Law Commons^™

Another Role For Securities Regulation: Expanding Opportunity, Jasmin Sethi

Jasmin Sethi

Securities regulation can be justified on a number of grounds, but historically, expanding opportunities for wealth accumulation across sectors of the population has not been a justification given credence. This paper examines the implications of integrating an opportunities based perspective in evaluating securities regulation for policy decisions. I demonstrate how the policy implications of such a perspective are often distinct from those implicated by other approaches, such as a public welfare approach to securities regulation. In this article, I apply this perspective and what we know about human behavior to examine how securities policy could be shaped by an opportunities-based …

The End Of Mandatory Securities Arbitration?, Jill I. Gross

Pace Law Review

No abstract provided.

Sec V. Talbot: The "Misappropriation-Plus" Theory, Kalina Laleva

Golden Gate University Law Review

No abstract provided.

The Lion Awakens: The Foreign Corrupt Practices Act - 1977 To 2010, Michael B. Bixby

San Diego International Law Journal

This Article discusses the history, purposes and provisions of the Foreign Corrupt Practices Act, and traces its use and enforcement activity from 1977 to the present. This once little-used law has in recent years become the focus of aggressive activity by both the U.S. Department of Justice and the Securities and Exchange Commission. The manuscript also includes numerous charts reporting on key cases and enforcement activities over the last thirty-three years by the DOJ and SEC, as well as other information and statistics regarding the Foreign Corrupt Practices Act.

Securities Law, Peter A. Maclaren

Golden Gate University Law Review

In Hocking v. Dubois, the Ninth Circuit held that where an arrangement to sell a condominium included an option to participate in a rental pool arrangement ("RPA"), the arrangement constituted an investment contract. Consequently, what appeared to be a simple sale of real estate was subject to the provisions of the federal securities laws including the antifraud provisions of Rule I0b-5. This note will examine the rationale supporting the Ninth Circuit's application of securities law to condominium sales, examine the application of rules limiting private causes of action, and analyze the issues presented by the facts of Hocking.

Federal Jurisdiction, Susan H. Handelman

Golden Gate University Law Review

No abstract provided.

Leveraged Etfs: The Trojan Horse Has Passed The Margin-Rule Gates, William M. Humphries

Seattle University Law Review

What do the Great Depression, the Great Recession, and the demise of Lehman Brothers and Bear Sterns all have in common? One word: leverage. The misuse of leverage, in all its forms, contributed greatly to all of these events. Yet even today, common investors can purchase a leveraged exchange-traded fund (leveraged ETF), a complex product that uses leverage to increase returns, without triggering applicable laws designed to regulate the use of leverage. This Comment articulates the basics surrounding the functions and operations of leveraged ETFs and margin rules in order to assess the compatibility of the two. The Comment argues …

The Financial Reform Act: Will It Succeed In Reversing The Causes Of The Subprime Crisis And Prevent Future Crises?, Charles W. Murdock

Charles W. Murdock

Summary: The Financial Reform Act: Will It Succeed in Reversing the Causes of the Subprime Crisis and Prevent Future Crises? By: Professor Charles W. Murdock

The current financial crisis, which could have plunged the world into a financial abyss similar to the Great Depression, is far from resolved. The financial institutions, which this article asserts caused the crisis, have returned to profitability and have paid billions of dollars in bonuses, while ordinary Americans have borne the brunt of the meltdown, with formal unemployment hanging around the 10% mark. This has caused some to comment that profits have been privatized and …

Mediating Rights And Responsibilities In Control Transactions, Sean Vanderpol, Edward J. Waitzer

Osgoode Hall Law Journal

There is a growing debate as to the relative merits and consequences of a shift to a more shareholder-centric corporate governance framework. How much "direct democracy" makes sense in corporate decision making? If power is to be transferred to shareholders, should responsibilities be imposed (and, if so, how)? These issues have long been addressed by courts and regulators in the context of unsolicited control transactions. In its recent Air Products & Chemicals v. Airgas decision, the Delaware Chancery Court canvassed the evolution of its law on this point and concluded that implicit in the power (and responsibility) of the board …

