets are facilitated by parties like Broker Dealers.

17/ Want to know a secret? You know who is a registered broker dealer?

18/ Oh crap -- added that picture early and spoiled the big reveal. Relatedly, I should get another glass of wine.

It's Robinhood. But you probably already guessed that.

19/ So this brings us to a good place to do a round up of the folks that are going to take it from here.

A) The SEC (see above tweets)
B) FINRA (see below tweets)
C) State AGs
D) Class Action Law Firms // Private Litigants

20/ So the SEC is the main cop on the beat. They're also the principal, the secretary, the janitor and the football coach.

Let's unpack.

21/ the SEC is structured as a commission. This means most decisions need to be approved by a majority of the five politically appointed commissioners that sit on top the agency.

22/ Three of the SEC's commissioners get to be appointed by the same party as the president. But for balance, two need to be from the other party.

23/ Fun fact - a law school classmates is now an SEC commissioner. She'll probably remember me as the guy who slept through class, drank too much at the law school Thursday night bar outings, and got an A in securities law. Or more likely won't remember me. But she's cool.

24/ Below the commissioners, like my classmate Caroline, sit a whole host of divisions and functions. Corp Fin. Examinations. Investment Management. Trading and Markets. Economic and Risk Analysis. And Enforcement.

25/ Today we'll focus on examinations, trading and markets and enforcement.

26/ Each of the divisions generally has its own Rulemaking offices. These folks keep up to date on market development, take meetings with companies and SEC-registered entities (like Vlad's good 'ol Robinhood) and figure out when the tinker with the rules.

27/ Examinations is important to this story because there's a strong possibility Robinhood will get an SEC exam out of this to check up on things. This is a big deal, because exams can also be handled by a less-important industry body (FINRA - more on that below).

28/ Enforcment is also likely to enter the story in some shape or form. Either because the Exam staff do conduct an exam and then refer things, or because tipsters or other things catch their eye.