A North Carolina court has made high-school Latin relevant again. In a Pipe (Private Investment in Public Equity) case, SEC v Mangan, the judge dismissed the SEC's (Securities and Exchange Commission's) charge that defendants had engaged in the unregistered sale of securities. The judge accused the SEC of a logical causal fallacy, in a post hoc ergo propter hoc edict ("after this, therefore because of this"). This decision was the first in a series of well-publicised, and therefore embarrassing defeats for the SEC in its Pipes enforcement initiative.
The Mangan case also raised several questions about short selling, which the SEC has promised to resolve by providing guidance on naked shorting. In response to SEC requests about whether additional regulatory guidance on hedging would help, commentators in the past have universally agreed that less is more. Practitioners have long understood the SEC's views and its guidance on Section 5 of...