Messing With Models: Vanguard, Buffers, Two Sigma

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Bloomberg Audio Studios.

Podcasts, radio, news.

Should I get closer?

Yeah.

Even though people like my audio, at least relative to Matt's.

Yeah,

I'm the audio of death.

Sorry, I'm so low.

Should I do this?

Should I do like an E-Ro voice the whole time?

Maybe they'd like it a little bit more.

Hello and welcome to the Money Stuff podcast.

And then maybe they would like your normal voice more.

Hello and welcome to the Money Stuff Podcast.

Your weekly podcast where we talk about stuff related to money.

I'm Matt Levine and I write the Money Stuff column for Bloomberg Opinion.

And I'm Katie Greifeld, a reporter for Bloomberg News and an anchor for Bloomberg Television.

What are we talking about today, Katie?

Well, Eeyore, we're talking about Vanguard getting put on the SEC's naughty list.

We're going to talk about buffered Bitcoin ETFs, and then we're going to talk about Two Sigma.

I wrote this, it might be the last SEC naughty list.

Yeah, that's true.

I'm really interested what's going to happen in the next few years in terms of like, like, I've made fun of the SEC over the past few years about some of its enforcement things, like the

cell phone stuff, where like if you text about work, you get in trouble with the SEC.

I don't know how much the SEC is like a sort of like self-operating mechanism that has inertia and will keep bringing cases and will keep going after securities fraud and how much of it is going to be like the tone from the top is securities fraud is great and then we just you know never see an SEC case again or you see SEC cases but they have a very different political posture you know yeah

anti-ESG cases.

It seems like that sentiment is shared because it was a real rush to the finish for the SEC.

You had a very long column about everything that the SEC was doing.

It was like one quarter of the things that the

SEC did last week.

There were so many things.

Nestled at the bottom was something on Vanguard, of course.

Vanguard to pay $106 million to resolve violations related to capital gains distributions in their target date funds.

This is a rare moment where Matt and I both wrote about something, him in Money Stuff, me in the ETFIQ newsletter.

Julie newsletters.

Yeah, Matt, you find this aggressively boring, but I think it's kind of interesting.

Say what?

Okay.

Well, this came down, and to me, it sort of read like the inverse of what we were talking about with Capital One.

And let me tell you what

I'm going to do.

Okay.

All right.

So you're buying in.

So Vanguard basically lowered the minimum initial investment on its Vanguard institutional target retirement funds in December 2020.

But they also had a retail version of this.

And the institutional version had a lower fee than the retail.

And my crude explanation in my newsletter was that, okay, they told the investors in the retail product that they were lowering the minimum, and you had a bunch of these retirement investors switch to the now lower fee institutional TRFs that they could get access to.

But the bad news came in when the retail funds, to meet those redemptions, then had to sell a bunch of assets, and the remaining holders were caught with big capital gains.

Yeah.

So there's the two classes: the investor fund and the institutional fund.

The investor fund is not exactly retail.

It was like sub-100 million dollars.

And so a lot of retirement funds had their money in the investor fund.

And then they cut the minimum for the institutional fund to $5 million for $100 million.

So all these like small and mid-sized retirement plans were like, okay, we'll get the lower fees by taking our money out of investor and putting it in institutional.

But to get the lower fees, That's technically a like taxable transaction.

Like technically the retail fund sells all those stocks and the institutional fund buys it.

And that means that the retail fund has capital gains.

And those capital gains are shared by not the redeeming holders, but also the continuing holders.

So if you had money in that fund, you got a big capital gains tax bill and you were surprised by it because

it's not in any sort of proportion to your actual gains.

It's like all these people cashed out, so there was a big bill.

Yeah.

So mutual funds.

Mutual funds.

You were like, I wrote about this and I was like, let me guess.

They should have done an ETF.

Well, I mean, ETS, with ETFs, this wouldn't have happened.

Do you think about the creation redemption mechanism of ETF shares?

People love ETFs because you don't get capital gains bills in the same way that you would with a mutual fund when other holders redeem.

Right.

It's like you have to sort of think about what is the right treatment.

You know, so I wrote a few years ago, like Bloomberg Zach Meiter had a...

series of stories about the ETF heartbeat trade where basically like if you run an ETF, broadly speaking, you can avoid realizing any taxable gains because you're doing in-kind creations and redemptions.

But every so often, you need to like adjust the holdings of your fund.

And if you traded for cash, you would have taxable gains.

