Law Commons^™

Federalized Corporate Governance: The Dream Of William O. Douglas As Sarbanes-Oxley Turns 20, Joan Macleod Heminway

Scholarly Works

The federalization of U.S. corporate governance has been a topic of conversation among policymakers from the very beginning of the federal securities laws in the New Deal era. Among the early proponents of a federalized system of corporate governance oversight was William O. Douglas—perhaps best known as the longest-serving U.S. Supreme Court justice, but who also was a former commissioner and chair of the U.S. Securities and Exchange Commission. Reflecting on Douglas’s federal corporate governance ideas, Professor Roberta Karmel wrote a law review article for the Delaware Journal of Corporate Law, published in 2005, commenting on the extent and nature …

Securities Scholars' Comment Letter On Draft Whistleblower Award And Protection Act, Andrew K. Jennings, Samantha J. Prince, Benjamin P. Edwards, Andrew C. Baker

Faculty Scholarly Works

In May 2020, the North American Securities Administrators Association (NASAA), an organization representing state and provincial securities regulators in Canada, the United States, and Mexico, released a draft Model Whistleblower Award and Protection Act (the Proposed Act) for public comment. The Proposed Act drew from securities-whistleblower statutes in Utah and Indiana, as well as the federal Sarbanes-Oxley and Dodd-Frank Acts.

In brief, the Proposed Act provided for a state-level securities whistleblower-award program and an anti-retaliation private right of action. NASAA received seven comment letters, including one from securities scholars. Our securities scholars’ letter highlighted two areas of concern. First, we …

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, …

Addressing The Auditor Independence Puzzle: Regulatory Models And Proposal For Reform, Martin Gelter, Aurelio Gurrea-Martinez

Research Collection Yong Pung How School Of Law

Auditors play a major role in corporate governance and capital markets. Ex ante, auditors facilitate firms’ access to finance by fostering trust among public investors. Ex post, auditors can prevent misbehavior and financial fraud by corporate insiders. In order to fulfill these goals, however, in addition to having the adequate knowledge and expertise, auditors must perform their functions in an independent manner. Unfortunately, auditors are subject to conflicts of interest by, for example, providing non-audit services or the mere fact of being hired and paid by the audited company. Therefore, even if auditors act independently, investors have reason to think …

Legislative And Regulatory Obligations On Corporate Attorneys: Production Data In The World Of Sarbanes Oxley And General Data Protections, David Tersteeg

Northern Illinois University Law Review

Sarbanes Oxley, General Data Protection Regulation, and the American Bar Association's Model Rules place significant professional and personal obligations on attorneys who represent organizations in regard to their organization's handling of production and personal data. There are significant areas of vulnerability to the production and personal data that are frequently overlooked or ignored which significantly increase the likelihood and damage from a data breach. This article will provide an overview of the obligations, recent data breaches, the foreseeability and material impacts of data breaches, and a methodology to drive improvement in an organization.

The Federalization Of Corporate Governance—An Evolving Process, Marc I. Steinberg

Faculty Journal Articles and Book Chapters

This Article focuses on the timely subject of the federalization of corporate governance in the United States from both contemporary and historical perspectives. Although the states traditionally have overseen the sphere of corporate governance, federal law today affects the governance of publicly held corporations to a greater extent than ever before in our nation’s history. This Article, drawn from the author’s recently published Oxford University Press book (The Federalization of Corporate Governance), addresses this timely subject from the commencement of the 20th century to the present. Through the decades, the federalization of corporate governance has gone through periods …

From "Federalization" To "Mixed Governance" In Corporate Law: A Defense Of Sarbanes-Oxley, Robert B. Ahdieh

Robert B. Ahdieh

Since the very moment of its adoption, the Sarbanes-Oxley Act of 2002 has been subject to a litany of critiques, many of them seemingly well-placed. The almost universal condemnation of the Act for its asserted 'federalization' of corporate law, by contrast, deserves short shrift. Though widely invoked - and blithely accepted - dissection of this argument against the legislation shows it to rely either on flawed assumptions or on normative preferences not ordinarily acknowledged (or perhaps even accepted) by those who criticize Sarbanes-Oxley for its federalization of state corporate law.

