Goldstein Satirizes SEC Delay On Advertising Rules

Aug 28 2012 | 11:31am ET

Phillip Goldstein has had a change of heart on the question of hedge fund advertising. Well, a Phillip Goldstein has, anyway.

Taking a Swiftian turn, the Bulldog Investors chief has sent a satirical comment letter to the Securities and Exchange Commission, lauding the regulator for treating the 90-day deadline Congress set for the regulator to abolish rules against hedge fund advertising as "a suggestion" and ignoring "the wishes of Congress and President Obama." The missive follows two earlier comment letters to the SEC urging it to quickly move on the JOBS Act provision that requires the new rulemaking. The SEC missed its first deadline and now says the rule won't be ready until at least the fall.

But last week, Goldstein wrote that those two letters were "submitted by my evil twin brother who, by virtue of our devious parents, also shares my name."

The letter introduces Goldstein's friend Bernie, "an incurable risk taker" who loves betting on sports, cards and penny stocks, among other things. The only problem, Goldstein writes, is that Bernie is a liar—and not an accredited investor—and he has said that he'd make a false verification that he was to get his money into a "can't miss" hedge fund.

"Therefore, I agree with Secretary William Galvin of Massachusetts," with whom Goldstein has fought a so-far losing battle over whether hedge fund marketing is protected speech. "The Commission must protect the Bernies of the world from the consequences of their willingness to lie about their income or net worth."

"Much as it would like to do so, the Commission can't eliminate the JOBS Act," the good Phil wrote. But it can mandate "an intrusive and burdensome verification procedure" that may "dissuade many legitimate accredited investors from investing in private companies" and sending Bernie to Las Vegas, "where anyone can gamble away his or her life savings with no questions asked."

"Call me hopelessly paternalistic but I say foregoing a few hundred thousand jobs due to lack of capital is a small price to pay to save the countless truth-challenged Bernies out there from losing their money on risky investments they have no business making," Goldstein wrote. "Why, I bet there are thousands of Bernies in Massachusetts alone."

In his earlier letters, "evil" Phil blasted commentors such as Galvin, whose letter Goldstein wrote in July seems to argue "that Congress passed the JOBS Act to make it more difficult for private businesses to find accredited investors," urging the SEC to "ignore their views."

"The battle for the hearts and minds of Congress and the president is over," Goldstein wrote in June. "They lost."

But "good" Phil urges the SEC to consider, "What the heck do a bunch of political hacks like" Rep. Patrick McHenry (R-N.C.), a critic of the SEC's delay, "know? Who elected them anyway?"

The SEC is set to vote Wednesday on the new rule. Meanwhile, having lost his bid to have the Supreme Court consider his battle with Galvin, Goldstein has asked the Massachusetts Securities Division to vacate the $25,000 fine against his firm now that the JOBS Act has rendered the rule he allegedly broke moot.


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