If you run an ETF, the number one goal is never have taxable gains.

And so people have developed all of these like complicated mechanisms to take advantage of what a lot of people call the ETF tax loophole, right?

Like it's a loophole that you can have this fund that never buys or sells stocks and never has taxable gains.

Yeah.

yeah at their heart it's kind of a tax dodge yeah it's kind of a tax dodge it is so intuitively appealing to say i've put my money in a fund in a year or 10 years or 35 years i'll take my money out of the fund if i have gains over those 35 years i'll pay taxes on the gains but in between i shouldn't pay any taxes because i haven't sold anything like what's the taxable event where i just hold the mutual fund and every year i get a tax bill and the tax bill is not really related to my actual gains in the fund it's just weird yeah and like that's how the tax law works for mutual funds.

It's not how the tax law works for ETFs, in part because there is this ETF loophole and in part because people have built the industry around exploiting the loophole.

But like the ETF treatment is just more intuitive than the mutual fund treatment.

And a lot of people are genuinely surprised that they get a tax bill for their mutual fund trading activity.

And the SEC is like, they should have been surprised.

Like, it's not fair.

They shouldn't get the tax bill.

You know, because that is the tax law.

But

no one finds it intuitive or appealing.

I mean, so mutual funds, when they're in 401ks, what we're talking about sort of goes away.

Yes.

401ks, you don't have that capital gains thing.

In this specific instance with these Vanguard target date funds, so it was the investors that held these funds in their taxable accounts that we're talking about.

So Vanguard sort of assumed that most of these people were 401k investors.

Theoretically.

In part because

a lot of people hold these funds through Vanguard's own platform, like their website and their brokerage.

And so Vanguard could look at those people and say, almost all of these are 401k plans, so they won't have to pay the taxes, so it's not a big deal.

But also, like, people hold billions of dollars of these funds away, like in other brokerage accounts, and Vanguard didn't have transparency on them and sort of assumed, yeah, it's all 401k plans, it's fine.

But in fact, a lot of retail taxable investors had money in these funds and then got a big tax bill.

Yeah.

Because they were outside of the 401k.

Trevor Burrus, Jr.: So we've talked a lot about products and wrappers so far.

I want to talk, though, about why this is like the spiritual inverse of the Capital One example, because you had a lot of sympathy for Capital One last week.

And if that's the case, you must have a ton of sympathy for Vanguard here, kind of trying to do this out of the goodness of their hearts for these investors.

I do.

Yeah.

Talk about that.

The thing they did here was they wanted to lower fees.

Yeah.

Vanguard is an interesting company because it's sort of not a company, right?

It's like owned by the funds.

So it's a mutual in the sort of classic sense.

Like the funds ultimately own Vanguard.

So it doesn't like charge as much as it can to like provide returns to the shareholders.

It like has a mandate to kind of keep fees low.

And so it offered these funds.

It set some expense ratios and the funds gathered a lot of assets, including from like mid-sized 401k plans.

And they're like, we're making so much money off these plans that we don't need.

Yeah.

Like let's give it back.

And they thought of different ways to give it back.

And the way they came up with was lower the minimums on the institutional fund, which there are a lot of other options.

And they chose this one

for reasons that are not entirely clear to me, but basically the SEC sort of implies that they didn't fully appreciate the tax problem.

Yeah.

In part because they thought everyone was in 401k plans.

And in part because when they were considering this, it was like March of 2020.

And so stocks were all the way down.

And so they're like, yeah, nobody has capital gains.

It's fine.

It's not a big deal.

But then by the time they actually did it, people had capital gains.

Yeah.

So I sympathize with all of that.

The only thing I'll say, like, you know, I have a soft spot for Vanguard.

A lot of my money is in Vanguard funds.

But like,

Vanguard feels like a historic innovator in index funds that is like a little

timey.

Okay, old-fashioned.

Like, you know, out in the woods of Pennsylvania.

Yeah.

And like, you know, they sort of resisted ETFization a little bit more than the other places.

Jack Bogle had a lot to say about ETFs.

Some of that about what we'll get to, like weird, weird product ETFs, but like some of the, they just didn't like the ETF structure because it felt trader-y and they want like a sort of long-term buy-on-hold investors.

And

the way they've structured this,

you could have done this in a lot of other ways.

