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Comment by PragmaticPulp | Hacker News Reader

> An investment of $15,000 or less in an individual stock, or of $50,000 or less in an industry-specific mutual fund, isn’t deemed a conflict of interest under federal regulations.

> An FTC spokesman said the agency officials had followed the law.

While I don't really want to see regulators owning any amount of individual stocks in companies they're directly regulating, the $15,000 individual stock limit limits the impact quite a bit. Even if someone did own $15,000 of an individual stock, the personal financial gain/loss of even major regulatory actions isn't a huge amount.

Also keep in mind that you can't buy basically any large cap mutual fund without owning significant amounts of Facebook, Google, Amazon, Apple, and other large companies.

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Even a hundred dollars is enough to make people feel an irrational protective attachment to the company. Shit, even buying a company's product has been known to make people treat that company like part of their tribe. Insult Apple in another thread if you want to see a demonstration of this. Or insult the Harley Davidson company at a biker bar.

Making rules that avoid triggering irrational behavior is rather hopeless by definition though. For all we know a regulator once dated someone who worked at a company and the bad breakup makes them spiteful against the whole organization.

The solution there has to be oversight to identify when a regulator is misbehaving.

Though I'm fine with limiting their ownership to zero for purely rational reasons. A few thousand bucks worth of loss/gain might still sway small borderline decisions.

I don't seriously propose that regulators looking at Apple should be forbidden from owning Apple devices; that's too impractical even though it would otherwise be a good idea. For practical reasons I'd give a pass to indirect investment through mutual funds/etc too. But forbidden them from buying any amount of AAPL directly? I think that's very reasonable.

> forbidden them from buying any amount of AAPL directly?

Once the investigation starts, absolutely. But forcing a regulator to sell their $10k stake in Apple prior to investigating them creates its own weird incentives.

"You must do something with personal financial consequences if you want to start investigating Apple" isn't a workable improvement.

yes I was referring to stock ownership too, and only rational behavior. A phone probably won't change measurably in value from a regulatory decision, but $15k of stock certainly could.

we certianly need some way to separate the role of the regulator, from the person doing that job.

> Even a hundred dollars is enough to make people feel an irrational protective attachment to the company.

But anyone with stock investments at this scale is already seeing their portfolio swing a couple hundred dollars on the regular. Regulators also have far more to lose in their career (paying potentially millions over the multi-year course of their tenure) by making the wrong decision than they would by swinging their portfolio a couple hundred bucks on a given day.

We can't realistically demand that all public regulators abstain from investing in, for example, an S&P 500 index fund that holds several percent of Apple stock. If the job came with a requirement that the job holder couldn't invest standard index funds, anyone who knows anything about investing and financial planning would avoid the job at all costs.

There has to be a compromise. You can't demand absolute zero financial interest in things like index funds over the mere chance that someone might make an irrational career-harming move to swing their portfolio a couple hundred bucks.

You don't even have to buy anything. Insult Linux in a forum full of tech nerds if you want to see a demonstration of this.

Linux users love to insult Linux. That is what drives its improvements.

Germans love to complain about Germany, but if someone else does it...

This is pretty typical behavior, actually. I grew up Mormon, Mormons complain about people making polygamy jokes about them but also make polygamy jokes themselves. It's an in-group vs out-group thing: we can make those jokes.

Buying things that you're going to display as part of your personal image sounds like a much more relationship intensive activity than buying stock imo

>Or insult the Harley Davidson company at a biker bar.

Mentioning Toyota's EV situation on HN is a little more relatable for this crowd.

Genuinely curious what you mean by “Toyota’s EV situation” in this context, is it intended to be related to their hydrogen development or something?

They're trailing, hard, because they dumped a bunch of time/effort/money into hydrodgen and also didn't want to self-compete with their hybrids. Don't go around saying this too loud though. There's lots of fanboys around these parts and they tend to consider discussion of this topic unwelcome.

Thank you very much for the follow up

Sometimes I feel like I live on a different planet to the people on HN. I don't own $15k of ANY single stock. In fact I don't have significant savings outside of retirement savings (which I deliberately don't manage) of that magnitude. If I had $15k of any given stock, I'd have an extreme personal interest in the performance of that stock

IDK, maybe it's that I don't work in tech and I'm too young or too old or whatever (37, 2 kids) but it just seems crazy to me to think that for some people $15k in any SINGLE stock isn't a meaningful amount of money.

There are people on HN working for the big tech companies who are being granted that $15k worth of stock every month. ($180k/year) At the more senior levels and/or with some stock appreciation, it's not unheard-of for >50% of compensation to be in the form of RSUs.

Obviously they should sell-on-vest and diversify into index funds, but a lot of them choose to buy and hold some individual stocks that they're bullish on as well.

You've certainly got a point, but if a regulator has the ability to indirectly swing the valuation 10%, they stand to gain at most $1.5k which should be in the realm of a week's pay. It's an interest to be sure, but it would be hard to use it to finance a Lamborghini habit.

Regulators have the ability to swing the entire market.

