Law Commons^™

Gen Y More Black Corporate Directors, Chaz Brooks

Articles in Law Reviews & Other Academic Journals

Corporate diversity has been in the spotlight for decades. Recent efforts have followed years of legal scholarship, arguments on the business rationale for greater diversity, and more recently, the racial unrest during the summer of 2020. Called by some, a “racial reckoning,” the summer of 2020 catalyzed many corporate declarations on the importance of diversity, and more to the point of this article, the necessity of righting the economic disadvantages of Black Americans. This article looks specifically at one intervention by a corporate player following summer 2020, Nasdaq’s volley to increase corporate diversity through required disclosure. This article reviews the …

Delegated Corporate Voting And The Deliberative Franchise, Sarah C. Haan

Scholarly Articles

Starting in the 1930s with the earliest version of the proxy rules, the Securities and Exchange Commission (SEC) has gradually increased the proportion of “instructed” votes on the shareholder’s proxy card until, for the first time in 2022, it required a fully instructed proxy card. This evolution effectively shifted the exercise of the shareholder’s vote from the shareholders’ meeting to the vote delegation that occurs when the share-holder fills out the proxy card. The point in the electoral process when the binding voting choice is communicated is now the execution of the proxy card (assuming the shareholder completes the card …

Corporate Purpose Beyond Borders: A Key To Saving Our Planet Or Colonialism Repackaged?, Roza Nurgozhayeva, Dan W. Puchniak

Research Collection Yong Pung How School Of Law

The “corporate purpose” debate, while extremely important, has largely been built on an understanding of corporate law and governance that is local – jurisdiction bound – while the issue of climate change is global; pollution does not respect jurisdictional borders. Despite this, in practice, states, multinational corporations, and transnational organizations are increasingly using formal and informal mechanisms to shape sustainable corporate governance beyond jurisdictional borders – a colossal development that has been hiding in plain sight.This article develops a taxonomy for identifying and analyzing the forces driving corporate purpose beyond borders: state-based, firm-based, and organization-based “global corporate law and governance”. …

Comment Letter On Sec’S Proposed Rule On Conflicts Of Interest Associated With The Use Of Predictive Data Analytics By Broker-Dealers And Investment Advisers, File Number S7-12-23, Sergio Alberto Gramitto Ricci, Christina M. Sautter

Faculty Works

This comment letter responds to the Securities and Exchange Commission’s proposed rule Release Nos. 34-97990; IA-6353; File Number S7-12-23 - Conflicts of Interest Associated with the Use of Predictive Data Analytics by Broker-Dealers and Investment Advisers. Our comments draw on our scholarship relating to laypersons’ participation in securities markets and the corporate sector as well as on the role of technology in corporate governance.

We express concerns that the SEC’s proposed regulation undermines individuals’ ability to access capital markets in an efficient and cost-effective manner. In the era of excessive concentration of equities ownership and power, often with negative societal …

What’S Scope 3 Good For?, Madison Condon

Faculty Scholarship

Opposition to the Securities and Exchange Commission’s (“SEC”) new rule on updated climate risk reporting has focused on one category of disclosures as particularly objectionable: Scope 3 emissions.⁷ Otherwise known as “supply chain emissions,” Scope 3 emissions have been voluntarily reported by a growing number of companies since the term was invented as part of the Greenhouse Gas Protocol in 2001.⁸ They include all the emissions both up and downstream of a corporations’ own activities: the emissions of the privately-owned factory that produced the shoes Target sells, as well as the emissions you burn while driving to the …

Solving The Congressional Review Act’S Conundrum, Cary Coglianese

All Faculty Scholarship

Congress routinely enacts substantive statutes that require federal agencies to adopt regulations. When agencies issue regulations under these statutes, their rules are then subject to potential disapproval by Congress under a process outlined in a separate procedural statute known as the Congressional Review Act (CRA). If Congress passes a CRA disapproval resolution, this voids the disapproved regulation and triggers a provision in the CRA that prohibits the agency from adopting any subsequent regulation that is “substantially the same” as the disapproved one. But a CRA disapproval resolution does nothing to eliminate the agency’s obligation under the substantive statute to put …