You could have started from the beginning with we have one fund

and we can have two classes of shares of the fund, and we can lower the fees on one class without lowering, you know, like the problem here is that they had two separate funds, and so when they lowered the fees on some of the investors, those investors had to sell one fund and buy another one, which is like kind of crazy.

It shouldn't work that way.

So, like, I have a lot of sympathy here for Vanguard because really all they were trying to do was lower fees out of the goodness of their heart.

But I also like, yeah, this is kind of sloppy, you know?

Yeah, a couple things.

Vanguard turns 50 years old on May 1st.

May 1st, 1975 was when Vanguard was born.

Vanguard does this all the time in terms of lowering fees.

Like you talked about their ownership structure a little bit.

Like any time that they have extra cash or assets generated by their products, that is just...

funneled into lowering fees, which has put a crunch on the entire industry because of the way that they're owned.

Other people, like BlackRock, doesn't operate like Vanguard does, but BlackRock still has to compete with Vanguard and just lower fees to

dirt cheap levels, which is interesting.

And in the ETFIQ newsletter, you know, after you've read money stuff, if you read the ETFIQ newsletter, the $106 million,

I saw some reaction that was like, oh, that's nothing for Vanguard.

They manage how many, like $10 trillion in assets.

But because their fees are so low, assuming that they charge an average of 10 basis points, $106 million for Vanguard is like napkin math 1% of their total revenue.

So this is actually pretty painful for Vanguard.

Maybe it was sloppy, you know, but it was painful.

A thing that I read about a lot, I read about cases where either the SEC or like a shareholder class action sues a company for doing a bad thing and the company agrees to pay a big fine or pay a big recovery to shareholders.

And people always ask, like, isn't that circular?

Like, where does the money come from?

And part of the answer is like, the money sometimes comes from TNO insurance, but like, sometimes, yeah, like the company writes a check to compensate shareholders who lost money on something.

And you're like, well, like, how did that help the shareholders?

Like, the lawyer's got a fee, but like, the shareholders are writing a check to the shareholders.

Similarly with Vanguard, it's owned by its funds, right?

So if you find Vanguard $100 million,

in some sense, are you taking that money from the Vanguard investors who like lost money because of this tax problem?

Wow.

Like, they're the shareholders.

They're the owners.

That's true.

They're the ones paying the fine.

Those are good points.

And when I say they, I mean me.

Yeah.

So it's technically not a fine.

And I learned that the hard way.

Because

I had to.

So you said it was a fine?

I said it was a fine, and I had to correct my newsletter.

It's technically not a fine because the $106 million

will be distributed to those impacted.

Yeah, it's true.

So

you should still subscribe to ETFIQ.

90% of the time is correct.

Carol has for more than that.

Oh, come on.

I'm doing my best.

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Let's talk about something that Jack Bogle would absolutely hate.

They're called buffered Bitcoin ETFs.

Buffered ETFs, they're really popular.

They've just ballooned over the past several years.

Can you tell me why?

Oh, I don't know.

I actually, so I mean, it's a great pitch.

Yeah, I've written this.

Like, it is so close to my heart because it's like a pitch that I learned as a young derivative structure at an investment bank.

Yeah.

You'd be like, there's no downside.

Exactly.

Get all your money back.

It's great.

Like, what a great pitch.

Yeah.

And it sort of evolved evolved to be no downside at all.

Of course, 100% protected downside buffered ETFs have launched in the past year or so.

But buffered ETFs came into existence.

I'm sure they existed in other iterations, but they came into existence in 2020, I believe.

I was pretty new to the ETF beat.

And in that time, they've ballooned to this like $60 billion asset class.

And it's because the pitch is really good.

We're going to shield you against these losses.

Yeah, we're going to give you the upside in something, the SDG, whatever, micro strategy, whatever.

And if like it goes down, it doesn't go down.

Like you get all your money back.

Yeah.

It's amazing.

What a great pitch.

It makes sense in stocks, the 100% downside.

To me, I can kind of see it.

In Bitcoin, I don't super understand it because volatility is the selling point of Bitcoin for a lot of people.

People have fun trading extremely volatile cryptocurrencies.

If you are buying a 100% Bitcoin buffer ETF with like an upside cap of 12% or 11%,

what is the GD point?

What is that point?

Yes.

Right.

So Calios is launching these buffered Bitcoin ETFs, right?

Where like these things are all like defined periods, right?

So you get like a one year, like you buy it at the beginning, and at the end, you get some amount of the return on Bitcoin, but like fluoride at some level, right?

