Digital Commons Network^™

What Google Can't Teach Us About Ipo Auctions (And What It Can), A. Christine Hurt

Faculty Scholarship

No abstract provided.

Regulating Public Morals And Private Markets: Online Securities Trading, Internet Gambling And The Speculation Paradox, A. Christine Hurt

Faculty Scholarship

No abstract provided.

Give Me Equity Or Give Me Death - The Role Of Competition And Compensation In Building Silicon Valley, Richard A. Booth

Working Paper Series

In this essay, I argue that the preeminence of Silicon Valley as an incubator of technology companies is attributable to equity compensation. Ronald Gilson, relying on the work of AnnaLee Saxenian and others who have noted the tendency of Silicon Valley employees to job hop, has suggested that California law prohibiting the enforcement of non-compete agreements was a major factor in the rise of Silicon Valley (and the demise of Route 128). I extend this line of thought by suggesting that California employers may have relied on equity compensation as a substitute way to bind employees. I argue further that …

Materiality And Social Change: The Case For Replacing "The Reasonable Investor" With "The Least Sophisticated Investor" In Inefficient Markets, Margaret V. Sachs

Scholarly Works

The current materiality standard for federal securities fraud is a mid-twentieth-century construct that fails to accommodate certain twenty-first century realities. This Article argues that its reach should be restricted to preserve it for the many circumstances in which it continues to function well.

The current standard measures materiality from the standpoint of "the reasonable investor," a savvy person who grasps market fundamentals. This standard has a fatal flaw: its inability to protect unsophisticated investors who are duped by implausible falsehoods in inefficient markets. This flaw can no longer be ignored given Internet and telemarketing securities fraud and its many unsophisticated, …

Ex Ante Choices Of Law And Forum: An Empirical Analysis Of Corporate Merger Agreements, Theodore Eisenberg, Geoffrey P. Miller

Cornell Law Faculty Publications

Legal scholars have focused much attention on the incorporation puzzle—why business corporations so heavily favor Delaware as the site of incorporation. This paper suggests that the focus on the incorporation decision overlooks a broader but intimately related set of questions. The choice of Delaware as a situs of incorporation is, effectively, a choice of law decision. A company electing to charter in Delaware selects Delaware law (and authorizes Delaware courts to adjudicate legal disputes) regarding the allocation of governance authority within the firm. In this sense, the incorporation decision is fundamentally similar to any setting in which a company selects …

Developing Governance And Regulation For Emerging Capital And Securities Markets, Ali A. Ibrahim

Georgetown Law Graduate Paper Series

No abstract provided.

Insurance Against Misinformation In The Securities Market, Tom Baker

All Faculty Scholarship

Prepared at the request of the Task Force to Modernize Securities Legislation in Canada, this study describes and evaluates evaluate a new capital markets insurance concept: securities misinformation insurance. This new insurance would compensate investors for losses caused by securities law violations. The most powerful objection to this new concept is that investors do not need a new insurance program for securities misinformation losses. Individual and institutional investors already can spread securities misinformation losses by holding a diversified portfolio. Nevertheless, a securities misinformation insurance program has the potential to provide systemic benefits: improved compliance with securities laws (resulting from cost …

Dialectical Regulation, Robert B. Ahdieh

Faculty Scholarship

While theories of regulation abound, woefully inadequate attention has been given to growing patterns of "intersystemic" and "dialectical" regulation in the world today. In this rapidly expanding universe of interactions, independent regulatory agencies, born of autonomous jurisdictions, nonetheless face a combination of jurisdictional overlap with, and regulatory dependence on, one another. Here, the cross-jurisdictional interaction of regulators is no longer the voluntary interaction embraced by transnationalists; it is, instead, an unavoidable reality of acknowledgement and engagement, potentially culminating in the integration of discrete sets of regulatory rules into a collective whole.

Such patterns of regulatory engagement are increasingly evident, across …

Convergence Of Corporate Governance And Islamic Financial Services Industry: Toward Islamic Financial Services Securities Market, Ali A. Ibrahim

Georgetown Law Graduate Paper Series

This paper briefly discusses the significance of corporate governance for the Islamic financial services industry. Furthermore, it predicts that the Islamic financial services industry is likely to converge to modern governance practices. The paper also argues that the industry needs to have a homogenous and specialized regional securities market to realize its true potential.

Measuring Efficiency In Corporate Law: The Role Of Shareholder Primacy, Jill E. Fisch

All Faculty Scholarship

The shareholder primacy norm defines the objective of the corporation as maximization of shareholder wealth. Law and economics scholars have incorporated the shareholder primacy norm into their empirical analyses of regulatory efficiency. An increasingly influential body of scholarship uses empirical methodology to evaluate legal rules that allocate power within the corporation. By embracing the shareholder primacy norm, empirical scholars offer normative assessments about regulatory choices based on the effect of legal rules on measures of shareholder value such as stock price, net profits, and Tobin’s Q.

