Information Archives - In Class Book

March 17, 2023

Management Report: Continued Improvements Needed in the Bureau of the Fiscal Service’s Information System Controls Related to the Schedule of Federal Debt

Rapid Information

Treasury’s Fiscal Assistance problems personal debt to borrow cash for federal operations, and studies the financial debt on economical statements called the Schedules of Federal Debt.

We audit and concern viewpoints per year on the Schedules and on relevant internal controls (e.g., procedures to moderately guarantee that transactions are appropriately approved and recorded).

In FY 2022, Fiscal Company resolved 8 of our past recommendations to appropriate weaknesses in Treasury’s controls around information systems. But 15 linked tips remain unresolved—posing challenges, these kinds of as unauthorized access to, modification of, or disclosure of delicate facts.

blue and white computer code on a navy blue background

Highlights

What GAO Found

All through its audit of the fiscal yr 2022 and 2021 Schedules of Federal Debt managed by the Section of the Treasury’s Bureau of the Fiscal Provider, GAO determined that Fiscal Service adequately resolved manage deficiencies in safety management, access controls, and configuration management these that GAO no for a longer time considers the remaining manage deficiencies in information and facts process controls, individually or collectively, to characterize a significant deficiency as of September 30, 2022.

GAO determined recurring circumstances affiliated with earlier described data procedure handle deficiencies. Nevertheless, GAO did not establish any new reportable money info program control deficiencies appropriate to the Timetable of Federal Personal debt.

GAO determined that corrective steps ended up entire for eight suggestions and in system for the remaining 15 open up recommendations. Specifically, added actions are needed to take care of six tips similar to protection administration, just one advice related to accessibility controls, and 8 tips related to configuration management. These remaining facts program control deficiencies improve the threat of unauthorized entry to, modification of, or disclosure of delicate info and programs and disruption of important functions. Fiscal Services mitigated the possible result of these deficiencies on fiscal reporting for fiscal yr 2022 with compensating administration and reconciliation controls designed to detect possible misstatements on the Routine of Federal Personal debt. It will be essential for Fiscal Service management to continue on concentrating attempts on well timed addressing the remaining tips, some of which have been open up for several several years, linked to these data process command deficiencies.

In the Restricted Official USE ONLY report, GAO communicated detailed information and facts about actions Fiscal Service took to handle suggestions that ended up open up as of September 30, 2021.

Why GAO Did This Study

GAO is demanded to audit the consolidated monetary statements of the U.S. authorities. Due to the fact of the significance of the federal personal debt held by the public to the authorities-extensive economical statements, GAO audits Fiscal Service’s Schedules of Federal Personal debt per year. As section of these audits, GAO assesses vital controls around Fiscal Provider economical details systems that are applicable to the Schedules of Federal Financial debt.

This report offers (1) any data method manage deficiencies determined throughout GAO’s fiscal 12 months 2022 audit of the Agenda of Federal Personal debt and (2) the status of Fiscal Service’s corrective steps to address recommendations related to data method command deficiencies identified in GAO’s prior experiences that had been open up as of September 30, 2021.

For far more facts, make contact with Cheryl E. Clark at (202) 512-3406 or clarkce@gao.gov.

November 2, 2022

Investors Are Eager for Accurate ESG Information. Can Financial Analysts Provide It?

Yet for these buyers there is nonetheless a discussion: where by to transform to for excellent information and facts about a firm’s ESG general performance.

“How you uncover what’s valuable is the massive issue,” suggests Aaron Yoon, an assistant professor of accounting and information management at the Kellogg School.

In a new paper, Yoon investigates no matter if stories published by traditional fiscal analysts are a useful source of ESG details. Even though monetary analysts are not regarded for currently being on the cutting edge of ESG, he suggests, they are envisioned to be deeply educated about each shareholder-price-appropriate component of the organizations they address. So it stands to cause that this would lengthen to ESG-linked troubles.