Once we appreciate as much, we can begin by replacing …

What Would We Do Without Them: Whistleblowers In The Era Of Sarbanes-Oxley And Dodd-Frank, Sean Griffith, Jane A. Norberg, Ian Engoron, Alice Brightsky, Tracey Mcneil, Jennifer M. Pacella, Judith Weinstock, Jason Zuckerman

Fordham Journal of Corporate & Financial Law

No abstract provided.

Whistling Loud And Clear: Applying Chevron To Subsection 21f Of Dodd–Frank, Shaun M. Bennett

Washington and Lee Law Review

This Note addresses a circuit court split arising from a portion of the anti-retaliation provisions in the Dodd–Frank Wall Street Reform and Consumer Protection Act. Subsection 21F’s retaliation prohibitions apply to those employers whose employees make required or protected disclosures under the Sarbanes–Oxley Act of 2002 (SOX) or any other rule or regulation under the SEC’s jurisdiction. SOX provides anti -retaliation protections — similar to those available under Dodd–Frank — for employees of publicly traded companies who report misconduct. However, SOX expressly affords protections to those who provide information to “a Federal regulatory or law enforcement agency; any Member of …

Collaborative Gatekeepers, Stavros Gadinis, Colby Mangels University Of California - Berkeley

Stavros Gadinis

In their efforts to hold financial institutions accountable after the 2007 financial crisis, U.S. regulators have repeatedly turned to anti-money-laundering laws. Initially designed to fight drug cartels and terrorists, these laws have recently yielded billion-dollar fines for all types of bank engagement in fraud and have spurred an overhaul of financial institutions’ internal compliance. This increased reliance on anti-money-laundering laws, we argue, is due to distinct features that can better help regulators gain insights into financial fraud. Most other financial laws enlist private firms as gatekeepers and hold them liable if they knowingly or negligently engage in client fraud. Yet, …

Dictation And Delegation In Securities Regulation, Usha Rodrigues

Scholarly Works

When Congress undertakes major financial reform, either it dictates the precise contours of the law itself or it delegates the bulk of the rulemaking to an administrative agency. This choice has critical consequences. Making the law self-executing in federal legislation is swift, not subject to administrative tinkering, and less vulnerable than rulemaking to judicial second-guessing. Agency action is, in contrast, deliberate, subject to ongoing bureaucratic fiddling and more vulnerable than statutes to judicial challenge.

This Article offers the first empirical analysis of the extent of congressional delegation in securities law from 1970 to the present day, examining nine pieces of …

The Bylaw Puzzle In Delaware Corporate Law, David A. Skeel Jr.

All Faculty Scholarship

In less than a decade, Delaware’s legislature has overruled its courts and reshaped Delaware corporate law on two different occasions, with proxy access bylaws in 2009 and with shareholder litigation bylaws in 2015. Having two dramatic interventions in quick succession would be puzzling under any circumstances. The interventions are doubly puzzling because with proxy access, Delaware’s legislature authorized the use of bylaws or charter provisions that Delaware’s courts had banned; while with shareholder litigation, it banned bylaws or charter provisions that the courts had authorized. This Article attempts to unravel the puzzle.

I start with corporate law doctrine, and find …

Sarbanes-Oxley, Kermit The Frog, And Competition Regarding Audit Quality, Matthew J. Barrett

Matthew J. Barrett

The regulatory scheme after Sarbanes-Oxley has significantly improved public company audits in the United States, or at least has demonstrated the potential to do so, but the obligation to preserve client confidentially still prevents auditors from competing for new clients on the basis of audit quality. This paper suggests a simple way for the SEC to facilitate such competition within the existing regulatory framework. The SEC should require issuers and registrants to disclose whether their independent audits uncovered any financial fraud and, within specified ranges, the number and amount of all audit adjustments incorporated into the financial statements filed with …

