4 ms·

My only problem here is once again the fine is meaningless. $5.5 million is couch change for Nvidia. The fines are supposed to deter these actions. This has no

My only problem here is once again the fine is meaningless. $5.5 million is couch change for Nvidia. The fines are supposed to deter these actions. This has no effect whatsoever.

dsr_ 4y ago
The fine should be proportionate to the severity of the offense and the magnitude of the misbegotten gains. In this case, the severity was fairly low: they didn't lie about what they were selling or how much they were selling, but they did purposefully omit some material information about their customers. If you were convinced that cryptocurrency is the future, then NVidia not mentioning cryptominers should have reduced your forecast of their earnings. If you were convinced that cryptocurrency will die any day now, then NVidia's omission should have increased your forecast for them. But how much money did people lose? It's hard to say. This should be enough money that NVidia's investor relations people make sure not to do it again, but not so much money that NVidia can't recover. In a hypothetical where NVidia told lies in order to manipulate its stock price, a much much larger fine should be levied.
- allie1 4y ago
  It is not low impact. It makes a huge difference from an investor point of view if increased revenue comes from gaming (evergreen) or crypto mining (trend at best, hype). SEC failed to disclose the actual numbers, thus righting the wrong Nvidia has done to investors. And 5.5M is a ridiculous fine for something that the insiders benefited from multifold. They missed at least one 0. Someone should have been fired over this. I would be curious if those insiders that made the decision have sold shares that were inflated.
nickff 4y ago
Fines against public companies are among the least effective deterrents I can possibly imagine. The officers make the mistake/misrepresentations, and the shareholders take the hit. If the government really wanted to deter these actions, they'd fine the officers making the 'wrong' statements.
- omegalulw 4y ago
  This is a terrible idea. Mistakes of this magnitude are often the result of multiple people making mistakes - so blaming a specific person is wrong. Not to mention that this would force a culture of attributing blame to individuals which is toxic, encourages people to hide mistakes and when mistakes happen the first thing everyone would scramble to is to find a scapegoat. This is objectively worse for both the company and the shareholders. The right approach for the government is to appropriately penalize the companies. The right approach for companies is to put in processes that make sure no single person is even in a position to make mistakes like this.
  - nickff 4y ago
    >"The right approach for the government is to appropriately penalize the companies." The government isn't penalizing the companies, it's penalizing the shareholders, who are the ones that suffered the inadequate disclosures! >"Mistakes of this magnitude are often the result of multiple people making mistakes - so blaming a specific person is wrong." Then either split the fine amongst the responsible parties, or just issue some sort of order that requires changes (such as some sort of audit) without a fine. If you can't find any specific person who did something clearly wrong, it's probably best to avoid blaming 'the company' (which is just a collection of individuals).
    - yywwbbn 4y ago
      What makes you think the SEC can find the ‘guilty’ parties and that the company (i.e. possibly the very same people) would willingly cooperate with them and not just find a scapegoat to push under the bus? And just repeat this process every time something bad happens. The point of the fine is to disincentive the company (and also other companies) from doing the same thing again, unless criminal behavior (i.e. fraud) was involved that’s purely an internal matter for the company (they may fire the people who supposedly did this or do whatever they think is necessary).
      - nickff 4y ago
credit_guy 4y ago
That’s not entirely true. A fine from a regulator, no matter how small, contains the threat that a much bigger punishment will come if you are a repeat offender. That includes trading suspensions: https://www.sec.gov/files/tradingsuspensions.pdf https://www.sec.gov/files/tradingsuspensions.pdf https://www.sec.gov/litigation/suspensions.htm https://www.sec.gov/litigation/suspensions.htm

My only problem here is once again the fine is meaningless. $5.5 million is couch change for Nvidia. The fines are supposed to deter these actions. This has no effect whatsoever.

dsr_ 4y ago

The fine should be proportionate to the severity of the offense and the magnitude of the misbegotten gains. In this case, the severity was fairly low: they didn't lie about what they were selling or how much they were selling, but they did purposefully omit some material information about their customers. If you were convinced that cryptocurrency is the future, then NVidia not mentioning cryptominers should have reduced your forecast of their earnings. If you were convinced that cryptocurrency will die any day now, then NVidia's omission should have increased your forecast for them. But how much money did people lose? It's hard to say. This should be enough money that NVidia's investor relations people make sure not to do it again, but not so much money that NVidia can't recover. In a hypothetical where NVidia told lies in order to manipulate its stock price, a much much larger fine should be levied.

allie1 4y ago
It is not low impact. It makes a huge difference from an investor point of view if increased revenue comes from gaming (evergreen) or crypto mining (trend at best, hype). SEC failed to disclose the actual numbers, thus righting the wrong Nvidia has done to investors. And 5.5M is a ridiculous fine for something that the insiders benefited from multifold. They missed at least one 0. Someone should have been fired over this. I would be curious if those insiders that made the decision have sold shares that were inflated.

nickff 4y ago

Fines against public companies are among the least effective deterrents I can possibly imagine. The officers make the mistake/misrepresentations, and the shareholders take the hit. If the government really wanted to deter these actions, they'd fine the officers making the 'wrong' statements.

omegalulw 4y ago
This is a terrible idea. Mistakes of this magnitude are often the result of multiple people making mistakes - so blaming a specific person is wrong. Not to mention that this would force a culture of attributing blame to individuals which is toxic, encourages people to hide mistakes and when mistakes happen the first thing everyone would scramble to is to find a scapegoat. This is objectively worse for both the company and the shareholders. The right approach for the government is to appropriately penalize the companies. The right approach for companies is to put in processes that make sure no single person is even in a position to make mistakes like this.
- nickff 4y ago
  >"The right approach for the government is to appropriately penalize the companies." The government isn't penalizing the companies, it's penalizing the shareholders, who are the ones that suffered the inadequate disclosures! >"Mistakes of this magnitude are often the result of multiple people making mistakes - so blaming a specific person is wrong." Then either split the fine amongst the responsible parties, or just issue some sort of order that requires changes (such as some sort of audit) without a fine. If you can't find any specific person who did something clearly wrong, it's probably best to avoid blaming 'the company' (which is just a collection of individuals).
  - yywwbbn 4y ago
    What makes you think the SEC can find the ‘guilty’ parties and that the company (i.e. possibly the very same people) would willingly cooperate with them and not just find a scapegoat to push under the bus? And just repeat this process every time something bad happens. The point of the fine is to disincentive the company (and also other companies) from doing the same thing again, unless criminal behavior (i.e. fraud) was involved that’s purely an internal matter for the company (they may fire the people who supposedly did this or do whatever they think is necessary).
    - nickff 4y ago

credit_guy 4y ago

That’s not entirely true. A fine from a regulator, no matter how small, contains the threat that a much bigger punishment will come if you are a repeat offender. That includes trading suspensions: https://www.sec.gov/files/tradingsuspensions.pdf https://www.sec.gov/files/tradingsuspensions.pdf https://www.sec.gov/litigation/suspensions.htm https://www.sec.gov/litigation/suspensions.htm