Yoon and coauthors seemed at no matter whether inventory recommendations and focus on rates posted by financial analysts ended up in line with a company’s subsequent ESG procedures. In distinct, the researchers preferred to understand if analysts’ downward suggestions on stocks predicted destructive ESG incidents of some kind (like violations of workers’ rights or oil spills), and if their favorable recommendations predicted fewer of these incidents. Yoon, along with Min Park, an assistant professor at the College of Kansas College of Business enterprise, and Tzachi Zach, an affiliate professor at the Ohio Point out University Fisher University of Business, investigated this by making use of knowledge that track unsavory ESG situations.

The scientists identified that analysts’ inventory tips did in truth align with companies’ conduct over the upcoming year when it arrived to ESG risks. Analysts’ downward inventory revisions (say, from “buy” to “neutral,” or “neutral” to “sell”) predicted much more-recurrent negative ESG incidents for a corporation over the upcoming 12 months, though upward revisions predicted much less-regular types.

And, notably, the researchers found that this sample held even when managing for improvements in the scores from ESG-targeted rating agencies. This implies that analysts predict ESG danger at minimum as perfectly as their ESG-targeted counterparts.

“I believe traders will be interested to see these final results,” Yoon states. “I consider they’ve been bewildered at just about every turn as to which ESG raters to use, and which ESG alerts to use in common.”

Tallying Operational Hazards

The scientists chose to aim on how very good analysts were being at predicting ESG operational chance. In typical, operation threat refers to the forms of risks that a company and its leaders just take in the working day-to-working day functions of managing the corporation. Some operational challenges are ESG-linked, like overseeing place of work wellbeing and protection, or the management of dangerous waste and h2o, and some are not, like the possibility of supply-chain disruptions.

The plans of the analyze were being twofold. To start with, the researchers wished to realize irrespective of whether analyst stories are a helpful source of info for ESG-mindful investors. Next, they wanted to assess analysts’ keep track of data with regard to operational risk—a historically complicated enterprise.

“People would like to consider that analysts have some insights on operational risks—and analysts declare they do—but there is been no evidence either way,” Yoon claims. “We observed a distinctive way to examination no matter whether analysts do have insight into ESG and/or operational pitfalls.”

For their investigation, the scientists utilized a dataset from RepRisk, an ESG knowledge organization primarily based in Switzerland that tracks companies’ ESG-relevant incidents. RepRisk employs machine mastering to power a everyday assessment of 100,000 multi-language data sources, together with print media, on the web media, social media, and govt bodies. Yoon sits on RepRisk’s academic advisory board.

Unpacking Predictive Powers

The researchers’ investigation confirmed that analysts’ suggestions do without a doubt correlate with foreseeable future unsafe ESG incidents.

Precisely, every time an analyst downgraded a corporation score by just one notch, the enterprise seasoned 1.79 percent extra destructive ESG operational incidents about the adhering to 12 months than the typical business.

A subsequent analysis found that analysts—either intentionally or intuitively—were updating the “expected risk” in their assessments of how considerably dollars a firm is envisioned to make in the upcoming to mirror added ESG danger.

They also observed evidence that analysts appeared to be taking into account info both of those from companies’ ESG disclosure reports and business-unique stories from the Sustainability Accounting Standards Board (SASB), which spotlight fiscally materials ESG concerns.

The researchers also appeared at which analysts arise as most adept at forecasting long run ESG dangers. Counterintuitively, it does not surface to be all those who are most experienced or who have been rated as “All-Stars” by Institutional Trader, a financial magazine and study business whose analyst awards confer prevalent recognition. In point, the researchers’ effects indicate that analysts who did not have the All-Star status produced suggestions that much better predicted ESG incidents the same was accurate of all those with significantly less experience.

“Predicting ESG incidents may most likely call for a various set of capabilities,” the researchers write. It is also doable that additional-skilled and All-Star analysts “do not devote substantially focus to dangers that are related with the new location, due to the fact they are perhaps entrenched and snug in their part and are fewer inclined to innovate.”

