Tech Billionaire Mark Cuban Argues Stock Regulators Hurt the Economy (sfgate.com) 85
Tech entrepreneur and investor Mark Cuban denounced America's stock-regulating agency on CNBC this week, arguing that they're reducing the number of companies going public with vague rules that are open-ended. "[W]here there's no clarity and no certainty on what to do in response to the SEC, you get people doing nothing or people avoiding going public or doing anything to avoid dealing with the SEC," Cuban said on CNBC. "And that's a real problem for up and coming companies and it's a problem for the economy as well."
Mary Jo White, the head of America's SEC, had appeared earlier in the week near Silicon Valley, according to Bloomberg, telling an audience at Stanford Law school to be wary of billion-dollar valuation IPOs and warning that founders and startup advisors preparing for an IPO should watch their internal controls, reporting and certifications. "They are doing what the SEC always does," Cuban complained on CNBC. "100 degrees of gray."
Mary Jo White, the head of America's SEC, had appeared earlier in the week near Silicon Valley, according to Bloomberg, telling an audience at Stanford Law school to be wary of billion-dollar valuation IPOs and warning that founders and startup advisors preparing for an IPO should watch their internal controls, reporting and certifications. "They are doing what the SEC always does," Cuban complained on CNBC. "100 degrees of gray."
Lack of perspective (Score:5, Insightful)
If you're an honest business, you will see many regulations as an absolute hassle and cost. For every Enron there's a hundred relatively honest book-keepers who think the SOX laws as an unnecessary giant pain in the ass. Unfortunately they're needed to keep the market as a whole to function well, just like you need everything from health inspections for restaurants to safety inspections for construction workers. We know many would care anyway, but we also know some don't.
Re:Lack of perspective (Score:5, Insightful)
He's not arguing against regulation - he's saying the regulations are too vague.
For comparison, the FDA's regulations on medical device are insanely detailed. The terminology in the regulations have hyperlinks back to a thesaurus that explain exactly what each word means, and examples of it's usage in regulatory filings, so you know exactly what they mean. If something is due in 30 days, it's explained that it's 30 contiguous calendar days, starting from the day some event happened and ending at midnight on the day due.
SEC regulations can be maddeningly vague. Lots of "as soon as possible" and "within reason" and "as needed." So if you suffer a data breach, you need to notify your stockholders "as soon as possible." Well how soon is that? Within an hour? When you have all the relevant information on the impact? A month? An hour? Even if you are completely honest and up-front, it's possible to run afoul of a regulation like this, simply because it's up to some bureaucrat to decide if you've broken a vague regulation or not.
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Well how soon is that?
As soon as reasonably possible for the 51% of the well-meaning corporate publicists. That should clear thighs up. ;)
You sure you didn't mean to post on the "drone vigilante vs prostitutes" story?
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Do you know why there is that much of a difference between FDA regulations and SEC regulations? Both are 'written' by the same government, however as you point out the end results are entirely different. The lobbyists who write the FDA regulations have a direct interest in creating an environment their companies can work within whereas the SEC lobbyists still think that it's best to create legislation what they can work around.
The simple truth of the matter is that those bureaucrats whom you imagine are
Re:Lack of perspective (Score:5, Interesting)
> SEC regulations can be maddeningly vague
Many FDA regulations are *insanely* confusing. Try doing *anything* that involves human nervous systems, such as research into sensory nerves or artificial vision, and you run into incredible amounts of what one "cannot" do and no acknowledge of what one *can* do. It's even worse for anything politically sensitive, such as revolution on human/simian comparative physiology, which offends the anti-evolution lobbies in Florida, artificial hearing, which offends the sign language deaf community, or Yahoo-Wahoo forbid, anything that mentions "stem cells", whether fetal or adult stem cells, due to the scare mongering about baby harvesting by these twits http://www.usatoday.com/story/... [usatoday.com]
You would also not *believe* the regulatory schizophrenia about homeopathy and Scientology. The FDA refuses, under lots of lobbying pressure, to call them outright frauds. But it also refuses to allow them to make medical claims, so practitioners of both frauds make the claims by implication or by "personal testimonial", not by official advertising, and the FDA continues to not act against them.
