I think they'd have more luck selling 1,000,000 shares at $200 each or 100,000 at $2,000 each. Individual fans would then be willing to buy just so they could say they owned a piece of the team. Some would buy up thousands of shares, others just 1. I see the $200 per share working best as many fans could put together $200 for ego purposes.

I think they'd have more luck selling 1,000,000 shares at $200 each or 100,000 at $2,000 each. Individual fans would then be willing to buy just so they could say they owned a piece of the team. Some would buy up thousands of shares, others just 1. I see the $200 per share working best as many fans could put together $200 for ego purposes.

Is that legal?

Seriously though I'm pretty sure think MLB has rules against that kind of public ownership. Or is it only the majority stake? I think someone once mentioned the Indians sold public shares in the 90s.

The Mets saga is like a movie that you watch, but some of the scenes are so painful you just wish they would end, even when very well done, because of the discomfort you feel watching them. I have no feelings about the Mets, positive or negative, but this really is unbearable to watch.

When does the kickstarter campaign begin?

Why would anyone believe the Mets when they say this? I think this is the third or fourth time they've announced it and still no sale.

Is that legal?

Seriously though I'm pretty sure think MLB has rules against that kind of public ownership. Or is it only the majority stake? I think someone once mentioned the Indians sold public shares in the 90s.

Edit: I think the public can own up to 49%

There is a rule that teams are not allowed to have more than X owners. I forget exactly how many; maybe 20?

I don't know what the limit is, but Crane's purchase of the Astros involves quite a few co-owners. This article reports that the smaller ownership interests provided 80% of the financial commitment, that the Board of Directors has 11 members, and states that "there are dozens of investors, as many of the blocks of fractional ownership have been further split up."

Seriously though I'm pretty sure think MLB has rules against that kind of public ownership. Or is it only the majority stake?

They just need to work it like the Green Bay Packers recent "stock" sale. They sold a ton of shares for $500(?) each, but each share comes with the following conditions: The owner can't vote in any shareholder meetings. The owner will never be eligible for dividends. The owner cannot sell or transfer ownership of the share apart from willing it to their heirs.

Seriously though I'm pretty sure think MLB has rules against that kind of public ownership. Or is it only the majority stake? I think someone once mentioned the Indians sold public shares in the 90s.

IIRC MLB has rules against publicly-traded ownership shares. They do not want the SEC digging in to ownership operations, nor to be required to publicly disclose financial info, which is what would happen were they to be listed on NYSE, NASDAQ, etc.

There is a rule that teams are not allowed to have more than X owners. I forget exactly how many; maybe 20?


I don't know what the limit is, but Crane's purchase of the Astros involves quite a few co-owners. This article reports that the smaller ownership interests provided 80% of the financial commitment, that the Board of Directors has 11 members, and states that "there are dozens of investors, as many of the blocks of fractional ownership have been further split up."

Yea, they only invoke that rule when they don't like you, like when Miles Prentice tried to buy the Royals and Red Sox. Otherwise its fine.

They just need to work it like the Green Bay Packers recent "stock" sale. They sold a ton of shares for $500(?) each, but each share comes with the following conditions: The owner can't vote in any shareholder meetings. The owner will never be eligible for dividends. The owner cannot sell or transfer ownership of the share apart from willing it to their heirs.

MLB and NFL forbids that kind of public stock ownership, at least the majority stake. The Packers were grandfathered in.

Interestingly, I heard that your stock certificate for the Packers comes with a clause that says if you are caught gambling, you are subject to fines of millions of dollars, as NFL owners are prohibited from engaging in gaming activities.

Green Bay has an exemption, but I believe most professional sports leagues prohibit public ownership now. Also, the Wilpons couldn't offer shares to the public without first jumping through a lot of SEC-related hoops. I'm sure our cadre of corporate lawyers would be happy to bore us to death describing them.

The Celtics used to be publicly traded until they were sold to the current ownership group.

I think they'd have more luck selling 1,000,000 shares at $200 each or 100,000 at $2,000 each.

Either scenario would have been hell on Mr. Met's appearance schedule!

Yeah for 20 million bucks I could have had Jose Reyes on my beer league softball team. Screw a share of the Mets.