This Article challenges the foundations of using the shareholder primacy norm to judge corporate …

Using Spread And Net Trading Range To Measure Risk In Suitability Cases, Richard A. Booth

Working Paper Series

Suitability is one of the most common issues that arises in securities arbitrations. Yet it is also one of the most difficult issues to resolve. Up to now there has been no easy and reliable way to compare the risk of one stock or portfolio with another stock or portfolio measured as of the time the investment decision in question was made. As I argued in an earlier article, spread is potentially a promising way to measure risk in real time as perceived collectively by competing market makers. But with the advent of decimal quotes and other recent changes in …

Ain't No Glory In Pain': How The 1994 Republican Revolution And The Private Securities Litigation Reform Act Contributed To The Collapse Of The United States Capital Markets, André Douglas Pond Cummings

Faculty Scholarship

Ain't No Glory In Pain recalls the deregulatory legislation adopted by the 104th Congress in 1995 and 1996, including the shareholder lawsuit limiting Private Securities Litigation Reform Act (PSLRA) and connects several of those measures with the historic corporate malfeasance that marked the capital market collapse of 2001-02. I propose, in the face of recent calls for further efforts to deregulate crucial industries and further hamstring shareholder lawsuits, that Congress and the SEC work together to reject certain provisions of the PSLRA and act in ways to ensure investor protection in this post-Enron/WorldCom environment.

Compensating Power: An Analysis Of Rents And Rewards In The Mutual Fund Industry, William A. Birdthistle

All Faculty Scholarship

The allegations of malfeasance in the investment management industry - market timing, late trading, revenue sharing, and several others - involve a broad range of mutual fund operations. This Article seeks to explain the common source of these irregularities by focusing upon a trait they share: the practice of investment advisers' capitalizing upon their managerial influence to increase assets under management in order to generate greater fees from those assets. This Article extends theories of executive compensation into the context of investment management to understand the extraction of rents by mutual fund advisers. Investment advisers, as collective groups of portfolio …

Tattlers And Trail Blazers: Attorneys' Liability For Clients' Fraud, Barbara Black

Faculty Articles and Other Publications

No abstract provided.

From Sec Enforcement Attorney To Commissioner, Roberta S. Karmel

Faculty Scholarship

No abstract provided.

Overvalued Equity And The Case For An Asymmetric Insider Trading Regime, Thom Lambert

Faculty Publications

This article argues for an asymmetric insider trading policy under which insider trading that decreases the price of an overvalued stock is generally permitted, but insider trading that increases the price of an undervalued stock is generally prohibited. Concluding that the net investor benefits of price-decreasing insider trading exceed those of price-enhancing insider trading, the article argues that an asymmetric insider trading regime likely represents the bargain that shareholders and corporate managers would strike if they were legally and practically able to negotiate an insider trading policy. Current insider trading doctrine would permit regulators to impose such an asymmetric insider …

Europe's Thirteenth Directive And U.S. Takeover Regulation: Regulatory Means And Political Economic Ends, Marco Ventoruzzo

Journal Articles

Cross-border acquisitions, especially through hostile takeovers, represent one of the most dramatic consequences of the growing integration, both within Europe, and when considering the economic balance of power between the US and the European industries. This Article focuses on the single most important piece of legislation on European takeover law, the Thirteenth Directive of the European Union on Takeover Regulation, which was approved on April, 21 2004 and must be implemented by Member States before the end of 2006.

Passage of the Thirteenth Directive is no minor event. Earlier versions were embroiled in arresting political controversies that generated significant Member …

The Supreme Court’S Decisions In Arthur Andersen And Dura Pharmaceuticals, Charles W. Murdock

Faculty Publications & Other Works

No abstract provided.

Nationalizing Ethical Standards For Securities Lawyers., Michael J. Kaufman

Faculty Publications & Other Works

No abstract provided.

When Does The Securities Litigation Uniform Standards Act Of 1998 Preempt State Law Claims?, Steven A. Ramirez

Faculty Publications & Other Works

No abstract provided.

The Explained Award Of Damocles: Protection Or Peril In Securities Arbitration, Jill I. Gross

Elisabeth Haub School of Law Faculty Publications

NASD's proposed rule change requiring arbitrators to provide written explanations in arbitration awards upon the customers' request (the “explained award proposal”), which was published for public comment in July 2005, is the clearest example of NASD's proposing a rule change in response to investors' complaints. “We have found that investors want to know more about how a panel reaches its decision,” stated NASD Chairman and Chief Executive Officer Robert R. Glauber in announcing the explained award proposal. “By giving investors the option of requiring a written explanation of an arbitration panel's decision, we will increase investor confidence in the fairness …

Rethinking Enforcement And Litigation In Ontario Securities Regulation, Mary Condon

Articles & Book Chapters

The Ontario government has recently made changes to provincial securities law that are aimed at more effective enforcement. For example, statutory civil remedies are now available to investors in actions involving misrepresentation or inadequate disclosure in the secondary market. A broader range of sanctioning options has also been made available to the Ontario Securities Commission.