So like they have a 100 by like 111, something like that.

Not exactly sure on what the cap levels are.

But so basically you buy it.

And if Bitcoin goes down, you get your money back in a year.

And if Bitcoin goes up, you get the return on Bitcoin unless it goes up by more than 11%, in which case you only get 11%, right?

So if you're sure that Bitcoin will go up, this is like a way to get an 11% return on your money.

But if you're sure that Bitcoin will go up, you just buy Bitcoin and it'll go up like, you know, 1,000%.

So why would you buy it?

I continue to ask you, why do people buy buffered ETFs, right?

I mean, like, it's such a good pitch.

When I was doing this, they didn't exist in ETF form.

They existed in structured notes at banks, right?

And like, this is a, this is like a classic structured note product, right?

This is like your wealth manager goes to a rich conservative person who's like, oh, I like this stock.

And you're like, well, I can give you that stock, but no downside, right?

Like, to be clear, like, you're always trading up upside, right?

Like, the trade is that the advisor goes and buys treasuries for,

you know, 96%.

of the investment, right?

And like that provides the downside protection because at $96, a treasury bill matures at $100 in a year.

And then he takes the other $4 and buys a call spread that gives you some of the upside on the asset.

This is a medium to high interest rates product.

If interest rates are really low, you have to spend like $99 on the treasuries to mature at $100.

And so you have only $1 to spend on a call spread.

But if interest rates are really high, you can spend like $10 on a call spread.

And then you're in business.

Yeah.

So a story I actually started reporting in autumn of last year, right before the Fed started cutting rates, was what happens to these 100% downside ETFs once rates start going lower.

And it seems like.

Yeah, well, that's the thing.

Well, no, some issuers, there's a choice you have to make.

Yeah, do you keep the 100% downside protection or do you lower the cap?

And some issuers were thinking about, you know, maybe it's not 100% protection.

It's 85%.

So there's a choice that has to be made.

But then interest rates went up like 100 basis points.

So it's less relevant right now.

But it will become relevant at some point.

My crude assumption is that you can get a buffer ETF that has 100 floors.

So you always get your money back.

And it has a cap of like crudely twice the treasury bill rate.

Right.

Because like, you know, like your option is like put $100 in today and get back the treasury rate or put $100 in today and get back, you know, with equal probability between zero and twice the treasury rate.

Yeah.

So it's like, that's sort of like the right expected value.

Yeah.

It's not exactly right, but it's like, it's like kind of close.

And so like you see caps that are under like 110 with like a foreign change treasury bill rate.

The other thing I'll say is the Bitcoin buffer ETF that we're talking about from Calamus, they actually have three options.

One is like 100 by like 111 or whatever.

And then the others are like a 90 by 130 and a 80 by 150.

So like those haven't launched yet, though, right?

Yeah, but they're like, they're talking about them like by 80 by 150.

I mean like if Bitcoin goes down by more than 20%,

you only go down by 20%, right?

So like if Bitcoin loses half its value, you only lose 20% of your investment.

But But then, if Bitcoin goes up, you get up to 50%

returns on your investment.

So, it's like a much wider collar, which is maybe more appealing.

Still, it's like a weird trade.

It is.

Before we talk about Trump coin, which is coming, one more point that I just remembered on buffer ETFs broadly.

I remember talking to Aliance about this and basically asking the same question that we are: who and why would you buy this?

And the point that they made, which I found found somewhat compelling, was this is a better version of bonds.

Like if you're putting together a portfolio, don't take from your equity bucket to put into these buffered products.

Take from your fixed income allocation.

This is a better version of bonds because bonds have been an unreliable hedge since the pandemic anyway.

This makes more sense as a fixed income alternative.

That was their pitch, which, you know, if you're getting 100% downside protection, but, you know, twice what treasury treasury builds are yielding, that makes a little bit more sense.

Yeah.

And like just in general, like you have some exciting sounding thing stamped on some bond-like product, right?

Like you have like, ooh, it's Bitcoin, but in bond form, right?

Like it's appealing, right?

Yeah.

I've written a lot about microstrategies, convertibles, right, which are Bitcoin in bond form, right?

And the appeal of that is a lot of that is to convertible arbitrageurs, but a lot of it is actually to like just boring fundamental like institutional investors who are like,

I'll take some Bitcoin upside and some, you know, 100% downside protection.

So, yeah.

I feel like there's still work to be done, though, when it comes to the pitch for a buffered Trump coin ETF.