They just need to work it like the Green Bay Packers recent "stock" sale. They sold a ton of shares for $500(?) each, but each share comes with the following conditions: The owner can't vote in any shareholder meetings. The owner will never be eligible for dividends. The owner cannot sell or transfer ownership of the share apart from willing it to their heirs.

Which is absurd. How is that not illegal as a fraud on the public?

Selling stock with no economic value or rights is just soliciting donations.

Which is absurd. How is that not illegal as a fraud on the public?

That would presuppose there was some sort of commission that investigated fraud in the securities industry.

The units, priced at $20 million each, would raise $200 million for the cash-strapped franchise and be used to pay existing loans and operating expenses for 2012

And will they then sell another 10 next year to pay 2013's operating expenses? When does it end?

That would presuppose there was some sort of commission that investigated fraud in the securities industry.

Perhaps I should reformulate my theory about the "all BBTF poster MLB front-office", to state that we could replace the SEC with a randomly selected group of Primates, and be more effective than the actual body. Hell, we've got enough lawyers.

Why would anyone believe the Mets when they say this? I think this is the third or fourth time they've announced it and still no sale.

Short answer: no one should. Their credibility is, or should be, completely shot to hell on this thing. For the reason you note (how many times can they make this claim that the sale of these shares is imminent???), but also because of the timing. They had to know that as January is ending, they were about to be hit with questions from reporters about why the sale of at least some of the shares, if not all of them, which they claimed was going to happen NOW . . . wasn't happening. So they were going to get hit with damaging "What happened???" stories -- which this announcement is obviously intended to pre-empt.

Definitely -- end of February. For sure this time! And the minority investors are named Harvey, all of them, and they are six feet tall and they are fuzzy, adorable white rabbits. The only difference between the Wilpons and Elwood Dowd is that Elwood was likeable and a lot more credible when he claimed to have an imaginary friend . . . and he was much more likely to get $20M from his pal than the Wilpons are from theirs.

IMHO, this is all to buy time to put the bankruptcy package together. But I guess we'll find out, won't we?

The owner can't vote in any shareholder meetings. The owner will never be eligible for dividends. The owner cannot sell or transfer ownership of the share apart from willing it to their heirs.

I thought they had voting rights?

Which is absurd. How is that not illegal as a fraud on the public?

Selling stock with no economic value or rights is just soliciting donations.

Perhaps, but where is the fraud? I have not looked at the language, but I suspect it is pretty clear that for the $250, you are entitled to a nice piece of paper saying you have a share of the team (suitable for framing). Are they promising something else that they are not actually giving?

Perhaps I should reformulate my theory about the "all BBTF poster MLB front-office", to state that we could replace the SEC with a randomly selected group of Primates, and be more effective than the actual body. Hell, we've got enough lawyers.

Actually, from my understanding a big problem with the SEC is a lack of resources to actually prosecute cases. Even if they have the political will, they're seriously outgunned by any major firm they regulate in terms of manpower and cash to throw into a very long and complex legal process, much less the ability to pursue a large multitude of cases at a time.

Perhaps, but where is the fraud? I have not looked at the language, but I suspect it is pretty clear that for the $250, you are entitled to a nice piece of paper saying you have a share of the team (suitable for framing). Are they promising something else that they are not actually giving?

Now I'm getting nervous.... are you saying that I really don't own an entire star system in the Andromeda galaxy? With all the lawyers here, is there anyone who specializes in intergalactic property rights?

Actually, from my understanding a big problem with the SEC is a lack of resources to actually prosecute cases. Even if they have the political will, they're seriously outgunned by any major firm they regulate in terms of manpower and cash to throw into a very long and complex legal process, much less the ability to pursue a large multitude of cases at a time.

Actually, I think their major problem is they focus too hard on prosecuting cases. They're mostly lawyers trying to prove their prosceutorial chops so they can run for DA, or go into private practice.

Instead, they should be focused on investigation, and uncovering fraud before it gets big. Let the US Attys., and the state DAs handle the actual prosecution.

