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Articles 1 - 30 of 36
Full-Text Articles in Law
In The Midst Of Bankruptcy: How Cryptocurrency's Classification Affects Creditors Who Were Once Customers, Mia Qu
Washington Law Review
In 2022, Congress proposed the Digital Commodities Consumer Protection Act to amend the Commodity Exchange Act and define a new type of commodity: digital commodity. The definition of digital commodity encompasses cryptocurrency and provides the Commodity Futures Trading Commission with jurisdiction over digital asset transactions. This definition of digital commodity has two important implications. First, it signals the lawmakers’ tendency to generalize cryptocurrency as a commodity. Second, it brings complications into how creditors—especially individual crypto account holders—can recover in the recent bankruptcy cases involving prominent crypto companies. This Comment contains four components. First, it provides a brief explanation of cryptocurrency …
Structural Barriers To Inclusion In Arbitrator Pools, Nicole G. Iannarone
Structural Barriers To Inclusion In Arbitrator Pools, Nicole G. Iannarone
Washington Law Review
Critics increasingly challenge mandatory arbitration because the pools from which decisionmakers are selected are neither diverse nor inclusive. Evaluating diversity and inclusion in arbitrator pools is difficult due to the black box nature of mandatory arbitration. This Article evaluates inclusion in arbitrator pools through a case study on securities arbitration. The Article relies upon the relatively greater transparency of the Financial Industry Regulatory Authority (FINRA) forum. It begins by describing the unique role that small claims securities arbitration plays in maintaining investor trust and confidence in the securities markets before describing why ensuring that the FINRA arbitrator pool is both …
What’S (Still) Wrong With Credit Ratings?, Frank Partnoy
What’S (Still) Wrong With Credit Ratings?, Frank Partnoy
Washington Law Review
Scholars and regulators generally agree that credit rating agency failures were at the center of the recent financial crisis. Congress responded to these failures with reforms in the 2010 Dodd-Frank Act. This Article demonstrates that those reforms have failed. Instead, regulators have thwarted Congress’s intent at every turn. As a result, the major credit rating agencies continue to be hugely profitable, yet generate little or no informational value. The fundamental problems that led to the financial crisis—overreliance on credit ratings, a lack of oversight and accountability, and primitive methodologies—remain as significant as they were before the financial crisis. This Article …
Small Investments, Big Losses: The States' Role In Protecting Local Investors From Securities Fraud, Carlos Berkejó
Small Investments, Big Losses: The States' Role In Protecting Local Investors From Securities Fraud, Carlos Berkejó
Washington Law Review
The securities regulation landscape has changed dramatically in recent years. Federal laws have increasingly preempted the regulatory power of states, while at the same time expanding the universe of securities offerings that are not subject to registration at the federal level. These political and policy choices reflect a balancing of two sometimes competing goals: protecting investors and facilitating capital formation. While policies centered on preemption and deregulation might reduce the cost of raising capital, these could also lead to more pervasive securities fraud. Any resulting increase in fraudulent practices is likely to disproportionately affect small securities offerings that are local …
Are The Sec's Administrative Law Judges Biased? An Empirical Investigation, Urska Velikonja
Are The Sec's Administrative Law Judges Biased? An Empirical Investigation, Urska Velikonja
Washington Law Review
The Dodd-Frank Act significantly expanded the SEC’s enforcement flexibility by authorizing the agency to choose whether to bring an enforcement action in court or in an administrative proceeding. The change has faced strong opposition. Federal courts have enjoined several enforcement actions filed in administrative proceedings for constitutional infirmities, and cases are currently winding their way through the appellate process. But even if any constitutional problems were remedied, controversy would persist. Judges, lawmakers, practitioners, and academics have raised doubts as to whether litigation before administrative law judges (“ALJs”) is fair to defendants. In advancing their arguments, they have relied heavily on …
The Learned Hand Unformula For Short-Swing Liability, Andrew Chin
The Learned Hand Unformula For Short-Swing Liability, Andrew Chin
Washington Law Review
Section 16(b) of the Securities Exchange Act of 1934 allows for the recovery of short-swing profits realized by certain insiders from trading in a corporation’s stock within a period of less than six months. Three generations of corporate law students have been taught the “lowest-in, highest-out” formula that is intended to maximize the disgorgement of short-swing profits under section 16(b). Arnold Jacobs’s 1987 treatise presented two hypothetical examples where the formula fell short of the intended maximum, but courts, commentators, and practitioners have largely ignored these theoretical challenges to the formula’s validity. This Article identifies Gratz v. Claughton as the …
