Mark Cuban charged with insider trading by SEC......

[Mizzou B-ball fan]

Just saw it flashed on the newswire. Amazing.

[albionmoonlight]

He'll change the face of prisonyard basketball. After Cuban finishes increasing all the amenities of the prisioner team, no one will want to play for the guards team anymore.

[MikeVic]

Aww, I like him.

[Mizzou B-ball fan]

Here's the article............

SEC Charges Mark Cuban With Insider Trading - WSJ.com (http://online.wsj.com/article/SB122693827604333637.html)

[Coffee Warlord]

Conspiracy!

The MLB was so terrified of the thought of having him as an owner that they called their .gov buddies to take care of him.

[Mizzou B-ball fan]

I'm puzzled as to why a billionaire would go to these lengths to save less than a million dollars and risk imprisonment.

[Fidatelo]

Wow. I've always loved reading his blog, and felt he was pretty on-point with lots of his financial viewpoints.

[RedKingGold]

Conspiracy!

The MLB was so terrified of the thought of having him as an owner that they called their .gov buddies to take care of him.

SEC investigations don't simply start and wrap up within a month.

MLB probably knew about this coming down way before it even made public statements about Cuban's ownership candidacy.

[Atocep]

SEC investigations don't simply start and wrap up within a month.

MLB probably knew about this coming down way before it even made public statements about Cuban's ownership candidacy.

Remove this from the equation and double his bid for the Cubs and MLB owners still wouldn't even consider allowing him buy that team.

[flere-imsaho]

MLB probably knew about this coming down way before it even made public statements about Cuban's ownership candidacy.

How would MLB know about a pending SEC investigation when, say, the WSJ didn't?

[cartman]

The complaint filed mentions nothing about jail time. It asks for a judgment from the court to order Cuban to not commit any future violations of securities laws, forfeit any gains from the trade, and pay a fine.

http://sec.gov/litigation/complaints/2008/comp20810.pdf

[Logan]

I'm puzzled as to why a billionaire would go to these lengths to save less than a million dollars and risk imprisonment.

http://www.bestweekever.tv/bwe/images/2008/04/martha-stewart-042408-04.jpg

"Cheers to saving less than $50K in losses!"

[Logan]

How would MLB know about a pending SEC investigation when, say, the WSJ didn't?

I can speak with fact that there are sports leagues that have been made aware of investigations into owners prior to any official filings.

[Mizzou B-ball fan]

The complaint filed mentions nothing about jail time. It asks for a judgment from the court to order Cuban to not commit any future violations of securities laws, forfeit any gains from the trade, and pay a fine.

http://sec.gov/litigation/complaints/2008/comp20810.pdf

Understood, but I sincerely doubt that he researched exactly what the risk was when he made this move. As was already stated, Martha Stewart saved far less on her deal but she ended up running a home economics class in a minimum security prison for a few months as a result. He obviously assumed he could get away with it, which is something that Cuban should have known better about in this case.

[jbergey22]

My question is does the CEO hold any responsibility in releasing this information to Cuban? This would put any person in a tough situation. Its not as if Cuban was out fishing to find this information and sold off because of that. Of course on that other side it sounds like he knew he was doing the wrong thing and went through with it anyway.

[DanGarion]

Funny, not a single person had mentioned it on his blog... Till I did...

Page not found « blog maverick (http://blogmaverick.com/2008/11/14/i-hate-to-lose/#comment-53712)

[MrBug708]

I'm sure they'll fine him a billion...that's one way to help the recession. Just fine all of the people who can afford to lose a billion here and there

[SportsDino]

Just another sign of the poor health of the economy. The way stock offerings and information is handled now, its no surprise if any billionaire can be caught working on inside information at some point or another. The question is whether this is standard business, it may not be avoiding a single million dollar loss, but instead part of a normal routine that makes him multiple millions over the course of his career.

Nothing against Cuban personally. I just think the entire culture at the top is 'wink wink nudge nudge, I'll give you this info because your already super rich and my buddy, and let the suckers in the market absorb the losses'... ultimately bad for the economy, but great for individual actors (until they suffer from the collapse of the economy as a whole from lack of confidence, caused by their actions!).