Perhaps, but where is the fraud? I have not looked at the language, but I suspect it is pretty clear that for the $250, you are entitled to a nice piece of paper saying you have a share of the team (suitable for framing). Are they promising something else that they are not actually giving?

Calling it "stock" or "ownership".

I can't sell "moon rocks" with a fine print disclaimer that they're not actually from the moon.

I can't sell "moon rocks" with a fine print disclaimer that they're not actually from the moon.

...and now you've opened my moon pie distributorship up to massive litigation.

Perhaps, but where is the fraud? I have not looked at the language, but I suspect it is pretty clear that for the $250, you are entitled to a nice piece of paper saying you have a share of the team (suitable for framing). Are they promising something else that they are not actually giving?

Calling it "stock" or "ownership".

I can't sell "moon rocks" with a fine print disclaimer that they're not actually from the moon.

No, they're pretty clear what the value of the stock is.

From the Packers' Prospectus:

A purchaser of [GB] Stock in the Offering will not receive any special benefits, such as access to tickets to Packers games, preferential seating for Packers games or discounts on Packers merchandise. ... in light of the [shares'] transfer restrictions and redemption rights ... it is virtually impossible for anyone to realize a profit on a purchase of [GB] stock or even to recoup the amount initially paid to acquire such common stock.

Now I'm getting nervous.... are you saying that I really don't own an entire star system in the Andromeda galaxy? With all the lawyers here, is there anyone who specializes in intergalactic property rights?

I don't know, does Newt Gingrich post here?

From the Packers' Prospectus:


A purchaser of [GB] Stock in the Offering will not receive any special benefits, such as access to tickets to Packers games, preferential seating for Packers games or discounts on Packers merchandise. ... in light of the [shares'] transfer restrictions and redemption rights ... it is virtually impossible for anyone to realize a profit on a purchase of [GB] stock or even to recoup the amount initially paid to acquire such common stock.

I guess PT Barnum was right.

Even if they have the political will, they're seriously outgunned by any major firm they regulate in terms of manpower and cash to throw into a very long and complex legal process, much less the ability to pursue a large multitude of cases at a time.

In any given case, they stack up pretty well, but the key is the last part of your point -- they have to be very selective in where they choose to go to the mat.

Actually, I think their major problem is they focus too hard on prosecuting cases. They're mostly lawyers trying to prove their prosceutorial chops so they can run for DA, or go into private practice.

Eh, of the several latest gripes about the SEC, one of the big ones is NOT taking cases to trial. I'm not sure both things can be true.

Eh, of the several latest gripes about the SEC, one of the big ones is NOT taking cases to trial. I'm not sure both things can be true.

Sure it can. They want to get a high profile settlement so they get the good press, without risking losing.

Spitzer was king of this when he was AG in NY. Threaten (relatively) far fetched prosecutions, that still could be death to a financial firm, and force them into substantial, but easily affordable settlements.

You get your name in the paper for "getting" AIG or Goldman, but don't risk actually having to prove anything.

I'm not sure what you're describing is "focusing too hard on prosecuting cases." Nor is it clear to me how they "should be focused on investigation, and uncovering fraud before it gets big" other than through the enforcement function you are deriding. The whole point from the SEC's perspective of these large settlements is that NOT trying every case frees up resources to investigate more instances of possible violations.

I can't sell "moon rocks" with a fine print disclaimer that they're not actually from the moon.

Since when?

Half of your pharmacy is stocked with completely bogus products, with completely ######## weasally-worded claims in bold and fine print underneath.

The whole point from the SEC's perspective of these large settlements is that NOT trying every case frees up resources to investigate more instances of possible violations.

Right, but they don't.

The two big Ponzi schemes of the last few years were handed to them on a golden platter, but they didn't investigate.

All the big I-banks and CDO managers were involved in hugely dubious practices of setting up CDOs that were designed to fail, yet the SEC hasn't done ####.

What are they investigating?

The settlements we see it the $100-300M range are a joke given the tens and hundreds of billions of shitty securities originated.

Where are the individual criminal prosecutions of people who f-ed the banks up?

Look, everybody's entitled to an opinion, just don't be an idiot.

Right, but they don't.

Of course they do.