Lying And Getting Caught: An Empirical Study Of The Effect Of Securities Class Action Settlements On Targeted Firms, Lin (Lynn) Bai, James D. Cox, Randall S. Thomas

Faculty Articles and Other Publications

Private suits have long been championed as a necessary mechanism not only to compensate investors for harms they suffer from financial frauds but also to enhance the deterrence of wrongdoing. But many critics have claimed that there is a hidden dark side to the successful prosecution of a securities class action. In this paper, we shed light on these issues by examining whether the revelation of earlier misstatements, the initiation of private suit, and the payment of a substantial settlement, weaken the defendant firm so that the firm is permanently worse off as a consequence of the settlement.

We find …

Blue Skies Ahead: Auction Rate Securities And The Need For A Private Right Of Action For New York Investors, Stephanie Myers

Pace Law Review

No abstract provided.

The Fox And The Ostrich: Is Gaap A Game Of Winks And Nods?, Arthur Acevedo

Arthur Acevedo

The fox is frequently described as sly, cunning and calculating in world literature. It is often associated with behavior that seeks advantage through trickery and pretext. The ostrich on the other hand, has been portrayed as cowardly and irrational. Its character defect is epitomized when it sticks its head in the sand at the first sign of trouble. The Financial Accounting Standards Board (FASB) can be described as the fox; the Securities Exchange Commission (SEC), the ostrich. This article examines the creation of accounting principles by the fox and the failure to govern by the ostrich. History demonstrates that the …

How Incentives Drove The Subprime Crisis, Charles W. Murdock

Charles W. Murdock

How Incentives Drove the Subprime Crisis

In order to address any systemic problem, whether the goal is to change the system, regulate the system, or change the incentives driving a system, it is necessary to appreciate all the drivers operating within the system. In the case of the subprime crisis, one of the drivers was the changing nature of the subprime loans, which was not factored into the models used by the investment bankers, the credit rating agencies, and the issuers of credit default swaps.

This paper is an attempt to look dispassionately at the subprime crisis from a particular …

Evolving Regulation Of Corporate Governance And The Implications For D&O Liability: The United States And Australia, Joan T.A. Gabel, Nancy R. Mansfield, Paul Von Nessen, Austin W. Hall, Andrew Jones

San Diego International Law Journal

This Article compares the modern corporate regulatory environments in the United States and Australia, including an analysis of the climate for Directors & Officers (D & O) liability coverage. Comparing these regulations across two large markets with similar historical bases for assessing director and officer liability allows us to explore which reforms may be more effective as new scandals emerge.

Toward A New Law And Economics: The Case Of The Stock Market, Lawrence E. Mitchell

Lawrence E. Mitchell

Toward a New Law and Economics: The Case of the Stock Market

Abstract

Do the public equity markets play the macroeconomic role we believe them to play? What is the relationship between the U.S. public equity markets and American economic growth? What do these conclusions teach us about the approaches we take and should take in evaluating and designing the laws of corporate governance and securities regulation?

The law and economics paradigm of the last forty years may be mistaken in assuming that economic efficiency on an individual (or institutional) level is sufficient to ensure economic welfare on a macroeconomic …

How Incentives Drove The Subprime Crisis, Charles W. Murdock

Charles W. Murdock

How Incentives Drove the Subprime Crisis

In order to address any systemic problem, whether the goal is to change the system, regulate the system, or change the incentives driving a system, it is necessary to appreciate all the drivers operating within the system. In the case of the subprime crisis, one of the drivers was the changing nature of the subprime loans, which was not factored into the models used by the investment bankers, the credit rating agencies, and the issuers of credit default swaps.

This paper is an attempt to look dispassionately at the subprime crisis from a particular …

How Incentives Drove The Subprime Crisis, Charles W. Murdock

Charles W. Murdock

In order to address any systemic problem, whether the goal is to change the system, o regulate the system, or change the incentives driving a system, it is necessary to appreciate all the drivers operating within the system. In the case of the subprime crisis, one of the drivers was the changing nature of the subprime loans, which was not factored into the models used by the investment bankers, the credit rating agencies, and the issuers of credit default swaps.