Bridging the Hole

As curiosity in ESG investing proceeds to increase, the query of whose ESG examination to turn to will turn into significantly pertinent.

“Our final results are saying that analysts, since they know their businesses from the bottom up, are most likely to have the insights that are most helpful in consuming companies’ ESG disclosures,” Yoon clarifies.

Many thanks to financial analysts’ deep familiarity with their businesses and industries, he adds, they have a one of a kind capacity to identify no matter whether a supplied company’s disclosure is valuable.

“That’s the type of perception that these analysts are very likely embedding in their types,” he suggests. “They have organization-certain insights and information and facts that could help bridge the hole involving the nonfinancial character of ESG and organization-degree results. I think that is where by the worth-insert is coming from.”

July 3, 2022

GOP draft bill would tighten rules for finance firms using customer information

Rep. Patrick McHenry, a Republican of North Carolina and rating member of the Home Economic Expert services Committee, speaks in the course of a listening to in Washington, D.C.

Andrew Harrer | Bloomberg | Getty Visuals

A new draft invoice from House Money Products and services Ranking Member Patrick McHenry, R-N.C., lays the groundwork for how the GOP will tackle economical data privacy if the celebration wins again the majority in the chamber this November.

The dialogue draft, shared exclusively with CNBC, would modernize a fiscal info safety legislation recognised as the Gramm-Leach-Bliley Act to deal with data aggregators in addition to fiscal establishments and involve far more transparency with clients. These kinds of improvements could stop up implementing to fintech companies like Plaid or Intuit’s Mint.

The text will come on the very same working day that lawmakers on the Property Power and Commerce Committee marked up the American Facts Privateness and Safety Act, a new bipartisan framework that has introduced electronic privacy back into the limelight just as Congress prepares to wrap up for its August recess. Whilst the press for a federal privateness legislation has experienced quite a few stops and starts in the earlier, the new text furnished a renewed spark guiding the exertion as it incorporated compromises on vital challenges that had formerly stalled talks.

The draft aims to update a qualified element of the regulation and broaden it so it would keep on being applicable even in the confront of even more innovation, in accordance to a senior Republican staffer for the Economic Services Committee not licensed to converse on the document.

“We failed to want to start off with a really prescriptive and restrictive product that is heading to avoid developers from building a new application or great-tuning your application, generating new solutions,” the staffer claimed. “But we wanted to make absolutely sure that shoppers experienced all of the info to make sensible selections about what they are keen to share and what they are not ready to share.”

The discussion draft would involve the money institutions to explain to buyers when their nonpublic particular information and facts is currently being collected, not just when it is really staying disclosed to 3rd get-togethers.

It also would allow for shoppers to notify economic establishments and data aggregators to cease amassing their details or delete the information they have. In addition, it would increase the definition of individually identifiable nonpublic info topic to the regulation and corporations covered by the invoice would have to give people the capability to opt out of details assortment if it isn’t required to present company.

The draft invoice allows for federal agencies to develop regulations that acquire into consideration the perhaps larger stress of compliance on smaller sized corporations. It would also preempt point out law to generate a countrywide regular, anything that some Democrats have turned down in other privateness discussions for the reason that they see the states as essential areas to grow protections on leading of federal regulation.

“This proposal will modernize the existing framework to much better align with evolving know-how and defend versus the misuse or overuse of consumers’ particular facts,” McHenry reported in a statement. “I appear forward to continuing to function with my colleagues on this discussion draft to safe Americans’ privacy without strangling innovation.”

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WACH: What you know about passwords could be all incorrect

November 14, 2021

Financial Markets and Social Media: Lessons From Information Security

On January 28, 2021, stocks in U.S.-based video game retailer GameStop Corp. reached an all-time high of $483. Two weeks earlier, they had been trading at $20. Two weeks later, they were down again, and a congressional hearing on the matter was underway in Washington.