The two big Ponzi schemes of the last few years were handed to them on a golden platter, but they didn't investigate.

True, and they may well be at fault, but that's hardly indicative that "they don't" investigate securities fraud. They bring hundreds of enforcement actions every year.

All the big I-banks and CDO managers were involved in hugely dubious practices of setting up CDOs that were designed to fail, yet the SEC hasn't done ####.

What are they investigating?

Again, the SEC brings hundreds of enforcement actions every year, far beyond the ones you are hearing about from Bill O'Reilly. I'm not going to argue that the SEC is doing an optimal job, or even a good job. That's not the point. But your statements that they "don't investigate" because are spending too much attention on prosecuting cases is silly.

Where are the individual criminal prosecutions of people who f-ed the banks up?

The SEC doesn't have authority to undertake criminal prosecutions.

To your suggestion above that DOJ prosecute cases and that the SEC stay out of it, many securities law violations are not violations of the criminal laws. I'm sure you don't mean to suggest that the SEC just ignore those.

If I win the lottery in the next 15 days, you bet your ass I'm buying a share. Depending on the jackpot, maybe all ten.

Then, I'm calling Einhorn.

The Florida Panthers (NHL) issued stock the summer after their first Stanley Cup appearance in 1995 or whenever and were traded publicly for a while (another Huizenga special). I don't know whatever happened to the stock, whether it was bought back or whatever and don't care enough to check, but that was a weird moment in sports franchise ownership.

EDIT: Eh, I guess I do care. Apparently the NHL doesn't allow public ownership either, so the stock common folk were buying had no voting rights. Huizenga held a special class of stock where each share entitled 10,000 votes. They were pretty much novelty shares, much like Green Bay Packers stock.

If I win the lottery in the next 15 days, you bet your ass I'm buying a share. Depending on the jackpot, maybe all ten.

Then, I'm calling Einhorn.

Not really seeing how this is going to help, but it would sure as hell be entertaining.

But the best part of it is we now have our first confirmed interest by anyone in actually buying one of the shares, and I have a feeling Lassus is actually the hottest prospect they have.

I have a feeling Lassus is actually the hottest prospect they have.

Woohoo!

Besides manpower, the biggest problem facing the SEC in really going after transgressions like the CDO debacle is that, much like drug testers in the Olympics and MLB, they're in a reactive position, trying to catch up to whatever the bad guys are doing. The CDO market in particular got so arcane and so convoluted so quickly that no one in an oversight position had any idea what was going on and it took them forever to catch up. Even those of us, of which I consider myself one, who "predicted" the imminent demise in 2007 or 2008, even a year or a year and a half before Lehman failed and the market collapsed, actually missed the boat - the big damage was long done by then. Plus the SEC was completely hamstrung during that period in time by political pressure to not really interfere in any way. Perhaps we've forgotten all that the way we've already forgotten everything else that happened during the Bush presidency, but you could find more than a few serious, powerful people in 2005 and 2006 arguing that the SEC was TOO intrusive and had TOO much oversight, and that they should keep their nose out of things and let Goldman et. al/markets regulate themselves.

I think investors would be better off without the SEC, it really provides little or no service to them. If it did nothing that would be bad enough, but it often takes ridiculous positions on insider trading and short selling, where it works to make the markets even less efficient.

Which is absurd. How is that not illegal as a fraud on the public?

That would presuppose there was some sort of commission that investigated fraud in the securities industry.

Ouch! Good one.

The thing that's missing from SEC prosecutions are its inability to dovetail its cases with prosecutions for criminal behavior with penalties like 20 year prison sentences for proven fraud. Criminalizing all remotely significant securities fraud is also essential. Otherwise fines just become the cost of doing business. Convictions on amounts over a few grand should be treated like Grand Larceny.

@40: Yup. You want to invent a financial product, get its approval in advance. Then fund the registration of the participants. Then have an independent agency monitor related activity closely. Corporate charters are only licenses to plunder if we allow it.

I confess I'm indifferent to the efficiency of markets when the alternative is the idiocy of failing to regulate them strictly.