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The medical industry is not what you want to quote for effective regulation examples. That's exactly the kind of regulation we don't want.. overly specific and too case based, that just leads to micromanagement.
I think Mark is just a little too excited for a rapid economic recovery and boom. There is no need to speed up already blaoted investments in start-ups, nor is there any reasonably proof that the rules are hurting startups which are popping up left and right.. mostly with stupid ideas and far too muc
Re: Lack of perspective (Score:2, Insightful)
What an a$hole. Public companies are the ones really hurting the economy. They don't aim to employ, the don't aim to produce, they don't aim to create, they don't aim to have a long term strategy. Instead they aim to please an imaginary anonymous ugly gelatinous blob of all the "investors" which aren't investors but mere stock holders, and said ugly gelatinous blob does not really care if the company exists next quarter, the only thing they want is their earnings at the end of this quarter. That's right, th
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This is grade-A bullshit. You know who "investors" are? They're people who've been slaving away in cubicles for 30 years putting money into their 401(k) plans hoping to spend a few years sleeping in before they
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You know who "investors" are? They're people who've been slaving away in cubicles for 30 years putting money into their 401(k) plans
Indeed. The total value of American stockmarkets is about $20 trillion. The total value of American retirement accounts is about $19 trillion, but about 40% is in non-equity investments (mostly bonds, but also REITs, etc.). So more than half of stock market equity is owned by working people saving for retirement, or already retired.
The idea that investors only care about quarterly profits is nonsense. If you exclude HFTs (who are market-makers, not investors, and often hold stocks for less than a second
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Where did you get these numbers? About 80% of stocks and mutual funds are held by the top 10% of the United States. The vast majority are not even close to "working class". Certainly people in the middle class may hold a very small amount of stock, but by and large, it is an irrelevant amount.
Given that 90% of all non-primary residence wealth is held by the top 10%, it's ridiculous to imagine much of the financial wealth (stocks and mutual funds specifically) would be held outside the top 10%. Of course
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Mr. Cuban's gripes have nothing to do with the FDA. From the article that has his interview It's the SEC that cramps his style.
As to SEC rules being "vague", try formulating a set of clear rules and then watch everyone abusing the loopholes. Perhaps the largest part of the previous economic crisis (and the current lacklustre economy) is a direct result of runaway developments in the financial sector. Notably the stock market with its myriad derivatives, leverages, and trade of "risk". Those were
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Right, and they ARE INTENTIONALLY vague to make it so you can't come up with some bullshit loophole based on the wording of the law rather than its intent.
The SEC deals with blood sucking lawyers all day long, be happy you get vague rather than 'on a whim' or 'shot on site because they opened their mouth'.
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Absolutely.
Vague regulation is horrible.
I'm going to take this on a slight tangent. There is real desire for some people to get away from the rule of law.
I was watching the Democratic debate between Hilary and Sanders. There was a tidbit on gun control where
Bernie voted against a law that would allow people to sue Gun Manufacturers if say a person legally buys a gun and then shoots up a school... for what reason. I couldn't figure it out.
Hilary was all over it. She was saying Gun Manufacturers should be res
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you missed his point entirely. it's not that there's regulations; it's that they are so vague and unevenly enforced. honest businesses try to exceed the vague requirements and still get burned. criminal businesses bend the rules as much as possible and get away with it for years until they are caught after millions are lost.
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They are not vague by accident, they are vague on purpose. How does that work, easy, one group has millions to pay for lawyers and vague laws work for them in a corrupt interpretive dance and the rest, the 99% are persecuted and prosecuted by those same laws whilst they look at others who can afford get away with far worse crimes. The entitled rich paid to create an interpretive legal system they can readily abuse and even when finally prosecuted the interpretive penalties allow them to pay a smaller fine t
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If you're an honest business, you will see many regulations as an absolute hassle and cost
And if you're a dishonest businessman, the regulations won't hamper you in the slightest, because you'll just lie on the forms. WorldCom, Enron, and Madoff weren't caught by regulators; the only thing that got them was that when business goes sour, you can't pay debts with fictional accounts.