[Fidatelo]

Just another sign of the poor health of the economy. The way stock offerings and information is handled now, its no surprise if any billionaire can be caught working on inside information at some point or another. The question is whether this is standard business, it may not be avoiding a single million dollar loss, but instead part of a normal routine that makes him multiple millions over the course of his career.

Nothing against Cuban personally. I just think the entire culture at the top is 'wink wink nudge nudge, I'll give you this info because your already super rich and my buddy, and let the suckers in the market absorb the losses'... ultimately bad for the economy, but great for individual actors (until they suffer from the collapse of the economy as a whole from lack of confidence, caused by their actions!).

Cuban actually espouses these exact views on his blog. Basically, unless you have inside knowledge to a company or industry you shouldn't be in the stock market at all, because you are being preyed on by the people who do. In that context, it's not really surprising that he's gotten himself wrapped up in insider trading, since he clearly feels that is basically the only way to win in the market.

[Ronnie Dobbs2]

Naked Shorts… What I have learned « blog maverick (http://blogmaverick.com/2005/03/02/naked-shorts-what-i-have-learned/)

#4 is where he talks about his selling of mamma.com. Doesn't look too good.

[Logan]

My question is does the CEO hold any responsibility in releasing this information to Cuban? This would put any person in a tough situation. Its not as if Cuban was out fishing to find this information and sold off because of that. Of course on that other side it sounds like he knew he was doing the wrong thing and went through with it anyway.

There's really no way you cannot inform your largest shareholder of something as important as this ahead of time. Failing to do so would quicken your removal.

[RainMaker]

If he did the crime, then he should be punished. My issue is that there are tons of people who have fucked people out of billions over the years. Yet Mark Cuban is the primary target? It just goes to show that the law doesn't really apply to those with good connections.

[digamma]

Cuban actually espouses these exact views on his blog. Basically, unless you have inside knowledge to a company or industry you shouldn't be in the stock market at all, because you are being preyed on by the people who do. In that context, it's not really surprising that he's gotten himself wrapped up in insider trading, since he clearly feels that is basically the only way to win in the market.

There is a line of academia along these lines that in truly efficient markets you want people to trade on inside information. Vastly simplified version: The insider trades themselves get the information to the market faster allowing for faster processing and more efficient reactions.

[Galaxy]

If he did the crime, then he should be punished. My issue is that there are tons of people who have fucked people out of billions over the years. Yet Mark Cuban is the primary target? It just goes to show that the law doesn't really apply to those with good connections.

I think Martha got a bad deal with her sentence.

At least Mark isn't hiding. He did make a rather open, limited post about it:

blog maverick (http://blogmaverick.com/)

[digamma]

Just another sign of the poor health of the economy.

My reaction was that it was just another sign of the inefficiency of the SEC. These trades took place more than 4 years ago, and from reading the complaint, the charges are not complex at all. What took them so long?

[Young Drachma]

He's at least addressed it on his blog:

I wish I could say more, but I will have to leave it to this, and let the judicial process do its job.
November 17, 2008
RE: SEC Civil Action in the United States District

for the Northern District of Texas, Dallas Division

Mark Cuban today responded to a civil complaint filed by the United States Securities and Exchange Commission in the United States District for the Northern District of Texas, Dallas Division. In its complaint, the Commission charges that Mr. Cuban engaged in violations of the federal securities laws in connection with transactions in the securities of Mamma.com Inc.

This matter, which has been pending before the Commission for nearly two years, has no merit and is a product of gross abuse of prosecutorial discretion. Mr. Cuban intends to contest the allegations and to demonstrate that the Commission’s claims are infected by the misconduct of the staff of its Enforcement Division.

Mr. Cuban stated, “I am disappointed that the Commission chose to bring this case based upon its Enforcement staff’s win-at-any-cost ambitions. The staff’s process was result-oriented, facts be damned. The government’s claims are false and they will be proven to be so.”

The SEC « blog maverick (http://blogmaverick.com/2008/11/17/the-sec/)

[RainMaker]

I think Martha got a bad deal with her sentence.

At least Mark isn't hiding. He did make a rather open, limited post about it:

blog maverick (http://blogmaverick.com/)

Martha didn't go to jail for insider trading, she went for obstruction of justice. It will be interesting to see how this all plays out.

Reading through everything, it does seem like insider trading. His blog post sums it up. I honestly don't believe that insider trading never crossed his mind when he made the decision to sell.