The author explores the factors contributing to these developments, identifies recent controversies surrounding the Commission's enforcement activities, and evaluates the effectiveness of different approaches to enforcement. The author reviews policy issues surrounding enforcement through public, criminal and quasi-criminal sanctions, as well as civil remedies, and …

Does The Plaintiff Matter? An Empirical Analysis Of Lead Plaintiffs In Securities Class Actions, Randall Thomas, James D. Cox

Vanderbilt Law School Faculty Publications

The PSLRA's lead plaintiff provision was adopted in order to encourage large shareholders with claims in a securities fraud class action to step forward to become the class' representative. Congress' expectation was that these investors would actively monitor the conduct of a securities fraud class action so as to reduce the litigation agency costs that may arise when class counsel's interests diverge from those of the shareholder class. Proponents of the provision claimed that there would be substantial benefits from having institutional investors serve as lead plaintiffs. Now, ten years later, the claim that the lead plaintiff is a more …

An Empirical Study Of Securities Disclosure Practice, Mitu Gulati, Stephen J. Choi

Faculty Scholarship

Using a dataset of sovereign bond offering documents and underlying bond contracts for ten sovereign issuers from 1985-2005, we examine the securities disclosure practices of issuers and attorneys. The sovereign bond market is comprised of sophisticated issuers with highly paid law firms. If anyone complies fully with federal securities disclosure requirements, we expect sovereign issuers and their attorneys to do so. On the other hand, network effects that determine what information issuers chose to disclose as well as the high cost of determining what information is required for disclosure may lead issuers to fail to meet their disclosure duties. We …

Obligations Of Financial Advisers In Change-Of-Control Transactions: Fiduciary And Other Questions, Andrew F. Tuch

Scholarship@WashULaw

Outside the United States, financial regulators have recently focused their attention on whether a financial adviser to a party in a change-of-control transaction (such as a takeover) is obliged to avoid being in positions of conflict with the interests of that party. Because financial advisers in these transactions are typically investment banks, the integrated structure of which may make conflicts of interest inevitable, such an obligation is likely to pose difficult challenges for the investment banking industry. The question is complicated by two apparently inconsistent standards being applied: the fiduciary obligation to avoid conflicts and the statutory obligation in many …

Securities Mediation: Dispute Resolution For The Individual Investor, Jill I. Gross

Elisabeth Haub School of Law Faculty Publications

Part I of this article will provide a brief history of ADR in the securities industry (primarily arbitration), and then will describe the emergence of mediation as an alternative to arbitration. Part II will explore the state and federal statutory regulations that arguably govern the securities mediation process, and their impact on procedural and substantive justice. In particular, this section will review the applicability to and impact on securities mediation of the Securities Exchange Act of 1934 (1934 Act), the Federal Arbitration Act (FAA), and state mediation statutes, including the Uniform Mediation Act. In this section, I will argue that …

Strengthening Auditor Independence: Reestablising Audits As Control And Premium Signaling Mechanisms, Sean M. O'Connor

Articles

As recent scandals have demonstrated, ensuring the independence of auditors from the publicly traded clients whose books they inspect is one of the most vexing problems in the financial world today. Arguably, the imposition of a mandatory audit system through the 1930s federal securities laws created the modern problem of auditor independence.

The core issue is that the statutory audit is simply a commodified cost of doing business for issuers that imposes an impossible obligation to serve an unspecified “investing public” on the auditors. Yet, this investing public neither hires, fires, nor controls the auditors. Instead, the audit relationship is …

Internal Controls After Sarbanes-Oxley: Revisiting Corporate Law's "Duty Of Care As Responsibility For Systems", Donald C. Langevoort

Georgetown Law Faculty Publications and Other Works

Revisiting section 3.4.2 of Clark's Corporate Law ('Duty of Care as Responsibility for Systems") reminds us, however, that the internal controls story actually goes back many decades, and that many of the strategic issues that are at the heart of section 404 have long been contentious. My Article will briefly update Clark's account through the late 1980s and 1990s before returning to Sarbanes-Oxley and rulemaking thereunder by the SEC and the newly created Public Company Accounting Oversight Board ("PCAOB"). My main point builds on one of Clark's but digs deeper. Internal controls requirements, whether federal or state, are incoherent unless …

Contemporary Challenges In Takeovers: Avoiding Conflicts, Preserving Confidences And Taming The Commercial Imperative, Andrew F. Tuch

Scholarship@WashULaw

This article discusses contemporary legal, commercial, ethical and other issues that arise in the context of corporate takeover transactions. Due to their complexity and the numerous parties - including deal advisers - they involve, the loyalties of company directors and advisers are frequently tangled, creating legion opportunities for conflicted interests and breached confidences. At the same time, the high status of advising on takeovers and the financial lure they provide produce powerful incentives that inevitably inform the application of legal principles to these issues. The article adopts a hypothetical case study approach to focus on the challenges confronting these parties …

Tracing, Peter B. Oh

Articles

Tracing is a method that appears within multiple fields of law. Distinct conceptions of tracing, however, have arisen independently within securities and remedial law. In the securities context plaintiffs must trace their securities to a specific offering to pursue certain relief under the Securities Act of 1933. In the remedial context victims who trace their misappropriated value into a wrongdoer's hands can claim any derivative value, even if it has appreciated.

This article is the first to compare and then cross-apply tracing within these two contexts. Specifically, this article argues that securities law should adopt a version of the rules-based …