SEC Chair Gensler: 'January highlighted our inherent conflicts'

In an interview with Yahoo Finance's Brian Cheung, SEC Chair Gensler discussed the various conflicts tied to retail investing, including payment for order flow.

Video transcript

- Now, broadly, there were a lot of weird events that happened during the meme stock craze. You saw some funds blow up, you saw some short squeezes get hurt there. I guess I'm wondering, what based off of what you were seeing tells you that the markets were or were not acting efficiently during that episode, when you had stoppages in many cases preventing people from being able to take on new positions but they were able to sell?

- Restrictions on trading, that fateful Friday in January. That was not good for the retail investors that wanted access to the markets. And we know that. And that's why we're taking a look at these clearing and settlement plumbing. But also, we knew before January that there were inherent conflicts.

When a brokerage app is maximizing potentially for their revenues rather than the welfare of their users on the other hand. Whether it's because they're using algorithms to sort of encourage us to trade more, behavioral prompts to encourage us to trade more, which economic shows usually get lower returns. Investing is good, but trading actively often lowers returns. Whether it's that, or the inherent conflicts of payment for order flow, January just highlighted. But we were-- we were grappling with those inherent conflicts before January as well.