The same logic used by the SEC suggests that every limited partner of every VC that invests in any startup should also count to the total number of investors.
This is exactly how Goldman managed to be so successful in the subprime crisis. When they decided to unload their holdings, they were sold to their clients. There is a strong conflict of interest at Goldman between shareholders and clients.
My understanding is that Goldman can do two things to make money here: 1. charge fees on transactions and 2. decide when and how to sell/buy shares for themselves.
Whether the clients should be protected by the SEC is another matter.
Starting a big long thread about how Goldman is a vampire squid or whatever Taibbi called them is a waste of time, because I'm not arguing that Goldman is a good company or a bad company or that its interests are aligned with its clients.
I'm saying that the logic that assails Goldman's Facebook vehicle is nonsensical; Goldman is doing nothing more sinister than creating an ad-hoc venture capital fund and using it to invest in Facebook. Does every California public employee also count as a Facebook shareholder if CalPERS is an LP of a VC that invests in Facebook?
(Answer: no.)
A venture capital fund is diversified over many investments -- that's why it's a fund. A venture capital "fund" that invests only in Facebook is a fund in name only.
Also, unless you're a lawyer specializing in securities law, I doubt you know the answer to your own question. State employees can (and do) initiate lawsuits against CALPERS, and CALPERS has sued public companies on behalf of state employees. The pensioners clearly have some rights as investors.
Meanwhile, what does diversification have to do with the structure of a venture capital fund?
No, that's not what I said. I said that the investors clearly have rights -- presumably including the right to know the financial prospects for their investments. CalPERS invests some money in private equity funds and limited partnerships, but that just begs the original question. I don't know what the disclosure requirements are for companies involved in that kind of investment, but then, I'm not a securities law expert.
Do you actually know the answer, or are you just asking rhetorical questions in the hope that people will interpret your questions as statements of fact?
"Meanwhile, what does diversification have to do with the structure of a venture capital fund?"
Risk.
Are you saying that if Matasano took funding from a VC that had CalPERS as a limited partner, we might have to make additional SEC-mandated disclosures to account for CalPERS investors? You're right: I can't tell you that I know that we wouldn't; I can only call "BS" and wait for someone else to add facts.
Not really. You argued that Goldman Sachs created a venture fund, and that therefore, Facebook is immune from disclosure laws. I'm saying that there's a substantial practical difference between a venture fund and what Goldman appears to be doing here (not the least of which are issues of investment diversity) and that, even if that weren't true, it's not clear that financial disclosure laws can be bypassed so easily (the CalPERS digression was yours). Other experts happen to agree on these points, so I don't think I'm coming out of left field.
But since I'm not one of those experts, and you don't seem to have any special knowledge beyond your own opinions on the matter, this thread is more heat than light. I'm done with it. Counterarguments aren't "straw men" just because they don't directly refute your original points.
But, yes. Given everything that has happened in the last 15 years, we should be expected to believe that the private clients are getting screwed by Goldman/Facebook.
Creating an ad-hoc venture capital fund to invest in Facebook can be both legal and sinister.
That being said, Goldman Sachs and its investors will likely insist on financial disclosures from Facebook and maybe even some governance rights that, while not quite public company-strength, will lead to Facebook disclosing more information to more people than it had previously.