Collaborative Gatekeepers, Stavros Gadinis, Colby Mangels University Of California - Berkeley

Washington and Lee Law Review

In their efforts to hold financial institutions accountable after the 2007 financial crisis, U.S. regulators have repeatedly turned to anti-money-laundering laws. Initially designed to fight drug cartels and terrorists, these laws have recently yielded billion-dollar fines for all types of bank engagement in fraud and have spurred an overhaul of financial institutions’ internal compliance. This increased reliance on anti-money-laundering laws, we argue, is due to distinct features that can better help regulators gain insights into financial fraud. Most other financial laws enlist private firms as gatekeepers and hold them liable if they knowingly or negligently engage in client fraud. Yet, …

The Lawyer's Duty Of Disclosure Ethics And Sarbanes-Oxley The New Conundrum For Patent Lawyers, Abraham C. Reich, Steven J. Rocci

Akron Intellectual Property Journal

The general purpose of this paper is to sensitize intellectual property lawyers to the potential impact on their practice created by Sarbanes-Oxley. At a more detailed level, and because of the unique challenges facing them, this paper addresses Sarbanes-Oxley's potential impact on patent lawyers who practice before the PTO, even when it is the patent lawyer's sole practice. To that end, this paper will highlight relevant portions of Rule 56, the relevant ethical code sections, and the pertinent considerations under Sarbanes-Oxley.

Where Are The Jobs In The Jobs Act? An Examination Of The Uneasy Connection Between Securities Disclosure And Job Creation, Ian K. Peck

American University Business Law Review

No abstract provided.

Financial Rewards For Whistleblowing Lawyers, Nancy J. Moore, Kathleen Clark

Faculty Scholarship

The federal government relies increasingly on whistleblowers to ferret out fraud, and has awarded whistleblowers over $4 billion under the False Claims Act and the Dodd-Frank Wall Street reform and Consumer Protection Act. May lawyers ethically seek whistleblower rewards under these federal statutes? A handful of lawyers have tried to do so as FCA qui tam relators. They have not yet succeeded, but several court decisions suggest that they might be able to do so under confidentiality exceptions to state ethics law, which several courts have held are not preempted by the FCA. No lawyer has been publicly identified as …

The Sarbanes-Oxley Act And Fiduciary Duties, Lyman P. Q. Johnson, Mark A. Sides

Lyman P. Q. Johnson

This article explores the implications of the Sarbanes-Oxley Act of 2002 for fiduciary duty analysis in corporate law. The article examines those provisions of the Act, and recent SEC, NYSE and NASDAQ rules, that most pointedly bear on corporate governance. The article develops in detail exactly how Sarbanes-Oxley and those rules may alter state fiduciary duty law. Sarbanes-Oxley makes unprecedented federal inroads into the area of corporate governance and, although the fact of federal incursion into corporate governance is important in its own right, the more intriguing issue concerns the eventual interplay between federal and state law. Specifically, on various …

“Because That's Where The Money Is”: A Theory Of Corporate Legal Compliance, William C. Bradford

The Journal of Business, Entrepreneurship & the Law

The study and regulation of firms per se as agents of compliance may be misguided. Firms are abstractions that exist only in the legal, and not the natural, sense, and, as such, utterly lack decisional capacity. Firms do not decide whether to comply with law; people, specifically officers who exercise decisional authority on their behalf, do. Any theory that would explain or predict firm compliance must account for the individual level of analysis. However, most corporate legal compliance research minimizes the salience of personality. Accordingly, Part II traces associations between personalities of CEOs and firm compliance with obligations arising under …

Conflicted Counselors: Retaliation Protections For Attorney-Whistleblowers In An Inconsistent Regulatory Regime, Jennifer M. Pacella

Jennifer M. Pacella, Esq.