Yeah.

God, that's going to happen, isn't it?

Yeah.

Like, someone announced the filing for a Trump coin ETF, not a buffered one, just like

your Trump coin in a stock wrapper.

Yeah.

Yeah.

No, it's interesting because you think about what's like the Trump coin audience, right?

Like a lot of it is like Trump has a huge crypto native following who are like going on Solana and buying Trump coin but he also has like a you know yeah less tech native following who would love to buy Trump coin but aren't going to like mess around with the blockchain yeah and so selling them Trump coin in ETF form is like you know has an obvious appeal we had Kathy Wood of Arc Investment on ETFIQ the television show this week and of course we asked her about Trump coin and she stays away from meme coins she likes the big three as she called it and she said something to the effect of I'm not sure what the utility of Trump coin what it it is.

And it seems like the utility is just funneling money to the Trump family, hopefully.

I've along aside on utility.

I don't know if this is relevant.

Let's find out.

So, and this gets back to the SEC.

Five years ago,

if you talk to crypto people, there's a lot of talk about like, we're building the future of the internet.

We're building like these useful tools that will affect people's lives.

We're building new ways of gaming and new ways to store files and decentralized everything.

Right.

And you don't hear that anymore.

And now you hear fartcoin and dogecoin and trump coin, right?

Why?

Well,

one

very obvious possibility is that like all of those promises of utility, many of them, were kind of vaporware and they didn't work out.

And people are like, yeah, it's fun gambling, right?

Another possibility is that the people who were either building or hyping new technologies in crypto saw a new shiny object in AI and now we're all building and hyping large language models.

But I think a really important explanation for all of this is that the SEC had a huge crackdown on crypto, and it was specifically addressed to like people who were building stuff.

If you were offering an investment in some project that you thought would like build utility for the world,

the SEC said, well, that was a securities offering and you couldn't do it.

And if you got it listed on an exchange, the exchange would get in trouble.

The crypto exchange would get in trouble.

And so there was a SEC crackdown on crypto generally, but specifically on like useful crypto.

Whereas meme coins, everyone agrees, basically, are not securities because they don't promise anything.

They're just like, yeah, it's a meme.

It has no utility.

As long as you don't have utility, you can sell it to your heart's content.

It's like a collectible.

It's not an investment.

And so the SEC can't regulate it.

I feel like if the SEC went back, it would find that to be like a bad strategic decision because like it didn't stop crypto.

It just made crypto more useless.

And so one question is like with a much more accommodating SEC, will crypto become more useful or is the meme coin gambling stuff too good and that's all anyone wants anymore and it'll just be a lot of no utility meme coins.

Yeah.

And we'll find out what we want.

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Two Sigma.

This was also, you know, in the rush to the finish.

for the SEC under the Biden administration.

Yes.

Got that right.

Two

Tell me about it.

So Chooseigma announced in like 2023 that it had found someone messing with its models.

One of its employees was messing with its models in a way that caused some funds to make an extra $450 million and other funds to lose $170 million.

And when the stories came out, it was like he was messing with the models to try to improve his bonus, which is like the only reason anyone does anything, right?

And it's like a little bit of a funny story because he succeeded in the aggregate

in improving the performance of Two Sigma's funds, right?

Like he made more money on the good funds than he lost on the bad funds.

And like you could imagine

ex-ante, if you knew that that was going to happen, you'd be like, okay, we'll just like take $170 million from the funds that win, give it to the funds that lose, then they haven't lost.

They're fine.

And the funds that win have an extra like, you know...

$280 million.

Like, great work.

Here's your big bonus.

This seems like a happy story.

Right.

But neither Two Sigma nor the SEC saw it that way.

The guy was fired, and Tucson ended up paying like $90 million in penalties to the SEC.

And so, like, yeah, so he improved the overall performance of the funds.

And instead of a round of applause, he got fired and Tucson got fined.

And it's a little unclear why.

Yeah.

I mean, like, part of it is like he did it without authorization, right?

And you're supposed to run your hedge fund.

in a properly supervised way.

So one reason they got in trouble was for like failure to supervise.

Because basically like there is a long list of parameters that you're not supposed supposed to change without running it through a review process and he would just change them without running it through that process like he just yeah went into the computer and changed the parameters he was not supposed to do that but he did it anyway and so that's like a failure to supervise thing but the other thing that probably happened is that probably like you know a quantitative hedge fund is basically aiming for high

risk adjusted returns.

