

Venture Capitalists With Powerful Blogs May Run Afoul of the SEC - spiffae
http://www.betabeat.com/2011/09/14/venture-capitalists-with-powerful-blogs-may-run-afoul-of-the-sec/

======
0x12
This may apply to 'small fry' as much as it does to larger companies but the
wandering eye of the SEC will make a special exception for you when you do
this for a public company. That is when they go after you with a bunch of very
sharp pitchforks. Companies that have only had private investment and
investors that are not about to sell or buy stock in those companies at the
time they make their blog posts or other communications probably have very
little to fear.

That said, it is probably good policy _not_ to write about any companies that
you have an active stake in, especially while transactions are in progress.

The people involved in public companies all have been 'read their rights' on
this stuff and know full well the consequences of breaking the rules.

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relaunched
I'd be interested in seeing how fraud applies in the event that investors are
talking about their investments in private companies. For example, it's not
uncommon for you to see an investor to say something like, "I like the
businesses in space XYZ and the ABC business model...and that's why I invested
in company LMN". In this instance, I don't see an overt statement that is
fraudulent...even in the event that the company pivots away from any of the
above points.

I have heard investors say, "I'm not in deal ABC, but I could have been / wish
I was, because now those guys are killing it." Is that fraud? While that type
of talk can excite people to act, if the investor isn't involved...idk.
Oftentimes, the common public perception a company is 'killing it' is neither
news (to the general tech public), nor is it always true (lots of companies
appear to be killing it, but are running out of cash.).

Another scenario is when a VC talks publicly about an investment they are in,
in conjunction with details about how the company is performing. I can't
recall ever hearing this type of talk, though I'm sure it does exist. In these
cases, I'd suspect, as long as the company isn't about to go public, fraud
would still be questionable. If this type of information was used to persuade
other institutional investors, who conduct their own diligence, I'm not sure
the statements hold much meaning. With private investments, which are not
usually liquid, and investors are selected...it's akin to Goldman making the
argument that their clients are professional investors and therefore
responsible to make their own investment decisions. However, with the
introduction of Second Market, this might not be the case. In the event that
private stock acts like public stock, forward looking statements (either
positive or negative) that move the market could have a fraudulent effect.

The whole situation is unclear, especially considering the rare IPO and Second
Market effect, VCs can really only defraud professional investors / acquirers.
In those cases, I'm not sure their words have much of an affect. However, VCs
could potential make statements and sell stock on 2nd market.

It'll be interesting to see how it all works out and whether or not Second
Market will be able to trade private company stock in the future.

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cienrak
Does this apply to folks with personal blogs like Fred Wilson and Mark Suster
or just big corporate blogs like TechCrunch and GigaOm?

~~~
hvs
_Mr. Ferrara explained, “When an investor or insider is engaged in an omission
which proves to be a deception, and the result of that was a financial loss to
another investor, a case for fraud can be made.”_

That applies to any investor or insider, regardless of where they speak
publicly. So, it applies to Fred Wilson, Mike Arrington, and any other
investor.

~~~
startupcomment
So Fred Wilson and co. are fine as long as they do not "deceive"? I suppose
that still exposes them to the possibility that they might have to defend
themselves to prove that they have not "deceived"? Ah, the perils of the
internet age. I wonder if general liability insurance policies cover those
types of claims?

------
_delirium
This really applies to anyone engaged in communication about a company in
which they have a financial interest, doesn't it? If you take language like:

 _When an investor or insider is engaged in an omission which proves to be a
deception, and the result of that was a financial loss to another investor, a
case for fraud can be made._

As stated, at least, that seems like it would also apply to founders' blogs,
or even founders' posts on HN.

~~~
justincormack
No, it is not just about your interests, it is about whether you can be
construed as giving investment advice, which is a very grey area, eg see
[http://handbook.reuters.com/index.php/Personal_investments_b...](http://handbook.reuters.com/index.php/Personal_investments_by_Reuters_journalists#2._Investment_Advice)

------
temphn
The ironic part is that many of these VCs actually voted the people into power
who are now turning on them.

I wonder if Fred Wilson and Marc Andreessen have buyer's remorse today. These
SEC appointees didn't fall from the sky, they came from this administration.

<http://www.avc.com/a_vc/2008/11/barack-hussein.html>

    
    
      A world class management team. I remember the first debate 
      I ever watched Obama participate in. He was asked whether 
      he was a "strong operatating executive." He replied that 
      he was not "the COO", that he was more like "the CEO". And 
      then he went on to talk about surrounding yourself with 
      the best people you can find and then letting them do 
      their job. He did that with his campaign which was a 
      masterful thing to watch, he did that with his VP pick (in 
      stark contrast to the Palin fiasco), and I expect he'll 
      build a killer cabinet and a killer administration (look 
      for some picks from across the aisle).
    

<http://techcrunch.com/2008/03/03/marc-andreessen-for-obama/>

    
    
      Marc Andreessen: We asked him directly, how concerned should we be that you 
      haven’t had meaningful experience as an executive — as a 
      manager and leader of people?
    
      He said, watch how I run my campaign — you’ll see my 
      leadership skills in action.
    
      ...
    
      He’s got my vote.

~~~
jswinghammer
I think everyone wanted to believe in Obama and they were finding reasons. I'm
not sure why they did given how much support he received from the banking
industry. The reason he won was because the bankers preferred him over McCain
and gave him dump trucks full of money. It's easy to see why so far. Basically
we've had to give the bankers foot massages because a slap on the wrist would
have been too mean for their tender hearts to handle. I'm not arguing McCain
would have been much better but on this kind of nonsense he definitely would
have been better.

And of course Obama doesn't know anything about the market and certainly does
not believe in the free market to do anything. His latest jobs program should
make that painfully obvious to anyone paying attention. The notion of the
technocrat appeals to people who are smart and like solving problems. They
feel like any problem can be solved with a good enough team and a smart leader
(as an aside why does anyone believe Obama to be anything but an average
intellect). That is as FA Hayek put it a fatal conceit but it's easy to see
why people fall into it. I said the same thing about Mark Cuban's comical jobs
program: top down thinking is toxic to your brain.

~~~
nano81
I don't think this political rant belongs here.

~~~
jswinghammer
Yeah in retrospect you are probably right. I meant in response to the people
who supported Obama are getting what they asked for (without knowing it).

