Comment by ilaksh | Hacker News Reader

Comment by ilaksh | Hacker News Reader

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The SEC should show that it protects everyone's rights and not just large firms with piles of cash to pay to them and to pay expensive lawyers. Otherwise we have to assume that this is largely about trying to tax things.

The way they can do this is by making a real effort to update their technical, documentation, and regulatory programs.

Is there a straightforward way to do an Edgar filing that doesn't require a bunch of training? Is there a web page that clearly lists the requirements for these types of securities in plain English?

How much do the company registrations and filings actually cost? What is the basis for these costs? Because an ICO can be created at no cost. Are the excessive fees due to a lack of modernization or streamlining of the processes, or they simply bribes that line officials' pockets and protect the incumbent firms from poorly funded startups?

In recent cases, how would fees and filings have actually protected anyone? Does the SEC have technical staff or software capable of evaluating Ethereum contracts for validity or safety? If not, how does their regulatory effort provide any benefit, except as an opportunity for them to collect a type of tax and make it harder for startups to compete with large firms where SEC officials have friends working?

Comments like this are ludicrous. Do you really think the SEC doesn't understand distributed ledgers or ethereum contracts? Second, do you think anyone has technical staff that are capable of writing safe contracts in Solidity (Parity wallet would suggest not...).

In short, the idea that people must be incompetent because they're in the government is pretty ludicrous. The SEC is consistently one of the best technical organizations despite the fact everyone lobbies for them to have the fewest resources with which to do their job.

If you think all ICOs pass the smell test, maybe you haven't been fleeced enough in your life to appreciate scams when you see them?

Source: I run a crypto hedge fund and have spent a lot of time evaluating ICOs. Some of them are legitimate, philosophically sound ideas looking for funding and some of them are outright scams.

How is it "ludicrous" for memossy to ask a question?

In short, the idea that people must be incompetent because they're in the government is pretty ludicrous.

The comment did not express that. It was mainly about transparency and communication.

Is your hedge fund registered with the SEC? What's the name of it? I've been thinking about crypto hedge funds lately and am genuinely curious.

From HN profile

> General Partner, Crypto Lotus. > Cryptolotus.com

First google result for "crypyolotus sec" is an apparent SEC filing: https://goo.gl/txKA3t

Actually hung out with a JP Morgan Chase banker the other day. Big into crypto. He said the SEC had no clue what was going on. They leave at 5 PM, and head home to wife's and kids, and mortgages.

While the "kids" are hacking, micro-dosing, and working 100 weeks. And they are all of 17.

It's not in their world. A 55 year old banker is not hacking solidity contracts at 3 AM. No way.

Why should one believe a 17 year old, working 100 hour weeks and micro-dosing (really, what does this have to do with anything?) knows or is more capable than a 55 year old?

For that matter, I'd be skeptical about what any bank employee says about the SEC lol. My mom had worked at a big bank for decades and is not always saying nice stuff... (But in context it's cus they make her life harder)

This is the point that made me really chuckle.

While there's probably something to the motivated young weirdo hacker theory (it was William Burroughs who said "only the young bring anything in, and they are not young very long"), I would also very skeptical what a JP Morgan banker has to say about the SEC. It's like asking a bank robber what he thinks of the police (hyperbole, I know. Bear with me). There's a bit of a natural bias there.

That said, JP Morgan has launched their own Ethereum fork and is working closely with the Enterprise Ethereum Alliance and (to my knowledge) Vitalik Buterin. It seems they're sincerely chasing this tech (dragon?) for better intentions or for worse.

Ah, the classic SV "he or she has a real adult life, and thus cannot understand my h4xx0r skillz" chestnut.

Real adult activities and hacking are extremely opposed endeavors.

One can make time for both, but the prior probability is quite low that a person with a real adult life will also be on the cutting edge of technology.

If being on the cutting edge is microdosing and working 100 hours a week, to hell with that. Takes a rare person to prefer that to human interpersonal relationships and contact. Solidity contracts aren't going to love you back.

Not when it's one job to be on that cutting edge, and it's the SEC's job to be on the cutting edge of securities technology.

There are occasionally brilliant coders at 17 who produce things of beauty. It's wonderful to behold. They are rare.

Sometimes the fire of youth produces fantastic ideas that change our world. Their initial efforts, though raw and non-optimal, show a beautiful gleam that - through effort by more seasoned developers - is polished into something beautiful. These are more common, but still rare.

Most 17 year old coders however produce well intentioned awfulness that is technically poor, non-optimal, has security holes, and if it handles edge cases at all does so poorly - and that's the good stuff.

The kids work is valuable but mostly to them - they're still learning.. usually still learning the basics too.