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you may not actually care about the facts of the case, but Enron paid a dividend, that was a reasonably GOOD dividend compared to most other companies, throughout its time aggressively manipulating its books. The tax on dividends did not matter.
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If you're an honest business, you will see many regulations as an absolute hassle and cost. For every Enron there's a hundred relatively honest book-keepers who think the SOX laws as an unnecessary giant pain in the ass. Unfortunately they're needed to keep the market as a whole to function well, just like you need everything from health inspections for restaurants to safety inspections for construction workers. We know many would care anyway, but we also know some don't.
Any Canadian Company that has a subsidiary in the USA has to implement SOX. I did that for a company that I worked for, back in 2008. SOX in the end was a good set of rules to follow. It made us more responsable to the shareholders.
How quickly we forget the 90's (Score:5, Informative)
Re: How quickly we forget the 90's (Score:4, Interesting)
The fewer public companies we have the better. Individual shareholders have no say in anything anyway thanks to institutional ownership, and it's mostly public companies that are responsible for consolidation, loss of employment, offshoring, etc.
Most privately held businesses are not large (yes, there are exceptions). Small businesses don't outsource, they don't bring in H1-B Indian wage thieves to do their tech work, they employ more people on a percentage basis, and an awful lot of them are not interested in growth at all costs all the time either.
The economy and almost all of us would be far better off with less publicly traded companies.
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Publicly held companies are one of the main ways the "little guy" can save for retirement or his kids' college. They help ordinary people to participate in the capital side of the economy. One of Thomas Piketty's points (whether you agree or not) was that great amounts of income are accruing to capital these days. The situation would be far worse if regular folks could invest only in government bonds.
On the general topic of regulation for publicly traded US companies, I will further add that there is st
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Nobody but suckers invests in an IPO anyway. By the time the IPO comes around, the VC's have already negotiated themselves all the profits. The IPO is just to rake in some bucks from the dumb bastards who think they're going to be instant millionaires. Sure they'll drive the stock up hundreds of points and then it'll sink like a rock and trade for under $1 a share for months once people figure out it's actual value.
The only 'winners' are the people who staged the game but never played.
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Exactly. 90% of millionaires made less than $100k (Score:2)
That's exactly it. Over 90% of millionaires in America are retirees who made less than $100,000, invested about 15% of what they made, and are now self-sufficient because while they were "little guys", they were also owners of big businesses.
I was earning $50,000 and investing 10%, becoming an owner (stockholder) in Google and dozens of other companies. Public companies are THE major way that the "little guy" can get ahead and have the same advantageous that owners of big companies have - because investor
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Sorry, but with the limited liability laws for corporations and the bankruptcy laws, the only risk an investor is bearing is a possible loss of their initial investment. Society as a whole bears the risk of liabilities, in exchange for the potential economic benefits of increased risk taking.
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Getting in the way (Score:4, Insightful)
Mark Cuban is a douchenozzle (Score:5, Informative)
Sounds like pretty sound advice to me.
And Mark Cuban is a well-known douchebag who got lucky once and has been eating out on his good fortune ever since. And, he's one of the worst sports owners in the United States.
http://bustedcoverage.com/2009... [bustedcoverage.com]
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Cuban's views are probably influenced by SEC allegations against him of insider trading, for which he was cleared. He's actually a pretty good owner based on his willingness to try to provide a good fan experience and to do what it takes to put a winning team on the court. Yes, he got lucky by selling broadcast.com at the right time, but let's not pretend there wasn't a lot of hard work to put him in a position to receive such good fortune. Also, I like Cuban and Kevin O'Leary the best on Shark Tank. He's a
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I started reading the story wanting to hate him and disagree with him, and while I still dislike him, he's right. A lot of traders and companies and agencies are getting away with murder because the regulations are vague, and they use that to their advantage, keeping others out by interpreting regulations one way for some people, and raking in the dough by interpreting them more favorably for themselves and their friends. The SEC DOES 100% need to tighten up their regulations and enforcement. Someone bro
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Mary Jo White is, on the one hand, complaining that too many companies are eschewing an IPO. And on the other hand she's promising to put them through the ringer when they do.