It's aiming for some level of risk and the highest possible returns within that level of risk.

And it seems like what happened is that he changed these parameters to dial up the risk that the fund was taking on his strategies.

Like he built a bunch of strategies for the fund, for the funds for Two Sigma.

And

Two Sigma's overall model was like, we're going to put this much risk into these strategies in order to achieve good risk-adjusted returns.

And he kind of turned the dial to put more risk into those strategies, which did in fact, over the time period, mostly lead to higher returns, which was good for his bonus, but which was not what Two Sigma was looking for.

And like, you know, if you ran the simulation 100 times, it might not have made as much money.

And they're aiming for sort of long-term risk management framework, but like it happened to make more money in the time they needed.

Yeah.

So that one fund overperformed, but one of the funds underperformed, correct?

So investors did lose money.

Sure, sure, sure.

Some investors.

Right.

But like, again, like the overperforming fund overperformed more than the underperforming fund underperformed.

So like, you know, you could, you could reallocate that to make everyone happy.

happy i mean in theory you can't really because like there's they have specific mandates right and if they're not following their mandates then like that's bad does the fact that one fund overperformed lessen the blow to two sigma at all like this 90 million dollar penalty would it have been 180 dollars if everyone lost money i think i mean who knows but like i think that there's always a range of rogue trader behavior right like this guy's not quite a rogue trader are you supposed to ask for forgiveness later right like

you know, it's an interesting question of like, what would happen if he had just made money?

Yeah.

Everything had gone better.

I think that a lot of these quant funds are like really quite rigorous about risk management.

And like if they caught him just making $900 million for clients, they might have fired him.

They might have been like, nope, you messed with our risk management.

Like that is really important.

And you're fired, even though you only made $900 million for clients.

They might not have.

I don't know.

And I think Two Sigma is interesting because it's truly a quant fund, right?

Like I think a lot of like less rigorous banks, like kind of famously, like, don't fire rogue traders who make money.

This is like changing a little bit, but that's the stereotype.

But yeah, I think, you know, if he had only lost money, then it looks like malice or incompetence.

Or just like, it looks really bad.

If he makes money, then it's like he was genuinely trying to make money for the firm and thus for his bonus.

That's a little bit less, a little bit less bad conduct.

Well, maybe he got hired by a bank, you know, maybe has an illustrious new chapter

yeah i mean like you know like he could start his own fund being like

we're like two sigma but we take more risk yeah

two sigma full octane we do have a listener question on this oh yeah the listener asked like why is this an sec case yeah

you know it's a good question like the answer is like if you read it it's like they violated the anti-fraud provisions of the investment advisors act

and say why like it's not like two Sigma was doing a fraud on its investors in any obvious way, right?

Like, they weren't lying to them.

But I don't actually know what their market material said, but they probably didn't describe in detail the information security around the parameters for the, you know, like,

they probably didn't lie to the investors at all.

But the SEC is like, ah, you did this thing that just seems kind of bad.

And so it's probably operated as a fraud on your investors.

And, you know, in this environment, you settle that case.

Is that a case that the next SEC brings?

I don't know.

I will say there is one other reason that Tier Sigma got in trouble with the SEC, which is that they have NDAs.

And I've written this, like, it is sort of illegal for financial firms to have NDAs.

If you have an NDA that says you won't tell anyone about the secret stuff you learned at this firm, the SEC says, well, but what about whistleblowers?

What if a whistleblower wanted to come to the SEC and tell us that you were doing securities law violations?

Fair question.

That NDA would prevent them from doing that.

That's a violation of our whistleblower protection rule.

And so the SEC goes after all these firms for having NDAs that don't specifically say, but you can tell the SEC.

And in fact, Two Sigma had NDAs that did say you can go tell the SEC.

But the SEC said, well, but they didn't say that you were, they said, you know, you had to represent that you hadn't already disclosed any confidential information.

And that part didn't say you can have already told the SEC.

And so the SEC fined Two Sigma for having this NDA that sort of said you could tell the SEC, but didn't say it in the right way.

That was the last one.

Never see that case again.

That's it.

Enjoy it.

That's not legal advice, but you'll never see that one again.

Man.

Paul Atkins, over to you.

Is he confirmed yet?

No.

No.

Paul Atkins, potentially over to you soon.

And that was the Money Stuff Podcast.

I'm Matt Levine.

And I'm Katie Greifel.

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