Archive Page 2
UPDATE: Unfortunately the JOBS Act passed the Senate, albiet with important amendments to the Crowdfunding section that added in important disclosures, and then the amended version passed the House. It awaits Obama’s signature. I am updating this post to reflect the problems that still remain with this bill, but to also explain the problems that were fixed by the Senate amendment.
At a time when it’s is clear that Americans deeply want want more accountability, more justice, and more financial regulation, Congress is quickly and sneakily paving the way for less accountability, less financial records, and more potentials for investors to be completely exploited.
They are doing so with a new bill that flew through the House with bipartisan support and is set to his the Senate this Tuesday. It sounds great: the J.O.B.S Act (Jumpstart Our Business Startups). Except it’s not great, it’s absolutely egregious. It’s probably the worst roll-back of investor protections in decades. It risks putting us back into the wild west environment that led to the 1929 crash.
Worse still, they’re couching it in this JOBS language when really it’s about financial deregulation. And at a time when anti-bank, anti-fraud sentiment is so high, and people are talking about conflicts of interest (see: Greg Smith’s recent op-ed on why he left Goldman Sachs), here we have Congress passing a bill through the house with flying colors that will create the potential for more fraud, more conflicts of interest, and more scams.
So what is so bad about the JOBS Act?
- The bill is touted for helping startups, but if you actually read it, it defines a new class of company called an “Emerging Growth Company,” which is defined as a company with up to $1 billion in gross revenues per year. It proceeds to undo reporting and audit requirements for these new class of companies, which I’ll detail next.
- For five years after an IPO, Emerging Growth Companies (EGCs) and not required to submit to Sarbanes Oxley internal control certifications–which were controls put in place post-Enron to put the CEO on the hook for accounting fraud. With the JOBS Act, these EGCs are not required to run audits to prove you’re not cooking the books for 5 years following the IPO.
- The approach to IPOs makes U.S. markets less transparent than Hong Kong. It will lower the required disclosure of core financial information to two years for these Emerging Growth Companies. Three years of financial statements have been required of all U.S. public companies for over 70 years.
- An Emerging Growth Company does not have to be a new company. A private equity firm could take a public company private, and as long as they had less than $1 billion in revenues, they’d qualify for treatment as an EGC. The Private Equity firm can now flip the company (i.e. sell it to another investor or facilitate a merger) with only two years of financial disclosures.
- It rolls back the wall between the investment bank and the research analysts. It used to be that if you were an investment bank underwriting a company’s IPO, you couldn’t create research touting the stock–that’d be a conflict of interest. With the JOBS Act, Emerging Growth Companies are exempt from this rule. Goldman Sachs can take a company public, and provide research to the market on why you should buy the stock, too.
- Currently, Regulation D prevents solicitation or advertising for what’s called a “private placement.” Hedge Funds, for example, cannot advertise. Now, that rule is gone. Solicitation is ok, as long as the only people who buy in to your hedge fund or private placement are “accredited investors” (i.e. have a net worth of $1 million or more). Accredited investors isn’t a new thing. What’s new is that the JOBS Act will now allow Hedge Funds and private placements to advertise. So, we could see things like investment banks posting billboards by senior citizen homes and cold calling seniors to try and get them to pump “private” investments.
- There is no SEC registration is required for websites engaged in crowdfunding. In fact, companies can raise up to $1 million while providing no financial information at all to potential investors. This is nothing more than a recipe for fraudulent activity. UPDATE: The Senate thoughtfully amended the Crowdfunding provisions, and now a number of important disclosures and SEC registrations are present
- And to top it off, investors can bet up to $10,000 (or 10% of their annual income, whichever is less) on a given company. There is no aggregate cap on investments, so an investor could in theory repeat this bet 100 times over across 100 different companies. UPDATE: This was also addressed in the Senate Amendment, and now individuals cannot invest more than $1 million in aggregate.
- There is also no prevention of, nor disclosure required for, a company hiring people to promote the stock. UPDATE: The Senate also fixed this with the amendment, requiring that if someone provides “promotional communication” and is paid to do it, they must “clearly discloses the receipt, past or prospective, of such compensation”
Sound bad to you? It should. This is being hyper-aggressively pushed as a bi-partisan jobs effort, but this is really a boon to Wall Street, Venture Capitalists eager for an easy exit on their investments, and an invitation to re-inflate the dot com bubble and bring back the Boiler Rooms.
