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Yeah I would be surprised if SEC treats short-sellers as different from investors. The general tone you are maintaining is short sellers are some sort of abomin

Yeah I would be surprised if SEC treats short-sellers as different from investors. The general tone you are maintaining is short sellers are some sort of abominable gamblers who thrive on failures of other investors. Uh, no. A short seller is just another investor investing using the tools the market provides.

rohit2412 8y ago
Exactly. I find it hilarious that some people think that SEC should make sure that a certain category of investors be in profit. Nopes, SEC makes sure that laws and regulations are followed. Investigations in Enron also led to people losing money.
- zekevermillion 8y ago
  Unfortunately your notion of the SEC as neutral referee for a fair market is not reality. The SEC lacks the resources to enforce the law consistently even within a narrow mandate. Its approach is to target specific violators as a deterrant and/or to make known what it considers to be the proper interpretation of securities laws. Some people consider this to be a major defect in US securities enforcement regime and suggest that the SEC should be resourced appropriately to the immense task. Personally I have no idea what they would need to more systematically pursue violators, but wild guess would be a couple orders of magnitude more funding and personnel. In the realm of securities fraud, I would say that the private securities bar does about 90% of the impact (in terms of judgments and settlements). And successful criminal referrals a la Enron are quite rare, proportional to the actual amount of fraud going on. By the way, Enron was a fraud against its own investors. Enron was not about fraud against short-sellers, it was fraud against purchasers of Enron stock. Not that short-sellers don't deserve honesty, just saying that they do not typically receive much love from regulators. From what I can tell, it seems this is not solely due to the disposition of said regulators, but also because of legal uncertainty around short-sellers' rights under securities laws.
zekevermillion 8y ago
There was no "tone" intended. I was making a falsifiable prediction that the SEC would not penalize Musk or Tesla based on the harm suffered by short-sellers, but rather based on the harm suffered by purchasers of Tesla stock who "overpaid". Looking at the modest size of the civil settlement, we now have enough information to say that my prediction was NOT falsified by events. As I also pointed out, this does not mean that one cannot commit fraud vs a short-seller. However, from what I gather, the rights of short-sellers under 10b-5, based on a "fraud on the market" theory, are rather murky in established caselaw and differ between federal circuits.

rohit2412 8y ago

Exactly. I find it hilarious that some people think that SEC should make sure that a certain category of investors be in profit. Nopes, SEC makes sure that laws and regulations are followed. Investigations in Enron also led to people losing money.

zekevermillion 8y ago
Unfortunately your notion of the SEC as neutral referee for a fair market is not reality. The SEC lacks the resources to enforce the law consistently even within a narrow mandate. Its approach is to target specific violators as a deterrant and/or to make known what it considers to be the proper interpretation of securities laws. Some people consider this to be a major defect in US securities enforcement regime and suggest that the SEC should be resourced appropriately to the immense task. Personally I have no idea what they would need to more systematically pursue violators, but wild guess would be a couple orders of magnitude more funding and personnel. In the realm of securities fraud, I would say that the private securities bar does about 90% of the impact (in terms of judgments and settlements). And successful criminal referrals a la Enron are quite rare, proportional to the actual amount of fraud going on. By the way, Enron was a fraud against its own investors. Enron was not about fraud against short-sellers, it was fraud against purchasers of Enron stock. Not that short-sellers don't deserve honesty, just saying that they do not typically receive much love from regulators. From what I can tell, it seems this is not solely due to the disposition of said regulators, but also because of legal uncertainty around short-sellers' rights under securities laws.

zekevermillion 8y ago

There was no "tone" intended. I was making a falsifiable prediction that the SEC would not penalize Musk or Tesla based on the harm suffered by short-sellers, but rather based on the harm suffered by purchasers of Tesla stock who "overpaid". Looking at the modest size of the civil settlement, we now have enough information to say that my prediction was NOT falsified by events. As I also pointed out, this does not mean that one cannot commit fraud vs a short-seller. However, from what I gather, the rights of short-sellers under 10b-5, based on a "fraud on the market" theory, are rather murky in established caselaw and differ between federal circuits.