Ex-Con Man Says JOBS Law Makes Guys Like Him Rich | Hacker News Reader

Ex-Con Man Says JOBS Law Makes Guys Like Him Rich

bloomberg.com

32 pointsjsm38625 comments

Whether you think the JOBS act is a good idea or not ... people will get burned by it. Think Groupon minus the SEC disclosures and corrections they've had to make in recent weeks. Or a company pitching a flying contraption using that video that even Wired magazine couldn't determine whether it was real or fake as their pitch. That's the potential brave new world of investing this opens up.

Maybe it'll work. Maybe the intelligence of the masses will establish better oversight than the federally funded version that arguably does a pretty shitty job with listed securities. But people most definitely will get burned, and hopefully some amazing businesses will come out of it to keep things in balance.

I think the problem with even your guarded optimism is the general principle "bad money drives out good". Get enough people hawking too-good-to-be-true schemes and not being debunked and it will get hard to sell realistically-good schemes.

"Maybe the intelligence of the masses will establish better oversight than the federally funded version that arguably does a pretty shitty job with listed securities."

Don't count on it. Greed shoots down intelligence every time. I predict the come back of the classic "pump-n-dump" scheme.

> I predict the come back of the classic "pump-n-dump" scheme.

It went away?

News site whose primary audience consists of "traditional" investors runs article critical of law supporting non-traditional investment. Biased news at 11.

Yes, this act will allow various types of fraud that previously couldn't exist. It will also allow various types of awesomeness that previously couldn't exist. Seems like a net win to me.

I don't understand how anyone can make the argument that securities regulations are in any way effective after the Madoff debacle. I don't understand why the SEC wasn't just disbanded after it came to light they dropped the ball after being handed the case on a silver platter. Any regulation acts as a tax on legitimate business but the idea is the cost to legitimate businesses is out-weighed by the good done by stopping bad actors. If the regulations don't stop bad actors then all we are left with is a tax on legitimate businesses

Indeed the solution to every problem these days always ends up being: regulate it. But noone stops to ask if:

A) Regulation will actually stop anyone, or just make people try harder to hide it

and

B) Will the side effects of the regulation create more destruction than not having it

What is the alternative to regulation when an industry's lack of self-control becomes harmful to the world around it?

If you have to regulate, don't regulate behavior, regulate results. So, rather than saying "you must do X because !X causes problem Y for the world around you", say "you must not cause problem Y" (usually in the form "you incur all liability for any damage you cause by problem Y", since regulations imply an associated threat). You then make it possible for someone to come up with a more creative solution to not causing problem Y.

That seems reasonable, but the only real world examples I can think of come with inconsistent outlooks. The ESRB formed when video games were at risk of being regulated. Since then video games soared past the movie industry. The counterexample to that is the CCA, which is largely credited with keeping the comic book industry from diversifying and expanding.

What is needed to make self-regulatory organizations work out as well as the ESRB?

The regulatory situation I described only applies when some serious problem exists that will cause harm to others, but no existing law makes people liable for causing that harm, and no other financial incentive exists to self-regulate (e.g. the target market doesn't actually care about the problem in question). In such cases, regulation might make sense; I suggested that such regulation should just address the harm caused rather than the details of what (at the time of regulation) seem like the "right" steps to prevent that harm.

In the case of the ESRB and the CCA, self-regulation serves primarily as a marketing tool, with varying degrees of success; a strong financial incentive already exists to self-regulate. The ESRB works reasonably well because it helps the gaming industry target a broad age range and have everyone get what they want and expect. The Comics Code and similar systems worked badly because they attempted to censor rather than just label, and because they didn't do a good job of keeping up with what target audiences wanted; CCA failed because it no longer provided value to anyone.

Similarly, the automobile industry introduces a huge number of safety features because their target market cares deeply about safety; most such features don't come from regulatory requirements, and even the mandated features would continue to exist in the absence of regulation, because people demand them. Advertising for vehicles often touts independent safety ratings as primary selling points.

So, self-regulation works out very well when the target market wants it as a feature. It doesn't work well by itself when it provides no value to the target market.

A) That applies to all laws and restrictions.

B) What do you mean by "destruction?"

And the answer to ineffective regulation is to toss it out entirely???

That's like saying "the fire department is sure doing a bad job putting out fires, we should just disband it"

Actually it is, since the sec doesn't do their job any more what is the point of having the rules? When we decide that we want an sec that does something we can bring the rules back.

As Doctorow put it: "every complex ecosystem has parasites".

Personally, I find it hilarious to see old-world business types crowing about the benefits of regulation when they usually do just the opposite.

So the concern here is that crowdfunding sites will allow scammers to sell shares of nonexistant companies to average people?

It sounds like the biggest worry is that us "average" earners (under 100k annual income or net worth) have never purchased corporate shares, and are more likely to get scammed.

Their biggest worry is that ordinary people (i.e., "non-qualified investors" AKA "the 99%") might begin to invest up to 10% of their income without going through investment bankers.

I couldn't understand the point of the article other than they don't like crowdfunding, small investors shouldn't exist, and they don't like the JOBS act. Could someone lecture me on what I missed?

You missed the part where they basically equated crowdfunding with convicted felons and securities fraud.

The current convicted felons and securities fraudsters don't want competition.

MF Global - 1.2 Billion or more of supposedly segregated client funds, commingled and then missing. Futures contracts disrupted, lots of other irregularities.

How many weeks has it been since this came to light?

"Investors with annual income or net worth of less than $100,000 will be allowed to invest as much as $2,000 a year in a company that offers shares via crowdfunding."

Even if someone only invests in scams and gets royally fleeced out of their whole $2000 one year, a lot of people waste a lot more money on much stupider stuff.

Like state run lotteries

"It could be worse" as an economic policy?

It's pretty ridiculous that the JOBS act applies to companies with revenues up to $1 Billion.

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