The thing that's missing from SEC prosecutions are its inability to dovetail its cases with prosecutions for criminal behavior with penalties like 20 year prison sentences for proven fraud. Criminalizing all remotely significant securities fraud is also essential. Otherwise fines just become the cost of doing business. Convictions on amounts over a few grand should be treated like Grand Larceny.

Securities fraud is frequently prosecuted by criminal authorities in cooperation with the SEC. Just yesterday it broke that traders at Credit Suisse would be prosecuted in SDNY for fraud in connection with CDO sales in the housing meltdown. I can't say it works as well as it should (I really can't evaluate - clearly some bad actors are not deterred), but there are dozens of federal prosecutors whose job is exactly that.

The thing that's missing from SEC prosecutions are its inability to dovetail its cases with prosecutions for criminal behavior with penalties like 20 year prison sentences for proven fraud. Criminalizing all remotely significant securities fraud is also essential. Otherwise fines just become the cost of doing business. Convictions on amounts over a few grand should be treated like Grand Larceny.

Agreed.

What happens is execs commit the fraud, get rich, get fired, and the shareholders pay the fines.

That doesn't deter anything.

I wonder if they should have a system for tipsters like the IRS; report a securities fraud, and you get 10% of any fines and/or civil penalties levied.

What happens is execs commit the fraud, get rich, get fired, and the shareholders pay the fines.

Do you guys just make this stuff up as you go along? The SEC frequently goes after individuals who commit fraud. Just take TWO SECONDS to look it up:

http://sec.gov/litigation/litreleases.shtml

I can't believe I'm sounding like an apologist for the SEC -- my experience is defending clients AGAINST the SEC. Legitimate criticism of the agency is usually music to my ears, but this stuff is nonsense.

I wonder if they should have a system for tipsters like the IRS; report a securities fraud, and you get 10% of any fines and/or civil penalties levied.

What a great and novel idea.

(Reuters) - At least 219 former officials at the Securities and Exchange Commission have left since 2006 to help clients with business before the agency, bringing fresh allegations of a "revolving door" that leaves the commission too cozy with the Wall Street firms it regulates.

[...]

In all, those former officials advised firms on SEC business nearly 800 times, according to an advance copy of the report seen by Reuters.

Source: SEC's revolving door to Wall Street gets fresh scrutiny

[46] That undoubtedly happens all the time, and it should be scrutinized.

It's a tricky problem though. The government can't pay people salaries that are competitive with Wall Street (or Wall Street's law firms). You could prohibit SEC staff from working on SEC matters for some period after leaving the government, but you'd hurt the talent pool the Commission has to select from in bringing people in.

At the end of the day, I think the only thing you can really do is judge the Commission based on its performance (based on real facts, not imaginary ones like snapper's).

All the big I-banks and CDO managers were involved in hugely dubious practices of setting up CDOs that were designed to fail, yet the SEC hasn't done ####.

Honest question: What's the difference between that and the Green Bay Packers selling stock where investors have absolutely zero chance of recovering any proceeds of their investment? Don't tell me it's disclosure, because I guaranty you each issuance had plenty of strongly worded precautionary disclosure.

The difference was in expectations. The CDOs made a lot of money for some people and lost a lot for others, and even if it wasn't clear who was getting what they were sold as investments. There was serious money involved there, whereas the Packers were selling novelties for Father's Day. At no point were the Packer purchasers under any impression that they'd be getting anything other than the framed certificate.

The difference was in expectations. The CDOs made a lot of money for some people and lost a lot for others, and even if it wasn't clear who was getting what they were sold as investments. There was serious money involved there, whereas the Packers were selling novelties for Father's Day. At no point were the Packer purchasers under any impression that they'd be getting anything other than the framed certificate.

So if there's a 100% chance an investor will lose, it's fine, but if there's between a 0% and 100% chance and investor will lose, it's not? I don't buy it. And the Packers were selling to unsophisticated investors who were less likely to understand the nature of their "investment".

It's a tricky problem though. The government can't pay people salaries that are competitive with Wall Street (or Wall Street's law firms). You could prohibit SEC staff from working on SEC matters for some period after leaving the government, but you'd hurt the talent pool the Commission has to select from in bringing people in.