Wild swings are hardly uncommon in financial markets. This episode, however, had novel characteristics. In a recent report, the U. S. Securities and Exchange Commission states that “GameStop Corp and multiple other stocks experienced a dramatic increase in their share price in January 2021 as bullish sentiments of individual investors filled social media.” ¹ Retail traders congregating on the Reddit platform were key in both price formation and the emergence of a “Main Street versus Wall Street” narrative around the stock.²

The influence of social media on financial markets is here to stay, as younger generations start saving and investing. This carries both opportunities and risks. Information sharing and discussion on internet platforms can improve market transparency and efficiency. On the other hand, social media platforms are known vehicles of disinformation and manipulation of human behavior. They could be weaponized by malicious actors, ranging from state-sponsored groups to crime syndicates, looking to compromise market integrity and financial stability.

For liberal democracies with independent financial watchdogs, a complex policy challenge follows. In order to fight information operations, financial authorities will need to cooperate with intelligence communities and other relevant parts of executive branches. This requires rules that clearly define each party’s role and encourage reciprocal trust.

In many jurisdictions, cybersecurity statutes provide a starting point. They are, however, limited in scope, only covering cooperation vis-& agrave;-vis traditional cyber attacks. In this paper, we argue that the model must evolve to help prevent or defend against malicious information operations.³ We highlight, as a first step, the importance of organizational modules that allow entities with different levels of access to classified information to work together to assess and inform responses to hostile operations.

Retail Trading and Social Media

Nonprofessional trading has been growing for a few years, partly thanks to new low-cost, user-friendly fintech apps. According to market research firm Apptopia, the top seven trading apps that are not connected to legacy investment firms enjoyed 126-percent growth in U.S.-based downloads between 2015 and 2019. In 2020 and 2021, mobility restrictions related to the coronavirus pandemic translated into further interest in financial apps, both in terms of new users and of daily time spent on the apps by each user.⁴One of the most popular platforms, Robinhood, announced in its June 2021 IPO filing that it had 18 million funded accounts.⁵

Overall, in dollar terms, the phenomenon is still in its infancy. Participants may be legion, yet they invest relatively modest amounts.⁶Nevertheless, retail traders can have a substantial impact when they, as a group, target smaller stocks. Social media offer an opportunity for these groups to form and act at low cost and high speed.

Claudia Biancotti

Claudia Biancotti is a director at the Bank of Italy.

The wallstreetbets community on Reddit has emerged as a key forum for individual traders to exchange investment suggestions and coordinate actions. A few influential users taking an optimistic view of GameStop’s prospects were instrumental in building interest in the stock and orchestrating the first rally in early 2021. Before the GameStop episode, wallstreetbets had roughly 2 million subscribers. By July 2021, it had surpassed 10 million.⁷ Even as several members suffered heavy monetary losses, vivacious discussion and trading continued.⁸

Virtual trading communities have their own understanding of value. Participants certainly care about returns. Yet, as noted by economist Jayanth Varma, some of them maximize goals other than profit.⁹ Their trades are an investment and may also be a political, a moral, or even an emotional statement. Collective beliefs, epitomized in catchphrases and memes, are cemented by online interactions. The epic narrative of ordinary people challenging the powerful looms large. Making money is conflated with making a point, as photos of trades are posted with captions like “just joint the fight” (sic).¹⁰

This attitude partly originates in the crypto-asset world, the original twenty-first-century mixture of techno-utopianism, defiance, and run-of-the-mill profit seeking.¹¹ Indeed, wallstreetbets and crypto forums share a language, several players, and some trading apps. ¹² Although to different degrees, both are at the crossroads between internet phenomena and the formal financial system.¹³

Vulnerabilities

Increasing participation in financial markets and transparent discussion of assets in public forums can contribute to economic growth by improving efficiency in the allocation of capital. The popularization of nonmainstream financial analyses and trading strategies is also, per se, potentially positive. In market economies, asset prices reflect an average of different points of view. While this mechanism is expected to be reliable, sometimes it does not work perfectly, and divergent outlooks may be eventually proven correct. Asset valuation models improve over time, occasionally in the wake of such episodes.