The Learned Hand Unformula For Short-Swing Liability, Andrew Chin
The Learned Hand Unformula For Short-Swing Liability, Andrew Chin
Washington Law Review
Section 16(b) of the Securities Exchange Act of 1934 allows for the recovery of short-swing profits realized by certain insiders from trading in a corporation’s stock within a period of less than six months. Three generations of corporate law students have been taught the “lowest-in, highest-out” formula that is intended to maximize the disgorgement of short-swing profits under section 16(b). Arnold Jacobs’s 1987 treatise presented two hypothetical examples where the formula fell short of the intended maximum, but courts, commentators, and practitioners have largely ignored these theoretical challenges to the formula’s validity. This Article identifies Gratz v. Claughton as the …
State Equity Crowdfunding And Investor Protection, Christopher H. Pierce-Wright
State Equity Crowdfunding And Investor Protection, Christopher H. Pierce-Wright
Washington Law Review
Since Kansas enacted the first blue sky law in 1911, securities regulation has sought to protect investors from fraud and speculation. Historically, this meant precluding substantial numbers of small businesses from raising capital in the form of equity investments. In order to facilitate small-business capital formation, in 2012 the federal government passed the Jumpstart Our Business Startups Act (JOBS Act). Although Title III of the JOBS Act required the Securities and Exchange Commission to undergo rulemaking to allow for small-dollar equity investments, the agency dragged its feet. In the interim, states anxious to jumpstart their own economies took the initiative. …
Selling Advice And Creating Expectations: Why Brokers Should Be Fiduciaries, Arthur B. Laby
Selling Advice And Creating Expectations: Why Brokers Should Be Fiduciaries, Arthur B. Laby
Washington Law Review
Investors face a dizzying array of choices regarding where to invest their funds and increasingly rely on experts for advice. Most advice about securities is provided by investment advisers or broker-dealers, legal categories with little meaning to most people but fraught with consequences. Although advisers and brokers often perform the same function, advisers are subject to a strict fiduciary standard to act in their clients’ best interest while brokers are subject to a less rigorous standard of suitability to ensure that their recommendations are suitable for customers. In 2010, the Dodd-Frank Act authorized the U.S. Securities and Exchange Commission (SEC) …
Whistling In The Dark? Corporate Fraud, Whistleblowers, And The Implications Of The Sarbanes-Oxley Act For Employment Law, Miriam A. Cherry
Whistling In The Dark? Corporate Fraud, Whistleblowers, And The Implications Of The Sarbanes-Oxley Act For Employment Law, Miriam A. Cherry
Washington Law Review
Passed in 2002 in the wake of the accounting scandals that resulted in billions of dollars of lost value to shareholders, the Sarbanes-Oxley Act has as its major goal the prevention of corporate corruption. This Article analyzes the impact of section 806, the portion of the Sarbanes-Oxlcy Act that provides protections for employees who report securities fraud, and describes the effect that Sarbanes-Oxley has on existing employment law. In addition, this Article contributes to the debate over the general effectiveness of the Sarbanes-Oxley Act, a topic of contention among both academics and press commentators. This Article argues that the Act …
Disappearing Without A Trace: Sections 11 And 12(A)(2) Of The 1933 Securities Act, Hillary A. Sale
Disappearing Without A Trace: Sections 11 And 12(A)(2) Of The 1933 Securities Act, Hillary A. Sale
Washington Law Review
The judicially created tracing requirement thwarts the remedial sections of the 1933 Securities Act (the "Securities Act") by requiring shareholders to prove the impossible—that their securities were actually issued in the questioned offering. Since 1967, courts addressing this issue have, without question, adopted a requirement for section 11 that plaintiff-shareholders trace their shares to the offering. Recently, courts have expanded it to apply to section 12(a)(2) as well. For any but the first purchases of a share of stock, this requirement has always been virtually impossible to meet. Courts have also used the 1995 opinion in Gustafson v. Alloyd Co. …
Malone V. Brincat: The Fiduciary Disclosure Duty Of Corporate Directors Under Delaware Law, Nicole M. Kim
Malone V. Brincat: The Fiduciary Disclosure Duty Of Corporate Directors Under Delaware Law, Nicole M. Kim
Washington Law Review