Stakeholderism Silo Busting, Aneil Kovvali

Articles by Maurer Faculty

The fields of antitrust, bankruptcy, corporate, and securities law are undergoing tumultuous debates. On one side in each field is the dominant view that each field should focus exclusively on a specific constituency—antitrust on consumers, bankruptcy on creditors, corporate law on shareholders, and securities regulation on financial investors. On the other side is a growing insurgency that seeks to broaden the focus to a larger set of stakeholders, including workers, the environment, and political communities. But these conversations have largely proceeded in parallel, with each debate unfolding within the framework and literature of a single field. Studying these debates together …

Saving Climate Disclosure, Scott Hirst

Faculty Scholarship

Designing a regulatory response to climate change is one of the defining challenges of our era. In an attempt to address it, the Securities and Exchange Commission (SEC) has recently proposed a historic rule requiring climate-related disclosure by companies, resting squarely on the rationale of "investor demand." The proposed climate disclosure rule has met with an unprecedented response, some of it reflective of investor demand, but also including a broad array of opponents critical of the rule, who cast doubt on the rule's validity. A judicial challenge is all but inevitable.

This Article explains that the best way for the …

The Sec's Compensation Clawback Loophole, David I. Walker

Faculty Scholarship

The SEC has recently released final rules implementing the executive incentive compensation recovery or “clawback” provisions of the 2010 Dodd-Frank Act. These rules are aimed at recovering from executives incentive compensation determined to be excessive in light of a subsequent accounting restatement. Unfortunately, the SEC’s rules create a loophole by excluding purely time-vested stock and stock option grants from the reach of the new clawback regime. This aspect of the rulemaking seems inconsistent with the intent of Congress, and the result likely will be to distort executive pay practices in a perverse fashion, shifting compensation back in the direction of …

Statutory Interpretation And Agency Disgorgement Power, Caprice L. Roberts

Journal Articles

What happens when obstacles foreclose claims and threaten to leave parties without adequate relief? Or, when the cause of action escapes conventional classification? Or, when Supreme Court decisions frustrate private litigation causing pressure for public enforcement by agencies? Or, when individuals engage in novel forms of wrongdoing that the law may fail to reach? It becomes hard to resist the siren call of equity and its powerful remedies. This trend includes sweeping national injunctions, constructive trusts, and more. Disgorgement is also one such remedy, and its popularity is rising in terms of private and public applications and challenges. It is …

Special Purpose Acquisition Companies (Spacs) And The Sec, Neal Newman, Lawrence J. Trautman

Faculty Scholarship

Special Purpose Acquisition Companies (SPACs) are simply enterprises that raise money from the public with the intention of purchasing an existing business and becoming publicly traded in the securities markets. If the SPAC is successful in raising money and the acquisition takes place, the target company takes the SPAC’s place on a stock exchange in a transaction that resembles a public offering. Also known as “blank-check” or “reverse merger” companies, this process avoids many of the pitfalls of a traditional initial public offering.

During late 2020 and 2021 an unprecedented surge in the popularity and issuance of Special Purpose Acquisition …

The Corporate Forum, Sergio Alberto Gramitto Ricci, Christina M. Sautter

Faculty Works

In this response to Professor Jill Fisch’s article "GameStop and the Reemergence of the Retail Investor," we focus on one of the risks associated with the growth of retail investing that Fisch surveys, uncontrolled information sourcing. Drawing on our work on retail investors, we revisit an instrument dear to the U.S. Securities and Exchange Commission, whose potential has not been unleashed so far, the corporate forum. Our response succinctly discusses the main mechanics of the corporate forum, the benefits the corporate forum could provide, and the feasibility hurdles that might undermine the success of corporate forums.