The point is: would you be willing to risk massive fines and jail time for making unethical decisions to try to turn your $15k into $30k if you did? Probably not.

But if you could move your entire life savings into a stock the incentive for shady stuff increases significantly.

What are you talking about? There is no risk, the point is they're perfectly allowed to hold $15k in these stocks.

The risk is doing something illegal or unethical to increase the value of their holdings. The larger their holdings, the larger the incentive to do that illegal or unethical thing.

> the point is they're perfectly allowed to hold $15k in these stocks

They're not allowed to insider trade on it, or corruptly modify their regulatory duties on account of it, irrespective of whether is $1 or ten thousand.

Thankfully, all federal government positions like this have clearly specified salary ranges.

So let's take the DOJ, since they have easy to find vacancies.

https://www.justice.gov/legal-careers/vacancies?position=1&t...

They are mostly GS-15, which is 150-175k pay per year. They do fine on benefits, etc.

15k in stock is not a ton for them.

Certainly not something you'd mess up a job or career over.

My thinking is pretty inline with yours here, it’s a big number for day-to-day stuff but probably a fair number to have as the cutoff. Imo

If you have $211K or more in your 401(k) invested in S&P 500 or similar, you technically have $15K invested in a single stock: $AAPL.

If you're invested in the S&P500 wouldn't you fall under the separate limits for mutual funds?

The amount of money, relatively, is negligible. On the other hand, in the human psyche it can create significant bias.

Specially, for example, humans have an aversion to loss. It's true for small amounts. Certainly, for larger amounts it's just as bad. That is, few people regardless of resources would reach into their pocket and toss $15K into a fire pit. We're simply not wired for that.

And that wiring is going to influence the decision made. The amount is a minor factor.

Some people don't care about the money they have and it's not always because they have well above avg.

> Nearly one in four top FTC officials owned or traded individual stocks of tech companies

While I agree a broad based fund will have allocations of these stocks and should be okay for them to own, but what are they doing owning individual stocks?

> what are they doing owning individual stocks?

Many advisors invest based on an index (or modified index) but hold shares in clients' accounts directly.

Yep, the strategy is called direct indexing and tax-loss harvesting is the reason to do it. Gotta be careful doing it - fees can quickly eat up any upside. Some of the robo-investing platforms offer this strategy, though I haven’t looked deeply into it.

Micro managing their portfolios? I can also imagine a lot of them getting in on IPOs or later offerings before becoming FTC officials and not clearing those stocks out of their portfolio. But $15k...isn't a lot.

$15k is ~1 months salary for a senior bureaucrat (GS scale) in DC metro. How many months income does it take to corrupt somebody? $15k into each FAANG is $75k, double the national median income. It all adds up a sizable potential conflict.

This is roughly the same debate as Congress, just on a smaller scale. What is the balance between reasonable individual financial management and ensuring conflicts don't exist?

> $15k is ~1 months salary for a senior bureaucrat (GS scale) in DC metro.

That isn't income, profit, or gains, but just the actual amount of stock they can hold/trade at some time. Let's say they had inside information, $15k doesn't allow for much leverage to take advantage of that information.

> How many months income does it take to corrupt somebody?

Probably a heck of a lot more than you could earn on trading just $15k of stock.

Yeah, I suppose the real question is how active is their trading? And are systems in place to catch them if they do appear to trade on insider info?

This is one of those situations where the possibility/impression of special access to gains is probably worse than any actual gains being made. And it's certainly a much smaller scale than what we saw with Congress ($10s of millions in some cases).

Is that limit on the cost basis of the position or would the conflicted regulator have to sell off some stock if their position exceeded the $15k threshold?

If they held $15,000 in Facebook, Google, Amazon, Apple, MS, Nvidia, AMD, Intel, Qualcomm, TSMC, that's $150,000, and often these companies are doing extensive intermixed deals with each other with exclusivity agreements and other similar stuff.

Isn’t the correct comparison other ethics rules around conflicts of interest/gifting/etc for government officials? Upside on $15k through each merger transaction seems way out of line.

What large bumps due to merges/acqs are you referring to?

Do they specify that that 15k is in the underlying equity itself? If not, it is incredibly easy to use options to leverage the hell out of that $14,999.

To further this, if you have 200k of VTI/VTSAX or of a non vanguard alternative, that's $15,000 of Apple stock alone. It's about 6% of VTI currently which will hold true of any broad based market fund.

If you own a tech sector fund like VGT, Apple makes up 22% of the fund. So having 200k of VGT is going to be just shy of $50,000 worth of apple stock.

Even if someone did own $15,000 of an individual stock, the personal financial gain/loss of even major regulatory actions isn't a huge amount

In whose mind? Most people would fight to defend 50$ like they are defending their life, especially rich ones from my experience. Add to that the spouse asking questions and that 15k is worth a million.

What about derivatives?

at Bloomberg, even thought I didn't work on any financial product (I worked on their law product), I wasn't allowed to own any derivatives per my contract.

What if the stock is owned by a spouse?

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