Mark Cuban Takes on SEC Again

mark cuban SEC

Law360, Los Angeles (October 30, 2015, 9:52 PM ET) — The Eleventh Circuit on Thursday allowed billionaire Mark Cuban, a self-described victim of U.S. Securities and Exchange Commission overreach, to file a third-party brief backing real estate developer Charles L. Hill, who is challenging the SEC’s expanded but controversial use of administrative law judges.

Cuban, an entrepreneur and owner of the Dallas Mavericks who beat insider trading allegations brought against him by the SEC in 2013 after a jury trial, argued in an amicus brief filed with the court Thursday that the SEC’s aggressive use of a “defective” in-house tribunal creates unpredictability that harms the public’s best interests.

The SEC is virtually undefeated in in-house administrative proceedings, Cuban said, but is far less successful when it litigates in federal court.

“When the SEC has the ability to significantly influence the outcome of a complex, credibility-based matter such as its insider trading case against Mr. Cuban — or its insider trading case against Mr. Hill — merely by placing it into an administrative proceeding rather than a federal court, investors’ ability to predict the types of conduct that will, or will not, result in sanction is diminished, and the free flow of capital is impeded,” the 39-page brief states.

Cuban said that the SEC’s designation of administrative law judges as employees and not officers creates an “inherently biased proceeding” in which the judges are pressured to favor the SEC’s division of enforcement in administrative proceedings, according to the brief.

“The SEC seeks to force Mr. Hill to litigate similar [insider trading] issues before an ALJ that the SEC states has the status of a low-level functionary, a mere employee, with neither the stature (nor political accountability) of an officer nor the independence of a federal judge,” he said.

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SEC Passes Equity Crowdfunding Rules-A Boon For BDs?

brokerdealers crowdfunding

Will New Regs Create A Boon For BDs?  Brother, Can You Raise $1mil?

(–If only coincident to the Halloween Trick or Treat Holiday, it’s now official, on Friday Oct 30 the US Securities & Exchange Commission (SEC) passed new equity crowdfund regs, opening the path to what some believe will be a multi-billion dollar tidal wave of startup funding, and also, what more cautious experts believe could be an entirely new cycle of speculative investing by unsophisticated investors. The new rules approved will make it easier for start-ups to sell shares directly to the masses. Brother, can you spare $1million?

They could also be big business for a broad universe of broker-dealers, as well as handful of Los Angeles firms (among many others) that want to act as the stock exchanges where these deals will take place.

The rules, which will take effect in about six months, allow private companies to raise up to $1 million a year from small-time investors without most of the reporting and auditing required of larger firms or companies raising more money.

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SEC Locks Retail Brokers Out Of Stock Market Reform Meeting

Locksmith blog update profiles the SEC intentionally leaving retail brokers out of their upcoming meeting on stock market reforms. The group will meet four times a year and review old rules and advice the SEC on new regulation. Retail brokers are confused because the SEC has always made it a priority to protect retail investors so leaving retail brokers out of this advising group is raising questions.  This update is courtesy of Reuters’ John McCrank in his article, “SEC’s stock market reform club locks out retail brokers” with an excerpt below.

The U.S. Securities and Exchange Commission is convening a group of financial industry veterans for the first time next month to consider stock market reforms, but one group will be conspicuously absent: retail brokerages.

The SEC’s 17-member Market Structure Advisory Committee includes representatives of fund companies, an exchange, off-exchange trading venues, dealers, and academia, among others. The group, which meets four times a year, will review old rules, and advise the SEC on a range of new regulations designed to make sure the market is as stable and fair as possible.

Still, given that the SEC has said its main priority is to protect retail investors, the omission of retail brokers raises questions, because without their point of view the panel may recommend changes that favor institutional investors, analysts said. Retail investors place around 16 percent of all U.S. stock orders.

“There’s a missing gap of protecting retail order flow,” said Larry Tabb, chief executive of capital markets advisory firm TABB Group.

That gap was also noticed by committee member Joseph Ratterman, chairman of No. 2 U.S. exchange operator BATS Global Markets. He said he mentioned his concern to SEC Chair Mary Jo White shortly after the committee was announced and that she was supportive of him, along with committee member Jamil Nazarali, from market making firm Citadel Securities, formally representing retail interests.

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