The Environmental, Social, Governance (Esg) Debate Emerges From The Soil Of Climate Denial, Lawrence J. Trautman, Neal Newman

Faculty Scholarship

It has been almost six decades since Rachel Carson’s ominous warning of pending environmental disaster. During 2019 the United Nations requested urgent action from world leaders, given that “just over a decade is all that remains to stop irreversible damage from climate change.” With every passing year, damage resulting from destructive climate change causes increased pain, suffering, death and massive property loss. During 2020 and 2021 alone, severe weather events have included: destructive fires in California; record breaking freeze, power outage, and threat to the electrical grid in Texas; continuation of disruptive drought in U.S. Western states; and record-breaking high …

The Corporate Forum, Christina M. Sautter, Sergio Alberto Gramitto Ricci

Journal Articles

In this response to Professor Jill Fisch’s article "GameStop and the Reemergence of the Retail Investor," we focus on one of the risks associated with the growth of retail investing that Fisch surveys, uncontrolled information sourcing. Drawing on our work on retail investors, we revisit an instrument dear to the U.S. Securities and Exchange Commission, whose potential has not been unleashed so far, the corporate forum. Our response succinctly discusses the main mechanics of the corporate forum, the benefits the corporate forum could provide, and the feasibility hurdles that might undermine the success of corporate forums.

Pleading And Advocating A Negligence Claim Through The Regulation Best Interest Lens, Christine Lazaro, Michael S. Edmiston

Faculty Publications

(Excerpt)

On June 5, 2019, the SEC adopted the Regulation Best Interest Rule Package, consisting of (i) Regulation Best Interest: The Broker-Dealer Standard of Conduct (“Reg. BI”); (ii) Form CRS Relationship Summary and Amendments to Form ADV;(iii) the SEC Interpretation Regarding Standard of Conduct for Investment Advisers; and (iv) the SEC Interpretation Regarding the “Solely Incidental” Prong of the Broker-Dealer Exclusion from the Definition of Investment Adviser. Brokers were obligated to begin compliance with Reg. BI as of June 30, 2020.

Reg. BI contains four component sections mandating duties for brokers and firms: Disclosure, Care, Conflicts of Interest, and Compliance. …

The Sec's Fight To Stop District Courts From Declaring Its Hearings Unconstiutional, Linda Jellum

Articles

Can the Securities and Exchange Commission (SEC) unilaterally deny a United States citizen the right to challenge the constitutionality of the agency's administrative hearings in district court? The SEC thinks so, but it makes no sense for these constitutional challenges to be brought in the very proceeding that allegedly, and likely, violates the U.S. Constitution. The appellate courts mostly agreed with the SEC, until recently when the Fifth Circuit held that the district courts should hear these claims. Given this circuit split, this issue will soon reach the Supreme Court, making this Article extremely timely. The Securities Exchange Act of …

The Alchemy Of Effective Auditor Regulation, Sarah J. Williams

Faculty Scholarly Works

The audit profession has repeatedly failed in its obligation to accurately opine on financial statements prepared by companies that trade in U.S. markets. The list of entities that have contributed to the quest for effective regulation of these auditors is long; it includes the American Institute of Certified Public Accountants (AICPA), the U.S. Securities and Exchange Commission (SEC), Congress, outside directors of public companies, and the Public Company Accounting Oversight Board (PCAOB), a recent congressional creation. Yet, despite 50 years of effort, the formula for efficacious oversight of the audit profession remains elusive.