In Malone v. Brincat, the Supreme Court of Delaware significantly broadened the fiduciary disclosure duty of corporate directors under Delaware law. Malone allows shareholders to bring either a direct or a derivative action against directors for the public release of misleading financial statements reported to the Securities Exchange Commission, regardless of whether the alleged misstatements were made in connection with a request for shareholder action. The court also held that a federal preemption statute, the Securities Litigation Uniform Standards Act of 1998, did not preempt the shareholders' action in Delaware state court. This Note argues that the Supreme Court …
United States V. Smith: The Use-Possession Debate In Sec Enforcement Actions Under § 10(B), Oriana N. Li
United States V. Smith: The Use-Possession Debate In Sec Enforcement Actions Under § 10(B), Oriana N. Li
Washington Law Review
The U.S. Supreme Court has yet to address an underlying issue in the evolution of insider trading law: whether Rule 10b-5 liability should attach when someone trades while "in the possession of" material, nonpublic information, or whether a more stringent standard of having actually used or traded "on the basis of" such information must be met. In United States v. Smith, the Court of Appeals for the Ninth Circuit held that a violation of Rule 10b-5 requires an actual causal connection between the possession of inside information and the decision to trade in securities. This Note argues that the …
Should Labor Be Allowed To Make Shareholder Proposals?, Randall S. Thomas, Kenneth J. Martin
Should Labor Be Allowed To Make Shareholder Proposals?, Randall S. Thomas, Kenneth J. Martin
Washington Law Review
In this Article, we investigate whether labor unions and related entities should be permitted to continue to make shareholder proposals using Rule 14a-8 of the federal securities laws. We focus on the claim that labor is using the shareholder proposal mechanism to further the interests of workers at the expense of other shareholders. In particular, corporate management groups have suggested that when labor is involved in collective bargaining negotiations with management, it should be barred from submitting shareholder proposals because labor proposals seek to further interests not shared by other security holders of the company. Using data on shareholder proposals …
Gilding The Iron Rice Bowl: The Illusion Of Shareholder Rights In China, Matthew D. Latimer
Gilding The Iron Rice Bowl: The Illusion Of Shareholder Rights In China, Matthew D. Latimer
Washington Law Review
In the late 1970s, the People's Republic of China (P.R.C.) embarked upon a program of economic reform that has resulted in the issuance of equity securities in previously state-owned enterprises. with the recent advent of national stockmarkets, national securities legislation is emerging to supplement and further define prior local-level regulation. Despite these new laws, however, private investors still lack many of the protections enjoyed by investors in Western financial markets. This Comment examines these disparities and suggests that non-state investors in China's nascent financial markets still lack an effective means of overseeing the policy decisions of State-owned corporations and face …
Corporate Versus Contractual Mutual Funds: An Evaluation Of Structure And Governance, Wallace Wen Yeu Wang
Corporate Versus Contractual Mutual Funds: An Evaluation Of Structure And Governance, Wallace Wen Yeu Wang
Washington Law Review
This Article develops an analytic framework to evaluate the comparative merits of the structure and governance of the two dominant types of mutual funds—the Corporate Fund (the U.S. model) and the Contractual Fund (the German, Japanese and British models). The former is characterized by centralized decision-making functions, while the latter employs a more decentralized structure. The semi-hierarchical structure of the Corporate Fund leads to significant transaction costs such as influence, intervention and collective decision-making costs. Specifically, the board of directors is not effective in negotiating performance-related terms (e.g., fees), and shareholder suits based on fiduciary duties do not adequately address …
Tipper Credibility, Noninformational Tippee Trading, And Abstention From Trading: An Analysis Of Gaps In The Insider Trading Laws, Steven R. Salbu
Tipper Credibility, Noninformational Tippee Trading, And Abstention From Trading: An Analysis Of Gaps In The Insider Trading Laws, Steven R. Salbu
Washington Law Review
The regulation of insider trading in the United States prohibits only a fraction of the kind of behaviors which the Securities and Exchange Commission sought to curb in the 1930s. This Article explains the problems created by trading on tipper credibility and noninformation, as well as the difficulties associated with insider abstention from trading. These practices are conceptually akin to trading on inside information, yet they fall beyond the purview of existing prohibitions. The Article examines potential vehicles for rendering the regulations more consistent, including authorization of all insider trading, policing of information, the creation of inferences of fraud from …
On "Protecting The Ordinary Investor", Ralph K. Winter
On "Protecting The Ordinary Investor", Ralph K. Winter
Washington Law Review