I have been coding since I was 8. At 17, I had roughly 9 years experience. I built some really cool things with neural nets/genetic algorithms at 17, and they worked pretty well. However, I look back at the code I wrote and it almost brings me to tears how awful it is.

Right, exactly - I've been coding in some form since I was 5 (in BASIC and PEEK and POKES) but the stuff I did as a teenager was fun exploration play.

It's important to do that! That's great for a programmer and it will likely have some cool ideas... and hell, maybe a product or something will come from it.

But the original post was just naive.

Maybe if they had a few of those 55year olds with kids who know how to write a goddamn language interpreter without it being a train wreck, the DAO wouldn't have been the crisis that it became.

This veneration of the church of conspicuous effort is not a new idea. It's lead many people astray. Be careful.

Being competent is not exclusive with leaving at 5pm, having a wife, kids, and a mortgage. Nor is being 17, micro-dosing on psychoactive drugs, working 100-hour weeks or hacking at 3am.

In fact, I would argue that the correlation swings in the opposite direction.

It's not in their world. A 55 year old banker is not hacking solidity contracts at 3 AM. No way.

Fucking awesome. Nobody should be doing that.

The SEC has been dipping into crypto regulation since at least 2013 when they shut down BTCT for running an exchange that traded shares in various bitcoin mining companies. There are people there who have been working in the field for years now and understand it quite well.

Because the 55 year old is too smart to! It's not like those "kids'" are doing anything good at 3am either; their work seems to be flaky and fraud-prone. See: the DAO hack and recent Ethereum smart contract thefts to name just a couple.

Given the source, I might take that with a grain of salt.

> Because an ICO can be created at no cost

Except the cost to the participants who later have wasted money because the ICO contract was exploitable...

At the current rate major losses are as perceptible as all successes. Maybe the industry needs some externally imposed speed bumps from SOME authority until folks can get their acts in gear?

I doubt the SEC is a good fit for improving smart contract security.

I'd trust the SEC that one other agency capable of doing so. The SEC actually has a ton of technically capable people who understand and audit technology...they do as much for e-brokers, stock exchanges, high frequency traders, etc.

The only other agency capable of doing so would probably stockpile the exploits and use them to surveil the dark web to catch a million drug dealers and an occasional low level disposable terrorist.

Can you show me the losses vs successes?

I actually cannot name any successes, I looked for a few moments. I presume they exist.

For those thinking I am glib and downvoting, I am asking: Do you know of any? I searched, asked some friends in etherium. I presume they must exist in some for as we're no longer early-days with Etherium.

... and currency can be created at the cost of the future unborn generations.

Your move, KirinDave.

I do not understand. Sorry.

He's talking about how the government systematically Rob's from the future through inflation - in particular hurting the poor the hardest and creating lost decades and millennials along the way.

> He's talking about how the government systematically Rob's from the future through inflation

... What? Wait... what? I'm actually more confused by your response. So, the idea is governments create inflation to... rob the poor?

Also, who's Rob?

> in particular hurting the poor the hardest and creating lost decades and millennials along the way

Are you implying that millennials have... the government to blame for their current grim prospects in the job market? Because of inflation?

No, governments create inflation to satisfy an illusion of control and stability over the economy, and a side effect is robbing the poor (and giving to the rich).

Think about it:. If you're poor and spending 90% of income on survival, an increase in the cost of living has a more dramatic effect on the margin of survival than the identical increase in cost of living for someone who depends on 20% of their income.

Moreover, it's frequently said that inflation is necessary to combat 'sticky wages'... If you read between the lines, that's effectively 'cheating the poor of their wages'.

The common retort is that the inflation is good for the poor because it reduces the real value of their debt. But in the real world outside the ivory tower of economists who never were actually poor, the poor are offered high interest loans, which are only barely ameliorated by inflation. People who benefit from low interest rates are corporate C-levels, banks, and leveraged an margin investment (which is most of the "1%"

I don't get how inflation does these things. I've never heard of it robbing the poor or doing anything specific to millennials

> the SEC should show that it protects everyone's rights

One sure-fire way to get the SEC to go absolutely ballistic is to hurt mom-and-pop investors. This is why the commission was founded [1] and why securities law maintains "accredited investor" thresholds, controversial as they are.

> Is there a straightforward way to do an Edgar filing that doesn't require a bunch of training?

Securities lawyers are a few thousand dollars well spent. That said, the SEC has online self-help resources [2] and an online filing portal [3].

> How much do the company registrations and filings actually cost?

It depends on how much you raise. Right now it's 0.01159% [4].