[JonInMiddleGA]

Cuban actually espouses these exact views on his blog. Basically, unless you have inside knowledge to a company or industry you shouldn't be in the stock market at all, because you are being preyed on by the people who do.

Legal issues aside, sounds like a pretty solid line of reasoning with regard to the market.

[cartman]

There are a couple of things around this from what I've read that fall in Cuban's favor. One, he had a less than 10% share in the company. This keeps him from being designated as a major shareholder that must declare their trades when making them. The other thing in his favor is the "Full Disclosure" rule in the SEC regulations. This states that when a company intentionally discloses material non-public information to one person, it must also disclose that information to the general public without delay. So if the company's president told Cuban this information, the company president was supposed to make this knowledge public very soon (ie. immediately) after telling Cuban.

[Galaxy]

Martha didn't go to jail for insider trading, she went for obstruction of justice. It will be interesting to see how this all plays out.

Reading through everything, it does seem like insider trading. His blog post sums it up. I honestly don't believe that insider trading never crossed his mind when he made the decision to sell.

Good point on Martha.

[digamma]

There are a couple of things around this from what I've read that fall in Cuban's favor. One, he had a less than 10% share in the company. This keeps him from being designated as a major shareholder that must declare their trades when making them.

True, but this isn't about reporting trades, it is about actually making the trade.

The other thing in his favor is the "Full Disclosure" rule in the SEC regulations. This states that when a company intentionally discloses material non-public information to one person, it must also disclose that information to the general public without delay. So if the company's president told Cuban this information, the company president was supposed to make this knowledge public very soon (ie. immediately) after telling Cuban.

There is an exclusion in Reg FD for information that the recipient expressly agrees to keep confidential. When marketing a private securities transaction for a public company, the placement agent will begin the call by stating that the information to be provided is confidential and may contain material, non-public information. He/she will then ask for an affirmative acknowledgement of the confidential nature of the discussion and understanding that the information cannot be shared.

The SEC complaint explicitly states that the CEO informed Cuban of the confidential nature of the information and notes that Cuban acknowledged that the information was private and that he couldn't trade on it. Whether this "script" was recited by the CEO and whether Cuban acknowledged it will likely be the crux of any future proceeding on the matter.

[Young Drachma]

Insider Trading, or Political Persecution? - Floyd Norris Blog - NYTimes.com (http://norris.blogs.nytimes.com/2008/11/17/insider-trading-or-political-persecution/)

[cartman]

The SEC complaint explicitly states that the CEO informed Cuban of the confidential nature of the information and notes that Cuban acknowledged that the information was private and that he couldn't trade on it. Whether this "script" was recited by the CEO and whether Cuban acknowledged it will likely be the crux of any future proceeding on the matter.

Yep, I agree. If there is no proof of Cuban being told about and then agreeing to the confidential nature of the conversation, then he's off the hook.

[SportsDino]

I know of the pro-insider trading signaling theory guys, but I believe the market is so obfuscated these days, and easy to further obfuscate, that it is hard to say anyone would pick up on the insider trading signals enough to have it efficiently effect the market.

There is another line of thought on that in which not having the insider trading laws means there is a higher likelyhood of panic selling whenever an insider sells, even though they might have a legitimate reason for doing so.

My personal preference is we make company internals a lot more public than they are already, most people would probably scream bloody murder at that happening (and for some good reason I must admit), but in my opinion corporations that are publicly traded should be so transparent they are see-through... anything less indicates that the market is not as efficient as it proclaims to be. The more that is visible and efficiently communicated to the market, the less a deal insider trading becomes. Also I'm sure they could make laws (or enforce them) to cover fraudulently boosting the price while privately preparing to gut the company, also reducing the insider trading fear.

Right now I think this sort of thing is more the norm than the exception, so I don't know how hard Cuban will get hit by this. Ideally news travels instantly, but obviously the whole point is to liquidate your position while it is still overvalued, so for now insider trading laws are necessary.

[RainMaker]

Insider Trading, or Political Persecution? - Floyd Norris Blog - NYTimes.com (http://norris.blogs.nytimes.com/2008/11/17/insider-trading-or-political-persecution/)
There is no doubt in my mind that this move was political. Whether it's for the reasons listed in the article or not, he pissed off someone. This shit goes on all the time and the SEC turns a blind eye to it.