I've posted about it before, but to have a really effective regulatory body, you have to absolutely ban any future employment in the industry you regulate, or as a lobbyist for it. Otherwise, the desire to suck up to the regulatees, is too great.

Look, there are lots of really smart people who don't only value money in life. You need to offer them a well paying (but not exorbitant) career, with good lifestyle (i.e. very manageable hours), good benefits, secure employment, and a gov't pension., and the ability to actually do some good for society.

The Federal Reserve does very well at this. They attract very bright people and most of their staff are Fed lifers.

There's no reason the SEC (or pick a regulator) couldn't do the same. Lots of people hate I-bankers, and would be thrilled to match wits with them.

[51] I just don't see it from Enforcement people. I disagree with you that they'd have such an easy time finding well qualified lawyers, and I don't know how you offer "very manageable hours" to enforcement staff (it's inherently a time-intensive job). But really I don't think it's accurate to suggest that SEC enforcement is somehow "captured" by industry - anybody who's dealt with them knows they can act like cowboys and can be highly unreasonable in an investigation. Any given enforcement attorney is unlikely to be thinking about a job with the specific entity they're investigating, but their desire to come away with a big kill and move up in the ranks internally is an obvious motivation. Once they've devoted a lot of time to looking into a matter, it is very very difficult to make them go away, even if your client has been honest.

I just don't see it from Enforcement people. I disagree with you that they'd have such an easy time finding well qualified lawyers, and I don't know how you offer "very manageable hours" to enforcement staff (it's inherently a time-intensive job). But really I don't think it's accurate to suggest that SEC enforcement is somehow "captured" by industry - anybody who's dealt with them knows they can act like cowboys and can be highly unreasonable in an investigation. Any given enforcement attorney is unlikely to be thinking about a job with the specific entity they're investigating, but their desire to come away with a big kill and move up in the ranks internally is an obvious motivation. Once they've devoted a lot of time to looking into a matter, it is very very difficult to make them go away, even if your client has been honest.

Well, the staff shouldn't be mostly lawyers, for one. You don't need a law degree to investigate, and it may be counterproductive. I'd want a mix of lawyers, experience quantitative/analytical folks, former mid- and back- office people who know where the "paper" trails are, and just bright, young idealistic people.

And my point is not just about the SEC, it's any regulator or quasi-regulator, including the rating agencies. If a person in an oversight position can look forward to tripling their salary in five years by making friends with the people they oversee, they would be as good at their job as they should be.

I want an adversarial relationship between regulators and the industry. I want my regulators to personally dislike the people they oversee. I want them eating Chinese takeout when the Goldman guys are dining at Per Se. That'll make them better at what they do.

You make the hours manageable by doing what gov't agencies do. The expectation is a 40 hour week. If you go over, you get comp time. So if someone absolutely has to work 80 hour weeks for 3 months during a trial, they get three months of extra vacation.

Do you guys just make this stuff up as you go along? The SEC frequently goes after individuals who commit fraud. Just take TWO SECONDS to look it up:

http://sec.gov/litigation/litreleases.shtml

I can't believe I'm sounding like an apologist for the SEC -- my experience is defending clients AGAINST the SEC. Legitimate criticism of the agency is usually music to my ears, but this stuff is nonsense.

Using the link you gave there are numerous examples of the SEC fining companies for accounting fraud, which is essentially punishing the victims, i.e. the shareholders. While Snapper's entire complaint was over the top (execs do get punished, but not always), it's retarded stuff like that, especially when the execs get off with wrist slaps while agreeing to let the company pay a big fine, is why the SEC is so useless and dumb.

I own one share of Planet kajiggers so I'm entitled to some answers. Question 1: Why does no one visit me in my home?

I've posted about it before, but to have a really effective regulatory body, you have to absolutely ban any future employment in the industry you regulate, or as a lobbyist for it. Otherwise, the desire to suck up to the regulatees, is too great.

Or at minimum have a one-year cooling off period, as is the case with Members of Congress and senior staff who move to K Street. (They are prohibited from lobbying for one year.)

While we're at it, there should be similar scrutiny of those working for Fortune 500 companies and other large firms who suddenly appear as Senate/House committee staffers.

