There are only two reasons we watch CNBC here in the DB HQs—1. For the off-chance that the $Honey will slip up and say something about Todd Thomson (“No bulging bracket there”) and 2. To objectify man candy Dylan Ratigan. Carney also watches Erin Burnett on mute at home in the dark by himself but that’s not something we care to, nor would you want us to, get into here. But thanks to one intrepid DealBreaker reader and CNBC watcher, we got our hands on (read: were tipped off to search for on CNBC’s brand spanking new!! and very user friendly website) this gem of a moment between Phil “I’m not going to let some pompous ass sitting in Boston tell me I can’t talk to somebody or give somebody information when they ask for it” Goldstein and CT AG Richard Blumenthal/Former SEC Commissioner Laura Unger. It’s essentially a 9 minute catfight wherein ‘regulators’ and ‘hedge funds’ and-- we're paraphrasing here-- ‘I will scratch your eyes out mercilessly, Blumenthal, and you, too, Unger, if you don’t watch yourself’ are thrown around and a $100,000 is placed on the table—i.e., the CNBC Video wet dream we’ve been having all these years.
Sent: Wed 2/21/2007 7:33 PM
You may have seen Philip Goldstein, on CNBC's On The Money, bet $100,000 each to Connecticut AG Blumenthal and some former SEC commissioner lady Laura something that he wins his upcoming case involving the bulldog investors website and soliciting business, whatever the hell it is, being brought by Massachusetts. Blumenthal flopped a joke that he was "not an accredited investor for that bet" and SEC lady said she would take the bet if CNBC backed up her end. Goldstein was quick to point out that he was betting HIS OWN money.
Goldstein also showed spunk when he effectively said he'll make it cost millions of Massachusetts taxpayer money because he'll take it all the way to the supreme court if he has to.
Gotta love this guy, completely ready to stick it to the regulator.
Update: Full transcript, after the jump.
PG: I was shocked. I never thought that in this country somebody could be sued by a state regulator for essentially giving truthful information about a commercial product in response to an unsolicited request.
Are you soliciting investors online?
PG: No. No I don’t. First of all, we’re not soliciting anybody. But even if we were, I think what’s shocking is that Secretary Galvin doesn’t seem to have any understanding of the First Amendment. That’s fully protected speech under the Constitution, as long as it’s truthful, and he never made any allegations that we said anything false or misleading.
Laura, what do you think?
LU: I think there’s a lot going on here. There are a number of different issues at play. When I tried to go onto the Bulldog Investors site and see for myself what this was all about, it was temporarily down for reconstruction. So I’m not able to actually see what the allegations are.
PG: Check back in a few days, Laura.
LU: I’m wondering what the revisions are going to be, Phillip. I think one of the key issues really is 'what is a solicitation,' 'what is an offer,' in the day of the internet? It used to be very clear: You’d get something in the mail, you’d get an offering document. What’s tricky, I think, about the situation we’re talking about is, that hedge fund investments are generally only available to accredited investors, because they are unregistered pools of securities, and the only way they can stay unregistered is if only sophisticated purchasers buy them.
Phillip, what’s your response to that?
PG: Well, I have a lot of respect for Laura Unger. I think she did a terrific job as commissioner. But, really, that’s not an issue. All the terminology, the regulatory terminology, about solicitation is not an issue. This really is a First Amendment issue, and I defy anybody to find any first amendment lawyer who’s not going to agree that this regulation, this attempt to strike down free communication is going to be invalidated by a court. There’s no doubt in my mind that this is perfectly legal communication.
Well, we have one more opinion on that front, let’s add in Ct. AG Richard Blumenthal. What you’re reaction?
RB: My reaction is that a first amendment defense to this kind of regulation is going to be very weak ground for Mr. Goldstein. He would be much better off relying on the kind of distinction that Mrs. Unger raised between a private offering and some kind of solicitation, because clearly if there is a solicitation or marketing, advertising, some kind of public offering, he is entitled to regulate.
PG: Mr. Blumenthal, it is amazing to me that regulators like yourself could just blow off the first amendment. You test a law or a regulation against the First Amendment, not the other way around. Anybody who has done any study… Again, I defy you to find a constitutional lawyer who disagrees with me. Don’t ask an SEC regulator or a securities lawyer.
LU: Well, you know what, there is a lot of history with First Amendment and the Federal securities laws.
PG: There’s very little history there. There are no exemptions.
LU: Well, and I know you’ve had great success parsing through legal language in interpretation, which is how you overcame or successfully challenged the SEC’s authority on the hedge fund rule. What is an advisor to a hedge fund, is it the hedge fund or the people behind the hedge fund. So you might break new ground here, Phillip, but it’s highly unlikely because these are well settled rules of law. I can’t see the Web site, I can’t say for sure…
PG: Come back in a few days.
LU: I will!
RB: You know, the Web site is down, but there really is a larger issue here and I think Mr. Goldstein is doing the hedge funds a terrible disservice, because the whole idea of hedge funds is, that they are private, most folks who run hedge funds are intensely private because they want to avoid exactly this issue of seeming to offer to the public, and thereby incurring the obligation to register. And so, I think he’s really taken the whole hedge fund movement a Web site too far, if you will, and I think he’s really undermining the entire rationale for hedge funds avoiding regulation.
PG: With all due respect, there is a distinction between selling the security, investing in the hedge fund and getting information about the hedge fund. That is what the First Amendment is all about.
LU: Acutally, that’s not true.
PG: That is absolutely true.
LU and RB: No, it’s not.
RB: It’s not true, Mr. Goldstein.
LU: It’s completely inaccurate.
PG: You know what? I’ll tell you what: I’ll bet both of you $100,000 that we win this case.
What do you think, you guys, you want to take that bet?
RB: Well, that’s an easy bet for a qualified investor. I’m not a qualified investor for that bet.
LU: Wait, if you win this case on these ground?
PG: Yes. On First Amendment ground, we will win this case, and it won’t even be close.
LU: If CNBC backs up my side of the bet, you’re on.
PG: Ugh. I’ll back it up with my money.
We’re not going to advocate betting at all. Phillip, why don’t you tell us how the site is going to be changed and when it’s going to be back up?
PG: We filed our answer today. We had attempted to seek a settlement with Secretary Galvin, but he declined to want to settle this. Apparently, he’d rather spend millions of dollars of Massachusetts taxpayer money on this silly case than use it for things like education or fixing potholes.
RB: He is not spending millions of dollars. He is not spending millions of dollars.
PG: He will, because we will take this all the way to the Supreme Court.
RB: Here the more important, fundamental point, Mr. Goldstein: What does the hedge fund industry really want? Does it want to remain private, or does it want to go public, in effect, as you are doing with your Web site?
PG: I don’t know what the hedge fund industry…
RB: I think regulation will follow it going public and marketing as you are doing now.
PG: Mr. Blumenthal, let me make it clear: We are not seeking retail investors, but the makeup lady who said to me, “Are you telling me that Mr. Galvin says I can’t get the information?” Is that what you’re saying? She can’t get it because she can’t invest? That violates her First Amendment rights.