In 2020, then-president Donald Trump proposed to …

Esg & Anti-Black Racism, Alicia E. Plerhoples

Georgetown Law Faculty Publications and Other Works

This essay discusses contemporary federal, financial intermediary, and company efforts to navigate racial inequality, placing those efforts in the context of ESG—environmental, social, and governance—initiatives. While ESG tools and metrics have tended to focus on a firm’s external and internal impacts on the environment, human rights, and labor standards, in recent years, firms have targeted ESG efforts at racial equity primarily through internal diversity, equity, and inclusion (DEI) initiatives and customer-facing corporate philanthropy. This essay proposes an ESG racial equity goal, discusses how federal regulations of corporate DEI programs and policies fail to meet this goal, and highlights how racial …

Hidden Agendas In Shareholder Voting, Scott Hirst, Adriana Z. Robertson

Faculty Scholarship

Nothing in either corporate or securities law requires companies to notify investors what they will be voting on before the record date for a shareholder meeting. We show that, overwhelmingly, they do not. The result is “hidden agendas”: for 88% of shareholder votes, investors cannot find out what they will be voting on before the record date. This poses an especially serious problem for investors who engage in securities lending: they must decide whether the expected benefit of voting exceeds the expected benefit of continuing to lend their shares (or making them available for lending) without knowing what they will …

Climate Change As Systemic Risk, Barnali Choudhury

Articles & Book Chapters

Hindsight tells us that COVID-19, thought by former President Trump and others to have come out of nowhere, is more aptly labelled a “gray rhino” event, one that was highly probable and preventable. Indeed, despite considerable evidence of the impending threats of pandemics, for the most part, governments failed to prepare for the pandemic, resulting in wide-scale social and economic losses.

The lessons from COVID-19, however, should remind us of the perils of ignoring gray rhino risks. Nowhere is this more apparent than with climate change, a highly probable, high impact threat that has largely been ignored to date. Despite …

Unstoppable Gamestop: The Legislature’S Gap In Regulating Open Market Manipulations, Suzin Win

Student Publications

When imagining a modern David and Goliath story, one would not normally think of a group of Wall Street hedge funds versus individuals on a forum on Reddit.com. In January of 2021 though, many headlines made this comparison, as online traders frantically purchased GameStop stock (“GME”) and drove the prices sky-high, while large hedge funds faced up to $19 billion in losses. Throughout January and mid-February, users of the Reddit forum r/WallStreetBets began buying GME for collective entertainment reasons. What began as a “meme stock” that users purchased to comically pump the stock of a chain of mall video-game stores …

Public Compensation For Public Enforcement, Prentiss Cox, Christopher L. Peterson

Utah Law Faculty Scholarship

Public enforcement actions frequently result in the distribution of money to people affected by violation of market protection laws. This “public compensation” returns billions of dollars to consumers, investors, and others each year. The law of public compensation appears confusing at first impression because of inconsistent use of nomenclature and conceptual confusion, but courts have developed a discernible set of principles that allow for presumptions and loosened proof standards in awarding this relief. This doctrine held for decades despite repeated challenges by business defendants. The Supreme Court’s decision in Liu v. SEC in June 2020, followed by its grant of …

How To Regulate Blockchain’S Real-Life Applications: Lessons From The California Blockchain Working Group, Michele Benedetto Neitz

Publications

How should legislators write a law regulating a brand-new technology that they may not yet fully understand? With the advent of blockchain and other advanced computational technologies, this generation of legislators faces more complex questions than their predecessors. Drawing on the author’s experience as a member of California’s Blockchain Work-ing Group, this Article offers guidance to lawmakers, lawyers, and industry leaders seek-ing to draft effective laws regulating real-life applications of blockchain technology. This cutting-edge Article will do two things for its readers: (1) encourage them to be informed participants in conversations relating to federal and state blockchain regulation, and (2) …

Mandating Disclosure Of Climate-Related Financial Risk, Madison Condon, Sarah Ladin, Jack Lienke, Michael Panfil, Alexander Song

