Wednesday, January 19, 2011

My Comment To Wall St Journal About SEC And Goldman Facebook Offering Disclosures

A comment I posted on The Wall Street Journal to an opinion piece, "What Really Merits Disclosure? Goldman clients are the ones who should be ticked off" by Holman W. Jenkins, Jr:
The SEC thinks the only way a stock can go down is due to fraud or misreporting of financial data. The SEC measures it success by the number of legal actions it takes against companies or investment firms and it is not measured by key positive indicators important to the US economy, such as the number of IPOs, the amount of company market debt financings, the liquidity of the market, the costs of transactions, etc. Imagine running a manufacturing firm and giving bonuses for poor quality instead of good quality goods. The SEC is rewarded for market and investment failures with more staff and more money. Instead, it should be rewarded for more of the positive things markets do, such as IPOs, etc.

If it viewed the markets positively instead of negatively and was measured by indicators of success in the market instead of the few failures, the SEC would have worked with Goldman to find a way to make the Facebook domestic private offering happen. Instead, the SEC comes in looking for ways to find a guilty party before the deal ever takes place. The SEC should be penalized for preventing sophisticated US investors from participating in a domestic stock offering.

There was occasional fraud and misreporting in the stock market before the SEC was established 75 years ago and there is no indication that there is any less fraud and misreporting since the SEC began.

The SEC only real goal always seems to be to complain that it needs more staff and more funding to do its work.

If I remember correctly, there are more financial experts and economists at the Department of Agriculture than there are at the SEC. The SEC is overstaffed with inexperienced young lawyers and government bureaucrats who know little, if any, about finance, investing, starting a company or taking a business or investment risk. The SEC should be abolished and replaced. A new agency that is more pro-business, pro-markets, pro-investment measured by positive economic, and market attributes should replace the SEC.

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