In this lecture I propose to differentiate, in a somewhat arbitrary yet analytically helpful way, between four types of investors, and then to consider various issues of corporate and securities law in light of the interests and functions of the different investors. I will style the investors the "Ordinary Investor," the "Speculator," the "Institutional Investor," and the "Entrepreneur in the Market for Management Control." These distinctions are arbitrary because overlap exists between the categories. Moreover, these definitions are not based on how particular investors behave, but on the market functions different kinds of investors perform. Thus, some who consider themselves …
On "Protecting The Ordinary Investor", Ralph K. Winter
On "Protecting The Ordinary Investor", Ralph K. Winter
Washington Law Review
In this lecture I propose to differentiate, in a somewhat arbitrary yet analytically helpful way, between four types of investors, and then to consider various issues of corporate and securities law in light of the interests and functions of the different investors. I will style the investors the "Ordinary Investor," the "Speculator," the "Institutional Investor," and the "Entrepreneur in the Market for Management Control." These distinctions are arbitrary because overlap exists between the categories. Moreover, these definitions are not based on how particular investors behave, but on the market functions different kinds of investors perform. Thus, some who consider themselves …
Expanding Seller Liability Under The Securities Act Of Washington—Habermann V. Wppss, 109 Wash. 2d 107, 744 P.2d 1032 (1987), Barbara L. Schmidt
Expanding Seller Liability Under The Securities Act Of Washington—Habermann V. Wppss, 109 Wash. 2d 107, 744 P.2d 1032 (1987), Barbara L. Schmidt
Washington Law Review
The Washington Public Power Supply System's ("WPPSS") abandonment of two nuclear power projects led to the largest municipal bond default in American history. This default generated an unprecedented volume of securities litigation. Among the many court decisions handed down in the wake of the WPPSS fiasco was the Washington Supreme Court's decision in Haberman v. WPPSS. The Haberman court significantly expanded the civil liability provisions of the Securities Act of Washington ("WSA"). In Haberman, the court expressly included as a "seller" the bond issuer and implicitly suggested that professional consultants who provide services in conjunction with a bond issuance may …
Expanding Seller Liability Under The Securities Act Of Washington—Habermann V. Wppss, 109 Wash. 2d 107, 744 P.2d 1032 (1987), Barbara L. Schmidt
Expanding Seller Liability Under The Securities Act Of Washington—Habermann V. Wppss, 109 Wash. 2d 107, 744 P.2d 1032 (1987), Barbara L. Schmidt
Washington Law Review
The Washington Public Power Supply System's ("WPPSS") abandonment of two nuclear power projects led to the largest municipal bond default in American history. This default generated an unprecedented volume of securities litigation. Among the many court decisions handed down in the wake of the WPPSS fiasco was the Washington Supreme Court's decision in Haberman v. WPPSS. The Haberman court significantly expanded the civil liability provisions of the Securities Act of Washington ("WSA"). In Haberman, the court expressly included as a "seller" the bond issuer and implicitly suggested that professional consultants who provide services in conjunction with a bond issuance may …
Federal And State Securities Claims: Litigation Or Arbitration?—Dean Witter Reynolds, Inc. V. Byrd, 105 S. Ct. 1238 (1985), Sherrie Kaiser Goff
Federal And State Securities Claims: Litigation Or Arbitration?—Dean Witter Reynolds, Inc. V. Byrd, 105 S. Ct. 1238 (1985), Sherrie Kaiser Goff
Washington Law Review
This Note analyzes Byrd in light of the dilemma that occurs when federal and state claims arise in the same action. The Note concludes that, although Byrd may be a step in the right direction, the current state of the law is still not satisfactory. Because arbitration offers several advantages to the investor, this Note argues that both federal and state securities claims should be arbitrated. The Note suggests that either Congress change the law to allow arbitration of the federal claims, as Justice White proposed, or the Court allow arbitration of section 10(b) claims, or even of claims brought …
Securities Regulation And Freedom Of The Press: Toward A Marketplace Of Ideas In The Marketplace Of Investment, Donald E. Lively
Securities Regulation And Freedom Of The Press: Toward A Marketplace Of Ideas In The Marketplace Of Investment, Donald E. Lively
Washington Law Review
Federal regulation of securities traditionally, and almost unquestioningly, has included regulation of the press. Central to governance of the investment marketplace are systems of prior restraint and mandatory disclosure premised upon investor protection but antithetical to first amendment principles. The constitutionality of those systems largely has been uncontested. Since commercial speech has emerged as a protected form of expression, however, it is fitting to assess the compatibility of securities regulation with the first amendment.