You'd have to be crazy to go public now unless you have a shady business plan. Interest rates are near zero (well, below zero in some places, but you can't borrow at that rate). If you need money it makes far more sense to borrow for expansion and keep ownership of your company.
Regulate the term of the investment (Score:4, Interesting)
The problem with today's stock market is that you don't make money off of investing (committing resources in expectation of *long term* gain). Most people in the market are making their money off of high frequency trading or day trading. They could care less how a stock will perform over the next week, month or year. They're looking at potential gains that moment.
And there's nothing fundamentally wrong with that approach but that's not "investing". That's pure trading and it's very hard for companies to do business when they know their stock valuation (and hence access to capital) has nothing to with their long term plans but is driven by whichever way the wind is blowing that day.
How to fix it? Exchanges make trading fees based off of period of investment. If your in it for one day, they take a 50% cut of profits. One year, 25%. 2+ years 5%. etc. However, they won't because currently the make money per trade so they want people trading like mad instead of investing for the long haul.
Head of the SEC has an interesting history (Score:3)
Seems like there's a lot of conflicts of interest, kinda like Eric Holder [rollingstone.com]: Mary Jo White, current head of the SEC [wikipedia.org]
Just because she's very good at defending financial sector firms doesn't mean she's a wise choice for regulating them. The regulatory agency heads are in federal service only briefly, taking large pay cuts to get into the position in order to make connections and understand how the government operates, before they go back to their industry.
how do you define "hurt economy" (Score:4, Interesting)
Believe it or not, but his definition of "hurt economy" may not be same as yours. Suppose some regulation cuts down 10 billion from top billionaires (2% reduction in top 0.1% people) and increases by 5 billion for bottom 20% (> 10% increase), would you call it improvement or hurting economy? It has increased 5 times more income for 200 times more people but in absolute term, it has reduced total economy. People like Mark count hurting economy by checking if they (billionaires) benefits or not. Without the regulations, I would put all my money in CD and real estate. Even now, investing in anything other than index fund is not for normal people, but without regulations, even that won't work.
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The market is freer than that (Score:2)
If you prefer some other country's regulatory regime, incorporate there, give the shares of the company to that corporation, and IPO it. You don't HAVE to be under SEC jurisdiction.
Maybe swimming with sharks (Score:3)
was a bad idea.
News At 11 (Score:1)
Billionaire investor complains that the government doesn't operate like he does! "Why, when I want to make a decision, I just do it, you know? And I can do it for any reason, or even no reason at all. Why doesn't government work like this?"
The role of the SEC is not to be a friendly, compliant, confidante and buddy. They are like auditors, they hold you to an independent standard. You are supposed to be a little uncomfortable when they are around. And minimizing your contact with them isn't a bad thin
By analogy... (Score:5, Insightful)
"How insulting can I be to someone in a bar without getting a fist in my face?"
"Well, I can offer you advice, but you can't count on it if you make trouble"
"Yes, but that's too vague. I want exact rules!"
"That's not how it works, and trying to get right up to some limit is just asking for trouble"
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Modded +3? I weep for Slashdot, and humanity.
A better analogy - on the highway you see a sign:
Speed Limit: a reasonable speed.
lol, wtf would you do then? That is exactly what these businesses face and so they do the equivalent of asking their accounting and legal firms what speeds other people have been punished for, then go half that and hope for the best. It is a wonder that America has any businesses left.
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There is more to life than economy (Score:1)
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Christ (Score:2)
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THIS. This x 1000. *LACK* of regulations killed jobs -- anyone remember "free trade"? Seems these companies are doing everything to deflect blame from the policies that *they lobbied for* and dodge any responsibility for the social conditions that *they created.*