US SEC chief "worries" about retail traders making an attempt to get wealthy shortly

© Reuters. Chairman Clayton is attending an open meeting of the US Securities and Exchange Commission to propose a change to the definition of an "accredited investor" in Washington


By Katanga Johnson

WASHINGTON (Reuters) – The head of the U.S. Securities and Exchange Commission said on Thursday that he was concerned about the risks to retail investors who are increasingly placing short-term bets on low-cost trading platforms rather than sticking to long-term investments.

"We are seeing significant inflows of retail investors trading more than investing," said Jay Clayton in a Thursday interview about CNBC's Squawk Box.

The rise of new, cost-effective and user-friendly trading apps in combination with extremely low interest rates has triggered a flood of private customer funds in stocks of investors who want to benefit from the market rally. This money has often gone into very risky businesses, including stocks that have filed for bankruptcy.

Robinhood Markets Inc was criticized in June at a 20-year-old customer committed suicide after believing he had suffered a huge loss with the free trading app. The company has since expanded its educational content for options trading.

"I encourage people to educate themselves, but short-term trading is riskier than long-term investing, and I'm concerned about the risk that investors take," Clayton told CNBC.

He also defended a recent agency proposal to significantly raise the reporting threshold for large institutional investment managers after critics said this would reduce market transparency.

Last month, the SEC proposed to adjust Form 13F, a quarterly report that hedge funds submit about their investment activity and holdings. The move would track the activity of hedge funds holding $ 3.5 billion in assets, compared to the current $ 100 million threshold set four decades ago.

"The purpose of the form is for regulators to manage large positions in the market and the current threshold is clearly not the right number," said Clayton.

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