Amusingly, Jack Abramoff has suggested stronger prohibitions:

Abramoff has called for an end to the revolving door between Capitol Hill and K Street by prohibiting lawmakers from becoming lobbyists after they retire and banning campaign contributions from anyone doing business with the government, including lobbyists. He has also continued to explain how lobbyists exploit congressional offices for favors and to leak tidbits of information about wrongdoing, alleging, for instance, that lawmakers bragged to him about their insider trading of stocks.

from here

Using the link you gave there are numerous examples of the SEC fining companies for accounting fraud, which is essentially punishing the victims, i.e. the shareholders. While Snapper's entire complaint was over the top (execs do get punished, but not always), it's retarded stuff like that, especially when the execs get off with wrist slaps while agreeing to let the company pay a big fine, is why the SEC is so useless and dumb.

I didn't mean to suggest that the SEC does not also go after issuers - they do, and there's a reasonable argument to be made that they should focus on going after individuals. I don't necessarily agree that they should never go after entities (if that's where you're going) - the SEC is empowered to, and does, seek restitution on behalf victims of fraud. The alternative is class action lawsuits, which virtually never result in vicitms receiving reasonable compensation. But I would not have disagreed if all snapper was saying was that the SEC should pursue individuals a greater proportion of the time.

My point is simply that they do go after individuals, not just deep-pocketed entities.

especially when the execs get off with wrist slaps while agreeing to let the company pay a big fine, is why the SEC is so useless and dumb

For what it's worth, the SEC charged individuals in both the Goldman Sachs and Citigroup cases. If there's a problem with those enforcement actions, it's not really that.

The Federal Reserve does very well at this. They attract very bright people and most of their staff are Fed lifers.

The Fed attracts a completely different kind of person than regulatory firms do. People who go to the Fed are policy wonks. They want to create policy. A lot of bright young economics PhDs would like to go work at the Fed and actually work on the actual system. A regulatory job is very, very different. It's not economics and it's not finance. It's slogging through someone else's paperwork. Unless you're someone who has a natural love of trying to pick holes in someone else's work, regulatory work isn't a ton of fun and the backlog is endless. And you're constantly getting a ton of grief from regulatees and the public that you're either too nosy when times are good or not nosy enough when times are bad. No one wants to work there. I don't see any way around paying more money to attract better talent. That's really the only way to staff these places with good people in the long term.

I confess I'm indifferent to the efficiency of markets when the alternative is the idiocy of failing to regulate them strictly.

I think most people who go on about efficiency just don't understand what an actual "efficient" market would actually be a highly-complex industry such as this. This isn't three bakers selling three loaves of bread.

I have a feeling Lassus is actually the hottest prospect they have.

Woohoo!

As the leading BBTF Mets ownership candidate, Lassus owes it to the rest of us to go through the vetting process. Just call the main number and say you're contemplating investing your mega lottery winnings in the Mets. That should rate a return call from a Wilpon.

Someone mentioned Einhorn; he and his firm just got fined 7.2m sterling after hearing about an imminent financing (that would depress share price) and trading before it went public. Whatever. But this nugget from the FT really surprised me:

Mr Einhorn specifically told Punch’s broker at Bank of America Merrill Lynch that he did not want to be “wall crossed” – that is to say given confidential information that would prevent him from trading. In the US, that request could well have protected him from charges of insider dealing.

Financial Times

So in the U.S., you just have to say "EARMUFFS!" and you can hear any inside info you want, then trade on it? That can't possibly be accurate... can it?

If you reasonably rely on a broker's representations that information is public, that is a defense. There is an intent element.

Saying "EARMUFFS!" and then intentionally trading on what you believe to be insider info doesn't qualify.

went public. Whatever. But this nugget from the FT really surprised me:
Mr Einhorn specifically told Punch’s broker at Bank of America Merrill Lynch that he did not want to be “wall crossed” – that is to say given confidential information that would prevent him from trading. In the US, that request could well have protected him from charges of insider dealing.

Financial Times

So in the U.S., you just have to say "EARMUFFS!" and you can hear any inside info you want, then trade on it? That can't possibly be accurate... can it?