If you care about investor protections, preventing fraud, you should contact your Senator as soon as possible and urge them to throw out the JOBS Act. There is an amendment, the INVEST Act, that builds investor protections into the bill, but the best thing to do would be to throw this bill out all together.
You can send a form letter here or here, but I urge you first thing on Monday to also call your Senator’s Office. You can simply call the Capitol Switchboard and ask to be connected to your Senator’s Office: (202) 224-3121.
I think they are trying to fast-track this before the public can decipher what it’s truly about. I heard they may vote in the Senate on Tuesday. I find it truly alarming. It seems the Obama administration and Congress want a quick win that is bipartisan and has “jobs” in the title, but they are doing so with this sneaky piece of deregulation that will increase conflicts of interest, increase potential for fraud, and help all the wrong people.
Please note that this, and all content on my blog, represents only my personal view, not the view of any of the working groups I participate in at Occupy Wall Street.
Filed under: politics | 1 Comment
Today, I saw a MASSIVE signal that the OWS movement is inspiring those who work within the system to grow a backbone and actually do something.
Today, a NY Judge, Jed Rakoff, threw out a proposed settlement between Citigroup and the Securities and Exchange Commission (The SEC, if you need a refresher, is in charge of enforcing federal securities law and regulating the securities industry).
The settlement was for $285 million, over a case where Citi allegedly bundled up some crappy mortgage-backed securities, sold them off the investors, and then simultaneously shorted (i.e. bet against) the same securities. Citi made $160 million off the deal, and investors lost $700 million.
Settling would have allowed Citi group to avoid having to admit any guilt at all. All the SEC charged them with was “negligence.” They did NOT charge them with “scienter” which is legal-speak for fraudulent intent. This is despite the SEC having referred to Citigroup in a memo as a recidivist (a habitual criminal). Judge Rakoff states in the ruling: “By the S.E.C.’s own account, Citigroup is a recidivist, SEC Mem. at 21.”
Settling also would have allowed Citi to avoid going to court, where the case would be argued out in public and put before a jury, and should they lose, they could be subject to FAR more in fines than the $285 million they were trying to settle for.
Essentially, the SEC was offering Citi a slap on the wrist. Usually, judges just rubber-stamp these settlements.
But not this time. This time, Judge Rakoff threw out the settlement, insisting it must go to trial. His ruling is really a smack-down of both Citigroup and the SEC. He doesn’t really pull any punches.
Here are a few choice quotes (emphasis mine):
“An application of judicial power that does not rest on facts is worse than mindless, it is inherently dangerous. The injunctive power of the judiciary is not a free-roving remedy to be invoked at the whim of a regulatory agency, even with the consent of the regulated. If its deployment does not rest on facts — cold, hard, solid facts, established either by admissions of by trials — it serves no lawful or moral purpose and is simply an engine of oppression.”
Another choice part of the ruling:
“Finally, in any case like this that touches on the transparency of financial markets whose gyrations have so depressed our economy and debilitated our lives, there is an overriding public interest in knowing the truth. In much of the world, propaganda reigns, and truth is confined to secretive, fearful whispers. Even in our nation, apologists for suppressing or obscuring the truth may always be found. But the S.E.C., of all agencies, has a duty, inherent in its statutory mission, to see that the truth emerges; and if it fails to do so, this Court must not, in the name of deference or convenience, grant judicial enforcement to the agency’s contrivances.”
The full ruling is here, and really worth a read:
This is one of the strongest signs yet, in my opinion, that not only is the world watching, but our movement is holding the powers that be accountable, and our allies are all emboldened by everything we do. Now, to be fair to Judge Rakoff, he’s expressed doubt over these settlements in the past:
He “reluctantly” approved a $150 million settlement between Bank of America and the SEC last year, after calling the deal “half-baked justice at best.”
But today he seems to be willing to go further than he has before.
The broader implications of this was summed up quite nicely by Adam Sorensen in Time:
Monday’s decision could have implications beyond Citibank. Settling out of court with no admission of wrongdoing has frequently been the SEC’s modus operandi in cases like this. If political momentum built in the wake of Rakoff’s ruling and other judges picked up his banner, Wall Street could face a level of scrutiny it has so far avoided.
