As everyone knows by now, Martha Stewart was found guilty on four counts yesterday.
The one juror who willing to speak to the press said
"Maybe it's a victory for the little guys who lose money in the market because of these kinds of transactions."
Martha Stewart Living Omnimedia (MSO) shares traded as high as $17 per share yesterday, before the news of the guilty verdict. Shares closed at $10.86, a decline of $6.14 from the high. There are approximately 50 million shares outstanding, most of which are held by Martha herself. Even so, the public float of the company is 5 million shares, some of which is presumably held by individuals who applied Peter Lynch's stockpicking theories and purchased shares in MSO because they liked the Martha Stewart Living products they purchased at K-Mart.
From the daily high to the close, the market capitalization of the company was reduced by over $300 million, more than $30 million coming from the public float.
I wonder whether the individual shareholders of MSO feel that the guilty verdicts are a victory for the "little guys."
The CFTC has historically taken the position that CTAs and CPOs that are located outside the United States and that have no U.S. persons as clients are not required to register under the Commodity Exchange Act, even when such CTA or CPO trades futures on U.S. markets.
The CFTC recently published an interpretative letter that confirmed this position.
Normally, an interpretative reconfirming a previously taken position is a cut-and-dried document. This one, however, left me scratching my head.
In addition to the factors previously considered by the CFTC, the person requesting the relief, an Australian entity, made additional representations that: (1) it does not have and will not establish a location in the United States; (2) no person affiliated with the Fund will "undertake any marketing activity for the purpose, or that could reasonably be expected to have the effect, of soliciting participations from United States persons"; and (3) no marketing activities will be conducted within the United States. Further, the Australian entity started this process in May 2003, but the interpretative letter did not issue until January 22, 2004.
So, the requester had all the usual factors for relief from registration, plus it made additional representations and it still took 8 months to get the CFTC to confirm that the Australian entity wouldn't have to register?
This morning's WSJ has an interesting article (subscription required) regarding an unintended consequence of government actions in the last years against Wall Street stock market analysts. Specifically, there's less research available for retail investors. The article notes:
When New York Attorney General Eliot Spitzer succeeded last year in separating investment-banking divisions from stock analysts to eliminate conflicts of interest, the historic settlement was supposed to herald a new era of securities analysis -- one benefiting little-guy stock pickers. But now more than ever, the most pioneering, market-moving research is going exclusively to big mutual funds and the private investment pools known as hedge funds, not to the small investor for whom regulators waged their campaign.