When it comes to virtual communities there are, however, certain risks related to how ideas emerge and spread on the internet. Social media provide fertile ground for malicious information operations. Hostile actors can leverage features of online platforms to covertly nudge unaware users toward opinions and actions that serve destructive agendas.¹⁴ In the financial sector, most such agendas would involve erosion of trust—in markets, in individual institutions, or in regulators. While there is no evidence that the GameStop saga was driven by external adversaries looking to disrupt the market, some have argued that the next meme stock frenzy might well be.¹⁵

Social media are vulnerable to information operations for a number of reasons. First, they use recommendation systems based on what users read and watch, and suggest more of the same. For those with mainstream preferences, recommended content converges to big-name media outlets. For those interested in uncommon ideas, algorithms tend to generate “rabbit holes,” or exposure to progressively more extreme theories. Strategically placed ads can accelerate the fall down a rabbit hole. Adversaries who are adept at injecting their views into this system can succeed in creating self-reinforcing bubbles of radicalized users.

Second, despite significant effort by major platform operators, the presence of fake accounts on social media remains a difficult problem to solve. Troll factories, which are large groups of individuals paid to write comments online, can be deployed to create the illusion of sizable, active communities. Artificial intelligence can generate realistic profile photos that depict nonexistent individuals, and it is making strides toward the ability to post articulate, credible text. Inauthentic action has been repeatedly discovered in online discussions of sensitive topics such as race, gender, and the pandemic.¹⁶

Another significant factor, most evident in specialized discussion boards such as wallstreetbets, is the informal hierarchy among users. A few influencers play a major role in orienting group choices. Adversaries that succeed in recruiting influencers can hold sway over large crowds. This is also true in the offline world, but social media act as a formidable amplifier and accelerator.

The financial sector is a very attractive target for malicious actors of all stripes, a well-established fact in cybersecurity. Attacks against financial institutions or infrastructure are frequent. They offer the potential for monetary gain, exfiltration of sensitive information, and even systemic disruption of the economy.¹⁷ Adversaries may see information operations aimed at distorting price signals, undermining confidence in financial institutions, or otherwise creating disorder, as a means of inflicting the same kind of harm with fewer risks of detection and retaliation compared to traditional cyber campaigns.

Information operations that start off by targeting the financial system can eventually spill over to the political arena. Near-term, domain-specific outcomes—say, high market volatility or inspiration of protests against a single regulatory provision—may reinforce social divisions over broader ideological issues such as the ethical merits of capitalism, the trustworthiness of corporations, and the accountability of governments.

A Challenge for Policymakers

In liberal democracies, preservation of the financial system’s integrity and stability generally falls within the remit of independent authorities. This is meant to ensure that regulatory and supervisory decisions, while serving purposes defined by the law, are nonpolitical. Watchdogs have a broad range of conventional instruments to mitigate any risks of disruption ex ante, which they are adapting to new technologies.¹⁸ They also have the legal means to tackle standard market manipulation and fraud.

In the face of possible information and influence operations, however, financial authorities cannot and should not work alone. Whenever external actors attempt to interfere with a nation’s strategic assets and systems, the problem becomes political. An essential part of the data needed to understand an operation’s goal and mechanics is likely to be exclusively available to intelligence communities. Most importantly, decisions on response are a task for executive branches since they channel security policy choices.

The challenge for policymakers is to bring independent authorities and government agencies together to fight information operations in the financial system, leveraging the existing capabilities of each party and introducing new ones where necessary. Cooperation frameworks are needed that clearly define roles and responsibilities, and foster mutual trust.

In several jurisdictions, frameworks are already defined in cybersecurity laws, but they only cover threats to IT systems—unauthorized access, data exfiltration, ransomware, and so on. The model must be expanded and adapted to malicious information operations. The nexus between social media and retail trading offers the starkest example of a vulnerability right now, but it is important to note that the financial system as a whole is a potential target.