This paper is an attempt to look dispassionately at the subprime crisis from a particular perspective, namely, the incentives that …

Removal Of Covered Class Actions Under Slusa: The Failure Of Plain Meaning And Legislative Intent As Interpretative Devices, And The Supreme Court's Decisive Solution, J. Tyler Butts

William & Mary Business Law Review

No abstract provided.

The Tenth Annual A. A. Sommer, Jr. Lecture On Corporate, Securities, & Financial Law, Elisse B. Walter

Fordham Journal of Corporate & Financial Law

No abstract provided.

The Rule 10b-5 Suit: Loss Causation Pleading Standards In Private Securities Fraud Claims After Dura Pharmaceuticals, Inc. V. Broudo, Evan Hill

Fordham Law Review

In 2005, the U.S. Supreme Court decided Dura Pharmaceuticals, Inc. v. Broudo. The Court held that a plaintiff alleging securities fraud must prove that a defendant’s misrepresentation caused actual economic loss. The Dura decision put to rest the loss causation standard applied by several U.S. courts of appeals, which allowed plaintiffs to merely plead that a misrepresentation caused an artificially inflated purchase price. However, in Dura’s wake, the circuit courts have fashioned divergent standards with respect to pleading loss causation. The courts currently apply pleading standards ranging from the lenient and generally applicable Federal Rule of Civil Procedure 8(a) to …

A Tale Of Two Crises, William K. Black

Faculty Works

The savings and loan debacle of the 1980s was the worst financial scandal in U.S. history. The estimated present value cost to the taxpayers was $150-175 billion ($1993). The debacle was a major contributor to a sharp recession in real estate values in the Southwest. However, it had only a negligible effect on the general economy.

The Japanese economy, the second largest in the world, also experienced a crisis in the 1980s. Twin “bubbles” in its stock and real estate markets hyper inflated for most of the decade of the 1980s. In general, the bigger the bubble, the worse the …

Successful Financial Regulators Think Like Public Health Experts: Why Regulators Must Fight 'Control Fraud' Like Public Health Specialists, William K. Black

Faculty Works

“Control fraud” is the leading cause of bank failures and financial crises. In “control fraud” the persons controlling a seemingly legitimate entity use it as a weapon to defraud. This essay analyzes the role of regulators in two epidemics of control fraud: the savings & loan debacle of the 1980s and the ongoing financial crises that first became acute in the nonprime mortgage sector.

Effective regulation is essential to prevent and contain such epidemics. An epidemic is the natural outcome of a “pathogenic environment” which requires a reservoir of hosts for the pathogens to infect, and “vectors” to spread the …

How Trust Is Abused In Free Markets: Enron’S 'Crooked 'E’', William K. Black

Faculty Works

A market can have a lemon's problem when one party to the transaction has far superior information to the other and defects are not obvious. The classic bad car, the "lemon" led to the name for this theory. A lemon's market is inefficient. Both consumers and reputable sellers of high quality goods are harmed by the consumer's inability to distinguish superior goods. Frauds, who sell poor quality goods by misrepresenting quality are the only winners. Markets beset by lemon's problems may be improved by government intervention, which can aid both consumers and honest sellers.

In his article "How Trust is …

Keynote Address: The Conflicted Trustee Dilemma, Steven L. Schwarcz

NYLS Law Review

No abstract provided.

Burying The Constitution Under A Tarp, Gary S. Lawson

Faculty Scholarship

The Emergency Economic Stabilization Act of 2008, a.k.a. 'the bank bailout bill,' engendered a fair degree of political controversy during and after its enactment but relatively little constitutional controversy. That is unfortunate, and at least a bit puzzling, because, as a matter of original meaning, the statute raises important constitutional questions along at least four dimensions: it is questionable whether Congress had the enumerated power to authorize the Treasury Department to purchase securities, the specific authorizations were sufficiently vague to raise serious questions under the nondelegation doctrine, the expansion of the powers of the Secretary of the Treasury under the …