[Anthony]

There are a couple of things around this from what I've read that fall in Cuban's favor. One, he had a less than 10% share in the company. This keeps him from being designated as a major shareholder that must declare their trades when making them. The other thing in his favor is the "Full Disclosure" rule in the SEC regulations. This states that when a company intentionally discloses material non-public information to one person, it must also disclose that information to the general public without delay. So if the company's president told Cuban this information, the company president was supposed to make this knowledge public very soon (ie. immediately) after telling Cuban.

you are correct. i'm licensed in the securities industry and mamma.com actually had 24 hours to make that info public once they disclosed it to Cuban.

[Anthony]

actually, i looked over my literature and they have 24 hours to make that info public if it was released "unintentionally". if it was intentional then the info needs to be released simultaneously.

[digamma]

actually, i looked over my literature and they have 24 hours to make that info public if it was released "unintentionally". if it was intentional then the info needs to be released simultaneously.

Unless the recipient expressly agreed to keep the info confidential (as noted above).

[SFL Cat]

Dibs on the Mavericks.

[Galaxy]

The good thing is only civil. I think Mark is the type of guy who will fight this if he has a case.

[Anthony]

Unless the recipient expressly agreed to keep the info confidential (as noted above).

thats not in the info i have. i personally know of no such clause and a brief internet search doesn't support your statement. not saying you're wrong, but that clause isn't the general intent of reg fair disclosure, reg fd is primarily about what i stated - how quickly/when the issuer (company that is issuing the stock) needs to make insider info public. i'm not a reg fair disclosure expert, i just know what i know from being licensed in the industry, i'm sure an attorney would have access to the ins and outs of that and know of any various clauses that could get their clients out of jail. i spent a little under 10 min searching for this clause you mentioned but i can't find anything so i'm moving on.

[Senator]

Remember when I told you I would get you, Mark?

[digamma]

The exclusion is provided in Reg FD Rule 100(b)(2)(ii).

[digamma]

A little more from the SEC's adopting release:

Issuers who undertake private unregistered offerings generally disclose the information to the investors on a confidential basis. Under Regulation FD, public companies will still have the ability to avoid premature public disclosure in those cases. A public company need not make public disclosure if anyone who receives the material, nonpublic information agrees to maintain that information in confidence.

[Anthony]

The exclusion is provided in Reg FD Rule 100(b)(2)(ii).

interesting. good job. this certainly goes above and beyond what's required of a registered representative to know.

[flere-imsaho]

Legal issues aside, sounds like a pretty solid line of reasoning with regard to the market.

I think Warren Buffet says the same thing. Basically if you don't understand why a company makes (and loses) money, you probably shouldn't be investing in it. But there's a difference between knowing a company and its industry, and investing accordingly, and operating your trades based on insider information. One's a fair advantage, theoretically open to anyone who wants to do the research, while the other is an unfair advantage, based on privileged information.

[Northwood_DK]

A new update to his blog

SEC P2 « blog maverick (http://blogmaverick.com/2008/11/18/sec-p2/)

SEC P2
Nov 18th 2008 12:05PM

November 18, 2008

On behalf of

Mark Cuban

RE: SEC Civil Action in the United States District

for the Northern District of Texas, Dallas Division

The SEC knows their case centers on one telephone conversation between two individuals- 4 years ago. The SEC claims there was an agreement between these parties to the conversation to keep certain information confidential. We interviewed Guy Faure, the former CEO of Mamma.com Inc., with whom the SEC claims Mr. Cuban made an agreement. We had a court reporter transcribe the interview. There was no agreement to keep information confidential. Here is a relevant excerpt from the interview with Mr. Faure:

CHRISTOPHER CLARK :

1) Q- We spoke earlier about you were telling Mr. Cuban in words or substance : “I have confidential information for you”.

A- Right.

2) Q- Do you recall anything Mr. Cuban said in response or reply to that statement by you ?

A- No, I do not.

The SEC knows this-they have the transcript, yet they brought the case anyway. Why? Do they have a different statement from Mr. Faure ?

Why did the SEC end their multi-year investigation of Mamma.com Inc. for alleged securities laws violations days before interviewing present and former Mamma.com Inc. executives about this matter? Was the timing a coincidence? We think not.

[Galaxy]

The SEC « blog maverick (http://blogmaverick.com/2008/11/30/the-sec-2/)