Financial watchdogs constantly keep an ear on the ground for anomalies within their supervisory perimeter. For example, market authorities all over the world engage on a continuous basis in market surveillance, a wide array of activities ranging from verification of potentially harmful rumors to real-time deployment of data analytics to detect illicit behavior. Staff in financial watchdogs also already know how to watch for and react to websites and social media accounts deliberately misleading the public on a company or an asset.

These are good starting points, yet some re-skilling has to occur. In particular, influence operations do not necessarily build on lies alone& mdash;indeed, they are more credible when they incorporate elements of truth. Financial authorities have to learn the basics of how malicious information manipulation works, so that they can be on the lookout for the right clues. There is a need for threat awareness and at least some diffuse capability for intelligence analysis within all regulatory and supervisory agencies.¹⁹

Paolo Ciocca

Paolo Ciocca is nonresident scholar in the Cyber Policy Initiative.

Any suspicion of an information operation should be reported via structured channels to the intelligence community for further analysis and, where applicable, attribution. In traditional cybersecurity, the toughest part is finding the culprit(s) of an attack, who are often obfuscated by layers of hijacked machines and unaware accomplices. This applies a fortiori to information operations. Once conclusions are reached, they must be passed on to the relevant level of government for response decisions.

One important choice to be made is: to which extent should independent authorities stay involved in the process of investigating the operation, after they have alerted the government and provided a first round of data and evaluations? A delicate balance must be struck between protecting confidentiality, leveraging specialist skills, and avoiding frictions across institutions, while staying true to the legal mandate of each party.

Preferred solutions would likely vary across countries, even within like-minded groups such as the G7. It is nonetheless possible to find some common patterns across different systems and draw lines of reflection, at least in terms of principles. From a procedural point of view, it is crucial that this issue is settled transparently from the beginning. Factors that need to be considered include, but are not limited, to the following:

government agencies, independent authorities, and other potential participants in the process—for example, private sector entities or academia—have different levels of access to classified and otherwise sensitive information;

information must be passed along to participants on a need-to-know basis;

the effectiveness and fluidity of information exchanges need to be maximized; and

process separation must exist between information gathering, analysis, and response.

These constraints require a flexible organizational module, which enables differentiated access to information across participants. In several countries, current practice in homeland security foresees so-called “fusion centers” or “fusion cells,” hubs where data and capabilities of heterogeneous actors are jointly leveraged for a given goal.²⁰ Fusion centers can involve participants outside of intelligence and law enforcement, such as health authorities or private companies.²¹ The model could be adapted to include stakeholders from the financial sector. It could also envision appropriate modes of participation for platform operators, since they have access to crucial data on users, and for qualified communities of independent investigators, such as from academia. Depending on the jurisdiction, fusion centers may build on preexisting, cyber-related information sharing arrangements.

Conclusions

Finance-focused virtual communities are growing in size and potential economic and social impact, as demonstrated by the role played by online groups of retail traders in the GameStop case. Such communities are highly exposed to manipulation, and may represent a prime target for state and nonstate actors conducting malicious information operations.

Sophisticated information operations carried out online may be very hard to distinguish from spontaneous behavior. Financial authorities should learn the basic elements of how malicious information operations work, and act as a first line of detection and defense. An appropriate legal framework should be in place so that sector watchdogs can contribute data and specialist knowledge to governmental actors tasked with analysis of and response to information operations. This can be achieved by implementing organizational modules that allow entities with different levels of access to classified information to work together and, in several jurisdictions, by adapting existing legislation on cybersecurity.

The opinions expressed in this paper are personal and should not be attributed to the Bank of Italy, Consob, or the Carnegie Endowment for International Peace. The authors would like to thank Giuseppe Ferrero, Arthur Nelson, Mario Rasetti, Michele Savini Zangrandi, Giovanni Veronese, and three anonymous reviewers for useful insights and suggestions.