Pat yourself on the back today, Occupy Wall Street. The world is starting to change.
Filed under: activism, Occupy Wall St | 2 Comments
I have been busy. I have been actively involved with the Occupy Wall Street protests, in a number of Caucus and Movement groups (including Occupy the SEC which is a part of the Alternative Banking group). I’m long overdue to post to tell you about how I feel like a lawyer these days as I comb through The Volcker Rule text looking for loopholes the banks will use.
But today, I march in solidarity with my fellow protestors at Foley Square at 5pm in New York City. If you are in NY, I urge you to come out. I know many of my friends have been wary to join in. They question the efficacy, they question the tactics, they question the point.
The point is simple: unlimited campaign donations by corporations is free speech, per the Citizens United Supreme Court Case. But tents in a park is not free speech. Instead, it requires a military-style show of force at a time when our city is ostensibly unable to afford anything. And now I am hearing that Brookfield Properties who owns the park is not even allowing signs into the park. Free speech, indeed?
Here is an excellent video of the scene at the night of the eviction, set to Frank Sinatra:
I used to work on Wall Street, so I do think I have a sense of what is good and what is bad (and what is egregious) there. I do think that marching on the NYSE is not the best strategic move. The NYSE is a public, transparent exchange where listed products trade. This is not a warehouse of opaque CDOs that trade Over-the-counter in numbers no one knows and, per the 2000 “Commodity Futures Modernization Act” no one could regulate.
But the movement overall has shone a light on a fact Wall Street wished we’d simply forget: that they are not playing by “free market” rules, though they expect us to.
I lost all sympathy with the executives and producers of major banks in 2009. Here, after having gotten massive, hugely visible rescues, and continuing support in the way of super low interest rates (a massive transfer from savers), they did not do the right thing, which was to lay low for a couple of years, cut pay, and rebuild their balance sheets. Instead, banks fell all over themselves to repay the TARP simply to escape its think restrictions on executive pay, and Wall Street bonuses in 2009 and 2010 exceeded the 2007 record.
As we’ve argued, banks, particularly in this era of extraordinary support (rock bottom interest rates, regulatory forbearance, underpriced insurance schemes) enjoy far more government support than any other industry, including defense contractors. They can’t properly be considered to be private companies. They are utilities and need to be regulated as such. And if they won’t rein in pay levels on their own, it should include restrictions on pay.
And so, today at 5pm I will march on Foley Square. If you have been on the sidelines up until now, come join us today. Come see what we are up against. And come feel your heart soar, as mine has, as you stand side-by-side with a community of people who are finally getting out from behind their laptops and into the streets to make lasting change that’s been so long overdue.
Filed under: activism, OWS | 1 Comment
Well, it just so happens that JP Morgan invested significantly in a fund with a $400 million share of twitter back in March of this year. While at the time I’m sure they just thought it made good business sense, what it may well mean now is that they have say over one of the primary mediums the Occupy Wall St movement is using to get the word out.
More chilling is the $4.6 million donation that JP Morgan has recently given to the NYPD’s New York Police Foundation. Here it is emblazoned proudly on JPM’s corporate site.
In my mind, there are two possible interpretations here. The first is this is an attempt at suppression from multiple levels: communication and law. If you control the medium, you control the message. If you control the enforcers, you can supplant the law.
Another interpretation? That Chris Hedges was right. That JP Morgan is running scared.
Hedges recently gave a lengthy interview at Occupy Wall Street (which was so good I stayed up until 4am last night watching every part of it. He is so articulate and moving that I think my brain exploded a little listening to him), and one of the things he said is relevant here:
The real people who are scared are the power elite. Of course, they’re trying to make you scared and us scared. But I can tell you, having been a reporter for the New York Time, that on the inside, they’re very, very frightened. They do not want movements like this to grow.
Which interpretation is right? Perhaps both. We shall see.
Filed under: activism, Occupy Wall St | 0 Comments
It looks like a number of people running WordPress on Dreamhost fell victim to this.