> an ICO can be created at no cost

Until shit hits the fan. Then everyone needs to hire a lawyer. An SEC complaint, on the other hand, triggers investigations and potentially enforcement actions paid for by the filing fees, amongst other things. It's a public good that helps keep companies honest.

> how would fees and filings have actually protected anyone?

The SEC is constantly litigating [5], launching proceedings [6] and helping resolve failed companies [7] on behalf of investors. Audit requirements stop lots of crap before they get too serious, too.

> Does the SEC have technical staff or software capable of evaluating Ethereum contracts for validity or safety?

The SEC doesn't evaluate filings for fitness, just completeness. Its mantra is disclosure and transparency. That lets investors come up with their own informed conclusions. Especially small ones who can't afford corporate lawyers to pull managers' teeth.

[1] http://www.columbia.edu/~hcs14/SEC.htm

[2] https://www.sec.gov/info/edgar/guidance

[3] https://www.filermanagement.edgarfiling.sec.gov/Welcome/EDGA...

[4] https://www.sec.gov/ofm/Article/feeamt.html

[5] https://www.sec.gov/litigation/litreleases.shtml

[6] https://www.sec.gov/litigation/admin.shtml

[7] https://www.sec.gov/divisions/enforce/receiverships.htm

>> How much do the company registrations and filings actually cost? >It depends on how much you raise. Right now it's 0.01159% [4].

Those might be the fees. The cost of a registration is much higher. Gotta put food on the table of all those lawyers and accountants.

https://www.pwc.com/us/en/deals/publications/assets/pwc-cost...

Certainly, money can be raised more cheaply with exemptions, but those come with their own tradeoffs.

Why shouldn't mom-and-pop get the choice to invest in SEC regulated companies? If you like what the SEC has to offer, you can keep it. Taking away that choice seems paternalistic at best, corrupt at worst.

> Why shouldn't mom-and-pop get the choice to invest in SEC regulated companies?

When retail, i.e. unaccredited investors, get hurt (a) there are more of them and (b) it more often than not puts them into dire, sometimes existential, straits. The latter leads to political backlash and instability, e.g. the 1930s.

Basically, you must have a nest egg to act as a safety cushion before you can invest in risky things. This makes sense on another level, in that doing diligence on un-registered companies is expensive. That, in turn, drives a minimum practical investment size.

And yet plenty of first-world countries allow non-millionaires to invest in these companies, and it seems to work just fine.

It's not the government's business to decide what people do with their money.

People are going to make bad investments, no matter how much the SEC restricts. There are a huge number of non-securities investments available, and people pour huge amounts of money in them. A government is never going to be able to protect individuals from their own bad judgment.

All these regulations do is drive up the cost of directly accessing public capital markets (at last count, $6 million to do an IPO), and contribute to growing income disparity [1].

[1] https://www.brookings.edu/research/make-elites-compete-why-t...

> All these regulations do is drive up the cost of directly accessing public capital markets (at last count, $6 million to do an IPO), and contribute to growing income disparity

There's a fair argument in weighing the upsides and the downsides of registration requirements. But saying the downsides are "all these regulations do" is intellectually dishonest. Lots of scams get stopped, or at least quarantined, by these regulations. The speed with which the ICO market went from zero to bullshit only seems to re-inforce the prudence of these rules.

> $6 million to do an IPO

Having watched private companies spend much more than that to raise private capital, I think it's safe to say filing fees aren't the primary problem the public markets have.

It's not intellectually dishonest, because I'm commenting on the net effect. If people are getting scammed just as much, but from other sources, then "all they do" is the net effect on the negative side.

But fair enough: if you constrain this new internet sector, then you could conceivably reduce scams, just by virtue of forcing people into higher-friction areas of the economy, where less can practically be transacted. I'm sure Cuba has pretty low scam volumes by the same virtue.

>Having watched private companies spend much more than that to raise private capital, I think it's safe to say filing fees aren't the primary problem the public markets have.

Many private companies spend FAR less than that to raise private capital. To claim that a $6 million fee for entry is not going to disenfranchise a huge subset of the population is intellectually dishonest.

I'm not sure what a "non-securities investments" in the US securities scheme would look like. An "investment contract" is sort of the catch all category for everything that tries not to look like a security, but actually is one. If something is an investment, I can't imagine that it's not a security.

The Howey Test defines an investment contract more narrowly than you imply. People lose absolutely staggering amounts of money each year on bad investments. Money is like water. It flows around these regulations. The detours just add friction that slows innovation, and diverts capital to fees for legal/accounting professionals.

> The Howey Test defines an investment contract more narrowly than you imply

I mean, maybe?

An investment of money, managed by somebody else, with the expectation of profits. I feel like that covers most things we would typically consider to be investments. Aside from something like, "I bought this piece of art... as an investment." Maybe I'm just missing some obvious examples?