Notes

¹ “SEC Staff Releases Report on Equity and Options Market Structure Conditions in Early 2021,” U.S. Securities and Exchange Commission, October 18, 2021, https://www.sec.gov/news/press-release/2021-212.

² Other listed companies, such as AMC Holdings and BlackBerry, were involved in similar dynamics.

³ For a discussion of terminology relating to how information is used to influence target audiences, see Alicia Wanless and James Pamment, “How Do You Define a Problem Like Influence?,” Journal of Information Warfare 18, no. 3 (2019): 1–14, https://carnegieendowment.org/files/2020-How_do_you_define_a_problem_like_influence.pdf.

⁴ Adam Blacker, “Robinhood Now Has More Mobile Monthly Active Users Than the Top Legacy Providers Combined,” Apptopia, January 6, 2020, https://blog.apptopia.com/robinhood-now-has-more-mobile-monthly-active-users-than-the-top-legacy-providers-combined.

⁵ “United States Securities and Exchange Commission, Form S-1 Registration Statement, Robinhood Markets, Inc.,” U.S Securities and Exchange Commission, July 1, 2021, https://www.sec.gov/Archives/edgar/data/1783879/000162828021013318/robinhoods-1.htm.

⁶ IHS Markit, a financial data firm, estimates that “individual-driven, pure play retail accounts” commanded roughly 3 percent of total trading volume on U.S. stock markets between January 2020 and January 2021. Volume is computed based on “changes to custodial positions at Charles Schwab, E*Trade, Interactive Brokers, National Financial (Fidelity’s retail arm), Robinhood, TD Ameritrade, and Wells Clearing custodians.” It does not reflect intraday trading, or individual investment mediated by professional wealth managers. IHS Markit does not specify the reference market(s). According to Reuters, investment bank Morgan Stanley puts the figure at a much higher 10{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}– 15{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} for the Russell 3000 index. The computation methodology is not publicly available. See “Retail Investor Trends: Revisiting the Impact of Retail Activity,” IHS Markit, March 1, 2021, https://ihsmarkit.com/research-analysis/ retail-investor-trends-revisiting-the-impact-of-retail-activity.html; Thyagaraju Adinarayan, “Retail Traders Account for 10{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} of U.S. Stock Trading Volume – Morgan Stanley,” Reuters, June 30, 2021, https://www.reuters.com/business/ retail-traders-account-10-us-stock-trading-volume-morgan-stanley-2021-06-30/.

⁷ Not all subscribers are active in discussions, but installing the Reddit app on a smartphone and joining a subforum, or subreddit, implies exposure to content notifications on a somewhat regular basis.

⁸ For example, Robinhood was still in Google Play’s top 100 chart in the spring of 2021.

⁹ Jayanth Varma, “The Rationality of r/wallstreetbets,” Prof. Jayanth R. Varma’s Financial Market’s Blog, January 31, 2021, https://jrvarma.wordpress.com/2021/01/31/ the-rationality-of-r-wallstreetbets/.

¹⁰ Novabud, “Just Joint the Fight #GME STAY STRONG,” Reddit, March 5, 2021, https://www.reddit.com/r/wallstreetbets/comments/lyfh2x/ just_joint_the_fight_gme_stay_strong/.

¹¹ Nick Paumgarten, “The Prophets of Cryptocurrency Survey the Boom and Bust,” New Yorker, October 15, 2018, https://www.newyorker.com/magazine/ 2018/10/22/the-prophets-of-cryptocurrency-survey-the-boom-and-bust.

¹² GameStop and other so-called meme stocks are traded in regulated markets. Bitcoin is not but, in the quasi-normalized version of today, it is traded by some professional investment firms following strategies that have long been employed for other high-volatility instruments, without any connection to the cryptocurrency’s original spirit. The appearance of normalization is reinforced by a few high-visibility brands choosing to accept Bitcoin as a means of payment—it is, however, important to note that Bitcoin is not legal tender, with the sole exception of El Salvador. See Robin Wigglesworth and Eva Szalay, “’Digital Tulip’ or New Asset Class? Bitcoin’s Bid to Go Mainstream,” Financial Times, February 12, 2021, https:// www.ft.com/content/7ac6c3a6-3fed-4dd9-8a69-939ad6094933.