There is a great write-up of the issue here: http://www.travelswithakazoo.com/2011/09/how-embarassing/ and here http://sucuri.net/new-malware-sweepstakesandcontestsnow-com.html
script src="http://do not go to sweepstakesandcontestsnow.com/nl.php?nnn=1"[/code]
So, what about this site? It looks like I was saved by some of the custom tweaks I made to this particular WordPress install, as it appears that the malicious script tried to do the same to this site, but, well, failed (the script tried the wrong directory).
I haven’t heard back from Dreamhost on how this all went down, but I have since changed all my logins and thoroughly chastised myself. If you have visited alexisgo.com in the last 10 days, especially if you were running IE, you will want to do a full system scan. I deeply apologize for this.
If you use Dreamhost and run WordPress, you should check out your sites while running NoScript in Firefox, and make sure you don’t have cause to feel as embarrassed as I do right now. Here is the cleanup for the effects of this should your site have been a target: http://blog.sucuri.net/2010/05/simple-cleanup-solution-for-the-latest-wordpress-hack.html
Filed under: FML | 0 Comments
A little over a year ago, I quit my job on Wall Street. I made great money. I worked with smart people. I was eligible for promotion to Director. And yet, I was deeply unhappy. I felt trapped. The journey to get to the day I resigned was a long one. So, I’ve decided once and for all describe my journey out of the golden handcuffs, out of a job I didn’t believe in.
I hope you find my process enlightening, or at the very least, amusing. If you follow these steps closely, you too can be an
successful entrepreneur unemployed hippie incredibly happy human being.
1. BE DISSATISFIED WITH YOUR JOB.
Find it hard to wake up in the morning. Feel the weekdays crawl by. Wonder what you could do if you spent all day working on YOUR projects instead of sweating for someone else. Have a melodramatic attitude about what you’ve done in your career (“Nothing!”) and life (“I’ve accomplished nothing! Nothing I do matters!”).
Suffer malaise and ennui.
Complain to all your friends about how much your job sucks until they can’t stand to hear anymore. Complain to them some more. Complain until your social circle consists only of your equally complain-y coworkers, or friends you see once every two months who always forget that you just bitch about your job the whole time.
Difficulty level: EASY
Filed under: Burning Man, change is hard | 12 Comments
HTML5′s Microdata allows us to use custom vocabularies to add better markup to our pages. It allows us to tell search engines things like “Hey, Google! I know I’ve got twenty images on my blog but this image is my bio pic!” This is so important that Yahoo!, Google and Microsoft have teamed up to work together on these vocabularies at schema.org. They’ve created vocabularies for everything from Event, Restaurant, Product and Review, to Person, Organization, Corporation, and NGO.
So why haven’t you heard more about it? Well, if the google analytics on Mark Pilgrim’s Dive Into HTML5 online book are any indication, people are generally uninterested. Pilgrim’s book covers Microdata in a dedicated chapter. But if you look at his analytics, you’ll find that that is the least read chapter. Mark writes:
Seriously, the shit that nobody gives about my beloved Peeks, Pokes & Pointers chart is rivaled only by the shit that nobody gives about Microdata.
In my mind, that’s an edge for those of us who do give a shit. Continue reading ‘Why you should give a shit about Microdata’
Filed under: HTML5 | 2 Comments
Um, should I be worried that KitKats cause cancer? Because Nestle just acquired a company, Prometheus Labs, that makes products to treat cancer and gastrointestinal illness. Uh, since this smells like vertical integration, I should be worried, shouldn’t I?
Filed under: activism | 2 Comments
I wrote a guest blog on HTML5′s Drag & Drop for Sitepoint.com. It’s a very simple example that builds a little Scrum Planning Board using a bit of CSS and the new Drag & Drop API. You can view the sample code up on github.
Filed under: programming | 1 Comment
You’d think now would be a time for kindness and charity. A time for companies, if they were to say anything at all, to offer to lend a hand.
But not SEARS! No, Sears looked across the south at all this devesatation, and you know what they saw? Big, fat dollar signs! So they sent me, and who knows how many thousands of other idiots that bought something from them once and receive their SPAM ever after, this email: “Affected by the storm? Sears can help you clean up.”
And here’s a handy graphic:
Filed under: profits not people | 1 Comment
You are currently browsing the Live to Try weblog archives.