Securities Regulation And Freedom Of The Press: Toward A Marketplace Of Ideas In The Marketplace Of Investment, Donald E. Lively
Securities Regulation And Freedom Of The Press: Toward A Marketplace Of Ideas In The Marketplace Of Investment, Donald E. Lively
Washington Law Review
Federal regulation of securities traditionally, and almost unquestioningly, has included regulation of the press. Central to governance of the investment marketplace are systems of prior restraint and mandatory disclosure premised upon investor protection but antithetical to first amendment principles. The constitutionality of those systems largely has been uncontested. Since commercial speech has emerged as a protected form of expression, however, it is fitting to assess the compatibility of securities regulation with the first amendment.
Compromise Merit Review—A Proposal For Both Sides Of The Debate, Gregory Gorder
Compromise Merit Review—A Proposal For Both Sides Of The Debate, Gregory Gorder
Washington Law Review
As is the case with many facets of modem life, government is involved in regulating the primary securities markets. Both federal and state laws require registration of initial securities offerings. Federal registration is procedural in nature, requiring full disclosure. State registiation, on the other hand, usually includes "merit review" of proposed securities offerings; state administrators typically may deny registration of a security if the offering would not be fair, just, and equitable or would be unreasonable in certain respects. This Comment analyzes the advantages and disadvantages of merit review, specifically the discretionary power reposed in the state administrator, and proposes …
Short-Swing Profiles In Failed Takeover Bids—The Role Of Section 16(B), Donna Darm
Short-Swing Profiles In Failed Takeover Bids—The Role Of Section 16(B), Donna Darm
Washington Law Review
This Comment examines the scope of section 16(b) liability for the unsuccessful takeover bidder. It then develops two possible analyses by which the courts might exempt the takeover bidder from section 16(b)'s provisions. Alternatively, it recommends that if the courts do not exonerate takeover bidders, they should at least allow a less harsh calculation of profit.
The Ninth Circuit's Requirement Of Notice To Targets Of Third Party Subpoenas In Sec Investigations—A Remedy Without A Right—Jerry T. O'Brien, Inc. V. Sec, 704 F.2d 1065 (9th Cir. 1983), Rev'd, No. 83-751, Slip Op. (U.S. June 18, 1984), Judith Bellamy Peck
Washington Law Review
The threat of civil, criminal, or administrative sanctions is, of course, the greatest risk faced by a subject of an SEC investigation. However, regardless of the investigatee's guilt or innocence, an investigation poses other hazards, especially damage to business reputation. SEC investigatees traditionally have had virtually no protection against the economic risks that accompany the investigative process. These risks have been seen as the unavoidable cost of pursuing a regulated activity. This Note examines generally the economic interests of SEC investigatees and reviews prior judicial treatment of these interests. The Note then analyzes the O'Brien decision, focusing on the court's …
Securities Fraud Under The Blue Sky Of Washington, Sally H. Clarke
Securities Fraud Under The Blue Sky Of Washington, Sally H. Clarke
Washington Law Review
In the past, federal courts have been the primary forums for securities fraud litigation because they exercise exclusive jurisdiction over claims under the Securities Exchange Act of 1934, and have expansively interpreted the antifraud provisions of that Act. Recent developments, however, suggest that state courts may provide a more attractive forum for plaintiffs seeking relief from securities fraud in Washington. Relevant considerations include recent United States Supreme Court decisions limiting the scope of civil liability under the 1934 Act, increasing congestion and delay in federal courts, recent amendments expanding the coverage of the civil liability provision of the Securities Act …
Federal Securities Law—Fraud—Supreme Court Affirmation Of The Birnbaum Rule—Blue Chip Stamps V. Manor Drug Stores, 421 U.S. 723 (1975), Douglass A. North
Federal Securities Law—Fraud—Supreme Court Affirmation Of The Birnbaum Rule—Blue Chip Stamps V. Manor Drug Stores, 421 U.S. 723 (1975), Douglass A. North
Washington Law Review
This note will examine the historical background and development of the Birnbaum rule and will consider the Supreme Court's reasoning in its first examination of that rule. Taking the position that the Birnbaum rule is generally a useful one, this note nevertheless suggests that the rule should be applied more flexibly in the future in order to achieve its twin objectives of admitting valid claims and excluding nuisance suits. Particularly questioned will be the Court's failure to delineate and consider separately the validity of the substantive portion of the Birnbaum rule; the Court's wholehearted acceptance of the rule, which casts …
Securities Regulation—Private Offering Exemption: Sec Proposed Rule 146, S. M. L.
Securities Regulation—Private Offering Exemption: Sec Proposed Rule 146, S. M. L.
Washington Law Review
This note will examine the present ambit of the private offering exemption, consider proposed amendments to it and propose changes to clarify its application.