

Ex-Con Man Says JOBS Law Makes Guys Like Him Rich - jsm386
http://www.bloomberg.com/news/2012-04-04/ex-con-man-says-jobs-law-makes-guys-like-him-rich.html

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uptown
Whether you think the JOBS act is a good idea or not ... people will get
burned by it. Think Groupon minus the SEC disclosures and corrections they've
had to make in recent weeks. Or a company pitching a flying contraption using
that video that even Wired magazine couldn't determine whether it was real or
fake as their pitch. That's the potential brave new world of investing this
opens up.

Maybe it'll work. Maybe the intelligence of the masses will establish better
oversight than the federally funded version that arguably does a pretty shitty
job with listed securities. But people most definitely will get burned, and
hopefully some amazing businesses will come out of it to keep things in
balance.

~~~
crag
"Maybe the intelligence of the masses will establish better oversight than the
federally funded version that arguably does a pretty shitty job with listed
securities."

Don't count on it. Greed shoots down intelligence every time. I predict the
come back of the classic "pump-n-dump" scheme.

~~~
rabidsnail
> I predict the come back of the classic "pump-n-dump" scheme.

It went away?

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JoshTriplett
News site whose primary audience consists of "traditional" investors runs
article critical of law supporting non-traditional investment. Biased news at
11.

Yes, this act will allow various types of fraud that previously couldn't
exist. It will also allow various types of awesomeness that previously
couldn't exist. Seems like a net win to me.

~~~
asmithmd1
I don't understand how anyone can make the argument that securities
regulations are in any way effective after the Madoff debacle. I don't
understand why the SEC wasn't just disbanded after it came to light they
dropped the ball after being handed the case on a silver platter. Any
regulation acts as a tax on legitimate business but the idea is the cost to
legitimate businesses is out-weighed by the good done by stopping bad actors.
If the regulations don't stop bad actors then all we are left with is a tax on
legitimate businesses

~~~
dmix
Indeed the solution to every problem these days always ends up being: regulate
it. But noone stops to ask if:

A) Regulation will actually stop anyone, or just make people try harder to
hide it

and

B) Will the side effects of the regulation create more destruction than not
having it

~~~
mkr-hn
What is the alternative to regulation when an industry's lack of self-control
becomes harmful to the world around it?

~~~
JoshTriplett
If you have to regulate, don't regulate behavior, regulate results. So, rather
than saying "you must do X because !X causes problem Y for the world around
you", say "you must not cause problem Y" (usually in the form "you incur all
liability for any damage you cause by problem Y", since regulations imply an
associated threat). You then make it possible for someone to come up with a
more creative solution to not causing problem Y.

~~~
mkr-hn
That seems reasonable, but the only real world examples I can think of come
with inconsistent outlooks. The ESRB formed when video games were at risk of
being regulated. Since then video games soared past the movie industry. The
counterexample to that is the CCA, which is largely credited with keeping the
comic book industry from diversifying and expanding.

What is needed to make self-regulatory organizations work out as well as the
ESRB?

~~~
JoshTriplett
The regulatory situation I described only applies when some serious problem
exists that will cause harm to others, but no existing law makes people liable
for causing that harm, and no other financial incentive exists to self-
regulate (e.g. the target market doesn't actually care about the problem in
question). In such cases, regulation might make sense; I suggested that such
regulation should just address the harm caused rather than the details of what
(at the time of regulation) seem like the "right" steps to prevent that harm.

In the case of the ESRB and the CCA, self-regulation serves primarily as a
marketing tool, with varying degrees of success; a strong financial incentive
already exists to self-regulate. The ESRB works reasonably well because it
helps the gaming industry target a broad age range and have everyone get what
they want and expect. The Comics Code and similar systems worked badly because
they attempted to censor rather than just label, and because they didn't do a
good job of keeping up with what target audiences wanted; CCA failed because
it no longer provided value to anyone.

Similarly, the automobile industry introduces a huge number of safety features
because their target market cares deeply about safety; most such features
don't come from regulatory requirements, and even the mandated features would
continue to exist in the absence of regulation, because people demand them.
Advertising for vehicles often touts independent safety ratings as primary
selling points.

So, self-regulation works out very well when the target market _wants_ it as a
feature. It doesn't work well by itself when it provides no value to the
target market.

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stephengillie
So the concern here is that crowdfunding sites will allow scammers to sell
shares of nonexistant companies to average people?

It sounds like the biggest worry is that us "average" earners (under 100k
annual income or net worth) have never purchased corporate shares, and are
more likely to get scammed.

~~~
marshray
Their biggest worry is that ordinary people (i.e., "non-qualified investors"
AKA "the 99%") might begin to invest up to 10% of their income without going
through investment bankers.

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ricardobeat
I couldn't understand the point of the article other than they don't like
crowdfunding, small investors shouldn't exist, and they don't like the JOBS
act. Could someone lecture me on what I missed?

~~~
marshray
You missed the part where they basically equated crowdfunding with convicted
felons and securities fraud.

~~~
fleitz
The current convicted felons and securities fraudsters don't want competition.

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patrickgzill
MF Global - 1.2 Billion or more of supposedly segregated client funds,
commingled and then missing. Futures contracts disrupted, lots of other
irregularities.

How many weeks has it been since this came to light?

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jnt8686
"Investors with annual income or net worth of less than $100,000 will be
allowed to invest as much as $2,000 a year in a company that offers shares via
crowdfunding."

Even if someone only invests in scams and gets royally fleeced out of their
whole $2000 one year, a lot of people waste a lot more money on much stupider
stuff.

~~~
asmithmd1
Like state run lotteries

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rhizome
It's pretty ridiculous that the JOBS act applies to companies with revenues up
to $1 Billion.

