Mark Cuban vs. SEC

I doubt that most people know or care about this issue, or more specifically the eventual fate of Mark Cuban. While I am among that number I do find the surrounding issues interesting. I certainly do not know or particularly care whether he is guilty of insider trading, which is itself a slippery subject; it is the reasoning behind the charges that fascinate me. There is also a loose Canadian connection due to the origin of the public company involved, mamma.com. If you want to read more about it I recommend this article which looks at the case from an informed and disinterested perspective.

Corporate governance laws and regulations are not strongly enforced by the SEC in the US, and even less so here by the OSC. They seem to pick a few high-profile cases to create the impression they are active and doing their jobs. The Cuban case may fall into this category. There is also some reported animosity between Cuban and SEC that may have contributed to the action.

One argument against the SEC action is that at present there are far worse securities violations that are now coming to light due to the financial crisis. So why does the SEC go after an alleged $750,000 of illegal profit when billions and trillions are at stake elsewhere? Does it even matter. Let's imagine an analogous situation where a driver is stopped for speeding.

Officer: I have you on radar going 60 which is 10 over the 50 limit.
Driver: Didn't you see that guy blow by me at 120? Why don't you go after him?
O: Sir, that isn't your concern. Would you like to see your speed reading?
D: No! I want you to go after that scumbag! Someone could get killed.
O: I'm writing you a citation. You can of course challenge it in court.
D: This is ridiculous! I wasn't hurting anyone. That guy is the one you want.
O: Here you go, sir. Take it easy and have a nice day.

We have two separable issues here. One, the behaviour of the stopped driver and, two, the officer's failure to act on what is arguably a greater violation. The error is in conflating the two. The driver is guilty since the standard to which he is being held is the law; guilt is not relative to the behavior of other violators. The second issue of the officer's performance is valid. Citizens might well wonder if their police force is spending its effort most fruitfully.

Looking at this analogy we see the SEC in the role of the officer, Cuban as the driver, and financial executives and directors in the car up the road. Everyone has dirty hands. It would be better in my opinion to deal with that fact rather than stand around having an argument about whose hands are the dirtiest.