
Zuckerberg sued over privacy scandals, alleged insider trades - mzs
https://news.bloomberglaw.com/securities-law/facebooks-zuckerberg-sued-over-scandals-alleged-insider-trades
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dpflan
"""A Facebook spokesperson said all of Zuckerberg’s trading in Facebook stock
had been done through plans set up under Securities and Exchange Commission
Rule 10b5-1. The rule allows company insiders to avoid insider trading
allegations by establishing formal plans to sell a predetermined number of
shares at a preset time."""

So you can follow the rules and have sales on a schedule and not be labeled
"insider trading", but restrict disclosure of information that would affect
the price prior to the scheduled sales. So there needs to be a mandatory
disclosure deadline once something is discovered. I'm not familiar with the
law here, but how is it changing? It seems hard to classify different events
as worthy of mandatory public disclosure when they vary across industries.

~~~
tyre
If events are disclosed in a timely manner then shareholders can sue for
securities fraud.

Matt Levine—a columnist at Bloomberg who is both smart and hilarious; his
Money Stuff newsletter is excellent—has a recurring theme of “everything is
securities fraud.”

The theory: anything that effects the stock price of the company and isn’t
disclosed as soon as possible is securities fraud.

Company doesn’t disclose a security breach? Securities fraud. Board buries a
sexual harassment settlement with the CEO? Securities fraud.

If you buy stock after the event but before the event is disclosed, you were
trading when the company had material information that could effect the stock
price. That’s securities fraud.

Levine is both joking and not that really _anything_ could be prosecuted under
this, and the SEC has seemed to make some prosecutions under this theory that
feel more like, “what you did was shitty and maybe not exactly illegal or we
don’t have exact evidence so we’ll prosecute you under this super broad
statute.” Wire fraud seems to be applied in a similar manner.

(I’m not a lawyer and this is not legal advice, just some things I’ve read and
now you’re reading on the internet from a random commentor. The above is how I
understand it.)

~~~
elliekelly
Securities lawyer here. And... I kind of agree. With respect to insider
trading at least. The laws are both complicated and unclear. Recent cases are
taking things to the point where it might soon be difficult for senior
executives to own stock without a blind trust. Historically insider trading
has required some sort of affirmative _action_ (buying or selling) but there's
been a trend recently (as alleged here) of alleging insider trading for
_inaction_. You didn't sell as planned, you didn't disclose in time, etc. It
could really put management in a difficult spot.

Other than the insider trading conundrum though it might seem like everything
is securities fraud because we're too used to executives putting their own
interests ahead of (or at least in line with) their shareholders*. That's a
problem because their fiduciary duty says that company/shareholder interests
have to come above all else.

Edit: Meant "shareholders" interests not "own" interests.

~~~
vec
Just playing devil's advocate a bit, but what would be the _downside_ of just
drawing a bright line that owning stock in your employer is inherently a
conflict of interest?

~~~
chucksmash
Owning stock in your employer can better align your interests with those of
the shareholders to whom you answer.

If you believe that mechanism is sound, then I guess the downside would be
that you have fewer incentives to maximize shareholder value.

~~~
asdff
It would be refreshing if business didn't have any incentive to maximize
shareholder value. Lots of great things are killed or diluted for a handful of
people to get a return. Exponential growth isn't sustainable, yet it's
expected to keep shareholders rich and satiated at the cost of the quality of
product that the end customer receives. What's wrong with just making a good
product and running a business well enough to cover your overhead and pay your
employees well? Why do we never hear of these stories in Bloomberg or Forbes?

~~~
SeanAppleby
There's nothing barring this. Just don't sell any control of your company to
anyone who won't agree with this strategy indefinitely, and run a consistently
cash flow positive business so you will never be in a position to need to bend
that rule to make payroll. It's definitely harder, especially if you don't
have your own capital to start with, or hit a temporary bump in the road that
bleeds the war chest, but people do it.

If you take outside capital to accelerate your business on the assumption that
the investors will make money as it grows, you're choosing to join that
system, no one forces you to participate.

Although I suppose you could end up in a zero sum competition with another
business for market share, and there might be an unstable nash equilibrium
where you both might want to not raise money, but if the other raises
significant capital they could crush you, so you are kind of systematically
pushed to play the game to keep your vision alive.

------
stefanmichael
It appears that there is probably not any insider trading going on in this
case. However, does anyone else have a thought of "what motivation does a
multi billionaire have to insider trade?" when reading headlines like this?
It's confusing why you would try to eek out that little bit of extra value,
there is no incentive.

~~~
tombert
Presumably the same reason that multi-billion dollar corporations (and people
for that matter) spend a lot of time and resources lobbying the government to
pay lower taxes. Once you've hit the billion-dollar mark, you effectively have
infinite money for most tangible purposes, and yet the drive to get more money
continues.

No idea if Zuckerberg is guilty, but I don't think "well he's already loaded"
is a very good reason to assume innocence.

~~~
JohnFen
> Once you've hit the billion-dollar mark, you effectively have infinite money
> for most tangible purposes, and yet the drive to get more money continues.

There is an amount of wealth (and I think it's substantially less than a
billion dollars), past which gaining more wealth won't improve your standard
of living at all.

However, most people who hit that continue to strive to increase their wealth.
I think that this is because the sort of person you have to be in order to
accumulate a large amount of wealth is the sort of person who isn't interested
in the wealth in the way ordinary people are.

They are interested in increasing their power, and in our society, wealth is
power. I also think that past a certain point, many wealthy people are
effectively engaging in a competitive game with other wealthy people, and the
amount of money you are worth is nothing more or less than your current score
in that game.

~~~
ryan_j_naughton
>There is an amount of wealth (and I think it's substantially less than a
billion dollars), past which gaining more wealth won't improve your standard
of living at all.

That is based on a very narrow definition of standard of living. If you
include the "goods" that are social status among your wealthy friends while
you're on your Mega-yachts around the isle of Capri then power is itself a
part of your standard of living.

Standard of living should be any good or service you have access to based on
your income/wealth. Those goods don't have to be material goods but can be
conceptual / philosophical goods.

Thus, reshaping whole industries, singlehandedly pushing the boundary on the
privatization of space, etc can all be thought of as part of one's standard of
living for the world's super elite.

~~~
JohnFen
I think that you and I are saying essentially the same thing, we're just using
slightly different terminology to do it.

