As was widely reported yesterday, a jury failed to find Mark Cuban liable for insider trading.  On the courthouse steps after the verdict, I think that Mr. Cuban made some very insightful and important comments:

• “There’s [sic] no bright line rules” – It’s important to remember that Congress has never defined by statute what exactly constitutes insider trading.  As a result, the courts have had to develop the elements of the violation and there have been competing theories – classical and misappropriation.

• “You can’t just call up the SEC and say ‘I want clarification’” – To me, fundamental fairness requires that those who enforce the rules must be obligated to explain the rules.  The SEC, unlike the businesses that they regulate, is able to disassociate itself from the statements of its employees.  Even no-action letters that are usually based on extensive written submissions don’t bind the Commission itself.

• “They regulate through litigation” – Administrative agencies essentially have three ways of regulating: rulemaking, enforcement and adjudication.  When the rules are not well-defined, enforcement is an attractive, but unfair option, for regulators.

He cited SEC Chair Mary Jo White’s embrace of the “broken window” approach to policing and observed that the many being prosecuted under that policy won’t have the resources to fight the SEC and can’t get clear guidance from the SEC.