Case law defines each of those points. This elaborates more on that:

http://coinbase.com/legal/securities-law-framework.pdf

So this is kind of an oddly phrased question. It's probably better to think of things in terms of offerings instead of companies. One company might have different offerings using different mechanisms to raise money. And different people can participate in different offerings. Pretty much anybody can participate in a registered offering or a Reg A offering, often called a mini-registration.

A Reg D offering is however limited to accredited investors. With Reg D the SEC is basically saying "We won't require as much disclosure from you, but you'll have to raise money from a more sophisticated investor, ostensibly."

Edit: spelling

Should they also have the choice to take non-FDA approved drugs?

Securities is my go-to example of government regulation that has a net-positive market effect. Whatever we lose in market efficiency we more than make up for in market confidence.

If I were to apply the idea initially expressed to your comment it would be to say "why not give people the choice to invest in non-SEC regulated markets." If the effect is net-positive, than why would you have to force people to choose SEC regulated markets.

Obviously if it was not actually positive then not having the choice is pretty crappy.

For sure. Regulation without justification is "pretty crappy". The starting point should always be "no regulation". Occasionally, we override the starting point following the occurrence of massive market failure, where market forces simply are insufficient to apply the right pressure to actors involved.

In environmental regulations, we had the Love Canal which exposed a lot of school children to toxic waste. The market failed, we responded was CERCLA and the EPA.

In the case of securities regulation, the market failure was a big one in 1929. We responded with major legislation in 1933. And in general, that legislation has been a rousing success. But it's important to note that the goal of security regulation, of preventing crappy investments, isn't just to protect mom-and-pop, but also to prevent against another 1929. In my mind, it's really hard to argue that the effect of US securities regulation hasn't been a net positive.

Do you remember when it was legal to smoke in bars? Every bar was filled with smoke. Sure a bar could opt in to going smoke free, but basically none did because it would drive potential customers away.

I guess my point is that market forces prevented bars from being smoke free, and what you suggest would lead to basically no SEC regulated investments.

I would say yes. :)

Keep in mind that having this right available will kill people.

Anything looks horrible if your analysis includes all costs and excludes all benefits.

Are you genuinely asking what the value of the SEC is? I generally am pro low taxes but the crypto environment right now is so flush with scams that it explains itself

Philosopjically, why not let people make their own decisions?

philosophically, because the working "mass" (to quote Alexander Hamilton in the Federalist Papers, 68, I believe) would not have the leisure time to be informed enough to make sensible decisions. i came from a blue collar family where everyone worked 2 FT jobs to make ends meet and making savvy investment decisions was hardly possible. ignoring the lack of financial education and experience, a good sales scam promising you riches after your 16 hour workday with 4 hours of household chores still to do, kids screaming, and no hope in sight, can be highly effective.

that said, look where the electoral college got us!!

so philosophy and reality are different.

in principle i agree, let people decide. in reality that leads to housing bubbles, global warming, donald trump...

I mean, this describes tax code and legislation in general. I'm hoping we can get text parsing models to the point that they can be utilized to simplify legal documents or even the entire US Tax Code. Like, Google Translate can translate Chinese to English decently, imagine if one day it could translate Legal Tax Code MumboJumbo to English as well? Or even cooler, if you could plug in your personal details (well, terrifying I guess) and it spits out all the loopholes you can exploit.

EDIT: I guess services like H&R block tried to automate this, but I'm thinking less like "oh you donated x dollars, make sure to put that on your forms!" and more like "Hey, you live in x city, did you know if you move a mere x miles away you avoid city taxes for y, county taxes for z, and can put a moving bonus for moving n miles!" or even "You are x type of contractor, consider switching your status to y because you will get these real number tax benefits."

The funny thing is, the IRS can already do this without any text parsing of legislation for domestic taxes. They have all the data and rule sets to completely automate the filing process.

In Australia the government has official tax software. It pulls all your PAYG information and auto-fills most of what you need. In NZ, people don't file taxes at all. They login to the IRD website and their tax data is populated. You can accept what's presented or file for corrections.

H&R Block and TurboTax actively lobby against the US IRS from creating the same type of filing system. Our entire banking system is 20 years behind the rest of the world:

http://penguindreams.org/blog/the-american-banking-system-is...

> They have all the data and rule sets to completely automate the filing process.

My partner works in outside sales as an agent for a "Fortune 100" company, and the IRS in no way has all the data to automate any part of her taxes. From the way she's compensated, to the reimbursements, to the legitimate business expeses.. there's no way she'd get a good deal if she let the IRS guess at any of that.

Okay, but then there's the other XX% of Americans who only have W-2 income.

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