Faculty Scholarship

Climate change presents grave risk across the U.S. economy, including to corporations, their investors, the markets in which they operate, and the American public at large. Unlike other financial risks, however, climate risk is not routinely disclosed to the public. Insufficient corporate disclosures have persisted despite the Securities and Exchange Commission’s (“SEC”) issuance of regulatory guidance on the topic, the emergence of voluntary disclosure frameworks and standards, and growing calls from major investors for improved disclosure. Given the inadequacy of the current regime, the SEC should take further action to fulfill its statutory mandate to protect investors and promote efficiency, …

Follow-Up Enforcement, Andrew K. Jennings

Faculty Articles

Firms sometimes break the law. When they do, a host of government agencies have power to bring enforcement actions against them, which serve to punish past wrongs, compensate victims, disgorge unlawful gains, deter others, and prevent recidivism. Each of these purposes but one—preventing recidivism—is either met or not once the case reaches settlement. Whether recidivism will occur, however, remains uncertain at the time a case is settled. In light of that uncertainty, this Article takes a critical look at how enforcers currently address recidivism prevention—what it dubs the “clawback” approach—under which defendant firms receive penalty credit today in exchange for …

Power And Statistical Significance In Securities Fraud Litigation, Jill E. Fisch, Jonah B. Gelbach

All Faculty Scholarship

Event studies, a half-century-old approach to measuring the effect of events on stock prices, are now ubiquitous in securities fraud litigation. In determining whether the event study demonstrates a price effect, expert witnesses typically base their conclusion on whether the results are statistically significant at the 95% confidence level, a threshold that is drawn from the academic literature. As a positive matter, this represents a disconnect with legal standards of proof. As a normative matter, it may reduce enforcement of fraud claims because litigation event studies typically involve quite low statistical power even for large-scale frauds.

This paper, written for …

Chiarella V. United States And Its Indelible Impact On Insider Trading Law, Donna M. Nagy

Articles by Maurer Faculty

Insider trading cases, which are typically prosecuted as securities fraud, carry a mystique rarely present in securities litigation. As a former U.S. Attorney for the Southern District of New York once observed, the cases involve "'basically cops and robbers. . . .[d]id you get the information and did you trade on it?" It is no wonder that each insider trading case featured in this symposium presents a captivating story. But for two distinct reasons, Chiarella v. United States occupies a special place in history. It was the first prosecution under the federal securities laws for the crime of insider trading. …

The New Insider Trading, Karen E. Woody

Scholarly Articles

Pursuant to the SEC’s Rule 10b-5, in order to obtain a conviction for insider trading based upon a tipper-tippee theory, the government must prove that the tipper received a personal benefit for the tip, and that the tippee knew about that benefit. The last five years of blockbuster insider trading cases have focused on this seemingly nebulous personal benefit test, and the Supreme Court has been unable to clear the muddy waters. As a result, the parameters of insider trading remain hard to pin down and often shift depending on the facts of the most recent case. Two terms ago, …

An Essay On Pluralism In Financial Market Infrastructure Design: The Case Of Securities Holding In The United States, Charles W. Mooney Jr.

All Faculty Scholarship

This essay will appear as a chapter in a forthcoming edited volume published by Oxford University Press. It builds on the earlier article, Beyond Intermediation: A New (FinTech) Model for Securities Holding Infrastructures, 22 U. Pa. J. Bus. L. 386 (2020), which argues that serious consideration should be given to modifications of the deeply intermediated securities holding systems in the United States and elsewhere. Many of the costs and risks imposed by the intermediated holding systems fall within the domain of the regulation of securities markets (internal costs), such as impairments of shareholder voting and bondholder claims against issuers. …

Taxing Bitcoin And Blockchains—What The Irs Told Us (And What It Didn’T), David J. Shakow

All Faculty Scholarship

The IRS recently issued its second description of how it will treat Bitcoin and other blockchain assets. Some of its analysis leaves open questions that invite further consideration, and important issues remain unresolved. Moreover, because the popular Bitcoin blockchain uses a "proof of work" consensus procedure, issues relating to the alternative "proof of stake" procedure have been neglected.