¹³ Wallstreetbets also has a measure of contiguity with other controversial corners of the internet. The forum’s tagline is & ldquo;Like 4chan found a bloomberg terminal” (sic), a reference to a now-defunct platform famous for hosting inflammatory content and favoring divisive, politically charged verbal extremes. Similar affinities exist in parts of the crypto world, especially where technical decentralization is translated into an anti-system sentiment.

¹⁴ This subject is discussed in a large and growing literature. Summarizing it is beyond the scope of this work. For an introduction to research methods in this field, see Technology and Social Change Research Project Team, “The Media Manipulation Casebook,” Harvard University, https://mediamanipulation.org/about-us. For a nontechnical primer, see for example P. W. Singer and Emerson T. Brooking, Likewar: The Weaponization of Social Media (Boston: Houghton Mifflin Harcourt, 2018).

¹⁵ Some retail traders appear aware of the problem, as shown by Russian spy-themed memes during the March 2021 wallstreetbets craze around U.S. defense contractor Palantir. Also see Josh Lipsky and William F. Wechsler, “The Gamestop Saga Is A Road Map For The Kremlin And Other Enemies Of America — Here’s Why,” MarketWatch, February 1, 2021, https://www. atlanticcouncil.org/insight-impact/ lipsky-and-wechsler-in-marketwatch-the-gamestop-saga-is-a-road-map-for-the-kremlin-and-other-enemies-of-america-heres-why/.

¹⁶ On the pandemic and vaccines, see for example European Union External Action Service, “EEAS Special Report Update: Short Assessment of Narratives and Disinformation Around the Covid-19 Pandemic, April 2021, https:/ /euneighbourseast.eu/news-and-stories/publications/ eeas-special-report-update-short-assessment-of-narratives-and-disinformation-around-the-covid-19-pandemic-update-december-2020-april-2021/.

¹⁷ Also see Tim Maurer and Arthur Nelson, “International Strategy to Better Protect the Financial System Against Cyber Threats, ” Carnegie Endowment for International Peace, November 18, 2020, https://carnegieendowment.org/2020/11/18/ international-strategy-to-better-protect-financial-system-against-cyber-threats-pub-83105.

¹⁸ On those, one issue that warrants special attention today is transparency with regard to business models, potential conflicts of interests, and the treatment of customer data. There may also be scope for innovation in disclosure requirements for asset issuers. Perhaps potential investors are entitled to know if a company can count on the support of r/wallstreetbets or Twitter, the way they must be informed of changes in funding or ownership. A reflection is needed on the shifts in risk appetite induced by a sizable influx of small investors.

¹⁹ This is urgent in areas where information plays a key role, such as finance, but also applies to other strategic economic branches. Social media are everywhere, influence operations can be anywhere.

²⁰ For example, the U.S. Department of Justice defines a fusion center as a “collaborative effort of two or more agencies that provide resources, expertise, and information to the center with the goal of maximizing their ability to detect, prevent, investigate, and respond to criminal and terrorist activity.” “Fusion Center Guidelines: Developing and Sharing Information and Intelligence in a New Era,& rdquo; U.S. Department of Justice, August 2006, https://bja.ojp.gov/sites/g/files/xyckuh186/files/media/document/ fusion_center_guidelines_law_enforcement.pdf.

²¹ “Nontraditional collectors of intelligence, such as public safety entities and private sector organizations, possess important information (e.g., risk assessments and suspicious activity reports) that can be “fused” with law enforcement data to provide meaningful information and intelligence about threats and criminal activity.” From “Fusion Center Guidelines,” U.S. Department of Justice.