The FSA documented how Einhorn only agreed to the phone call with the Punch Tavern CEO after he was assured no confidential information would be disclosed on it. This was very important because Einhorns fund owned 13% of Punch and he wanted to be free to buy and sell shares. Having calls with execs is standard for investment managers, it allows you to get a better understanding of the companies management, business and strategies than simply reading their financial filings.

The broker for Punch Taverns, who set up the call, and assured Einhorn that no confidential information would be disclosed, realized the call wasn't going well and blurted out at the end of it that his firm was leading a new round of fund raising for Punch very soon, something that was a huge red flag to Einhorn. Einhorn testified that he didn't believe the guy was disclosing an actual event that would happen, he interpreted it as typical broker braggadocio. So Einhorn decided he didn't like what he heard on the call, and since the call was classified as "non-cross walled" assumed he wasn't restricted from selling, immediately dumped a bunch of shares.

The FSA ruled that Einhorn should have known, as an investment professional, that the brokers disclosure of an imminent fund-raising was insider information, and fined him.

The FSA has not ruled the company violated any rules by disclosing valuable inside information randomly on investor calls. And so far, they haven't gone after the broker either.

Essentially, they ruled that management (the only parties that actually know what information about their company is material inside information) can freely spout inside information to outsiders and it's the responsibility of outsiders to interpret whether the information is true, and if so, whether it's material inside information or not. Orwellian rule making at it's finest.

Clearly the FSA is trying to prove they are dumber than the SEC in not protecting investors from real fraud by making up fake fraud instead. You might ask who did Einhorn harm? Well it wasn't the people he sold shares to, they got a substantially better price than they would have gotten had he not sold, and their losses from the stock being crushed when Punch announced the new round of investment were significantly lower. This is a perfect example of how "insider trading" actually is good for the market by pushing market prices closer to the actual value of the stock.

And if you read the FSA description, you might also wonder if some conspiracy might have been afoot.

Punch's broker originally approached Einhorn to see if he would be interested in investing in a round of fund raising for Punch. He specifically said never, but they had the call anyways because apparently Punch's CEO and the broker thought they could talk Einhorn into it. When it became clear on the call that wouldn't' be possible, suddenly the broker blurts out what he knew he was not supposed to blurt out. The CEO and the broker knew if Einhorn heard that, he would be prevented from selling in the week before the announcement, which would keep their stock price higher and lower the company's cost of financing.

One can wonder if the CEO of Punch and his broker pre-planned this disclosure to manipulate the price of Punch's stock before the offering. The problem was that David didn't realize his hands were tied, so he went ahead and sold anyways. Then it would appear as if the CEO or the broker found out that Einhorn sold, and angry that their "accidental disclosure" hadn't hogtied Einhorn, informed the FSA.

The FSA is the umpire in these decisions. Punch Taverns is the home team. David Einhorn was the visiting team.

Clearly we have a typical home field ruling, fine the foreigner and excuse the behavior of the prominent local CEO.

Why would anyone believe the Mets when they say this? I think this is the third or fourth time they've announced it and still no sale.

Anyone else notice the similarity between these announcements and the proclamations as to when Beltran/Reyes/Wright/Murphy/Santana/Davis/Valentin/Alou/Easley/Church/Delgado would be returning from the DL?

And my point is not just about the SEC, it's any regulator or quasi-regulator, including the rating agencies. If a person in an oversight position can look forward to tripling their salary in five years by making friends with the people they oversee, they would be as good at their job as they should be.

Not to throw this even more off-topic, but this is especially a problem with the ratings companies, is it not? Unless something has changed since my dad worked for one a couple decades ago, the ratings outfits are issuing ratings for their own clients. My father has told me specific stories of incidents where his superiors would pressure him to deliver more favorable reports for certain clients. He always felt that if you weren't absolutely, positively 100% objective that your ratings (and thus, your one and only product) would become worthless.

Of course, most of the ratings companies set up consulting divisions, and he said that sometimes the pressure for better ratings was because they wanted to keep the client as a consulting customer.

The firm he worked for eventually spun the credit rating stuff off, which later got swallowed up by someone else, so maybe it was just them. But it's a weird relationship IMO.