Attorneys, especially in-house counsel, are subject to retaliation by employers in much the same way as traditional whistleblowers, often experiencing retaliation and loss of livelihood for reporting instances of wrongdoing about their clients. Although attorney-whistleblowing undoubtedly invokes ethical concerns, attorneys who “appear and practice” before the Securities and Exchange Commission (“SEC”) are required by federal law to act as internal whistleblowers under the Sarbanes-Oxley Act (“SOX”) and report evidence of material violations of the law within the organizations that they represent. An attorney’s failure to comply with these obligations will result in SEC-imposed civil penalties and disciplinary action. Recent federal …

Chicken Little Lives: The Anticipated And Actual Effect Of Sarbanes-Oxley On Corporate Lawyers' Conduct, Susan Saab Fortney

Susan S. Fortney

This article addresses the controversy surrounding the Sarbanes-Oxley Act of 2002, which was seen by many lawyers as threatening the relationship between lawyers and their corporate clients. Part I of this article introduces the topic by providing a brief history of the increased government regulation and enforcement actions that forced lawyers to reexamine their role in representing their clients, beginning with the case of SEC v. National Student Marketing Corp. Part II reviews the organized bar's reaction to Sarbanes-Oxley. Part III focuses on law firms' response to the legislation. Part IV considers the views of individual corporate and securities lawyers …

The Ipo Crisis: Title I Of The Jobs Act And Why It Does Not Go Far Enough, Brian Howaniec

Pepperdine Law Review

This Comment explores the brewing controversy over Title I and assesses the actual impact that it is having (and will have) on investor protection and the IPO market. This Comment argues that Title I has the ability to affect both, but, due to factors outside of Congress's control, will likely have only a minimal effect on either. Part II discusses the objectives of investor protection legislation and how previous legislation regulated the financial markets. Part III explains how these regulations have been changed for emerging growth companies under Title I. Part IV examines what impact Title I will have on …

Shredded Fish Redux, Robert Sanger

Robert M. Sanger

The Yates case, in which certiorari had been granted to the United States Court of Appeals for the Eleventh Circuit had been discussed in a previous column of Criminal Justice. The article was entitled “Shredded Fish” because the sea captain in Yates was prosecuted under the document shredding provisions of the Sarbanes-Oxley Act of 2002 for destroying fish. That case has now been decided by the United States Supreme Court in Yates v. United States, on February 25, 2015. The case involves the rule of lenity as well as a discussion of overcriminalization.

Yates V. United States: The Supreme Court Lets Florida Fisherman Off The Hook For Sarbanes-Oxley Charge, Collin Mccarthy

GGU Law Review Blog

Capt. of a commercial fishing boat was charge under Sarbanes-Oxley of “destruction, alteration, or falsification of records in Federal investigations and bankruptcy,” to wit, fish illegally caught.

Cybersecurity: What About U.S. Policy?, Lawrence J. Trautman

Lawrence J. Trautman Sr.

During December 2014, just hours before the holiday recess, the U.S. Congress passed five major legislative proposals designed to enhance U.S. cybersecurity. Following signature by the President, these became the first cybersecurity laws to be enacted in over a decade, since passage of the Federal Information Security Management Act of 2002. My goal is to explore the unusually complex subject of cybersecurity policy in a highly readable manner. An analogy with the recent deadly and global Ebola epidemic is used to illustrate policy challenges, and hopefully will assist in transforming the technological language of cybersecurity into a more easily understandable …

Buying Voice: Financial Rewards For Whistleblowing Lawyers, Nancy J. Moore, Kathleen Clark

Nancy J Moore

“Buying Voice: Financial Incentives for Whistleblowing Lawyers”

Kathleen Clark and Nancy J. Moore

Abstract

The federal government relies increasingly on whistleblowers to ferret out fraud, and has awarded whistleblowers over $4 billion under the False Claims Act and the Dodd-Frank Wall Street reform and Consumer Protection Act. May lawyers ethically seek whistleblower rewards under these federal statutes? A handful of lawyers have tried to do so as FCA qui tam relators. They have not yet succeeded, but several court decisions suggest that they might be able to do so under confidentiality exceptions to state ethics law, which several courts have …

Managing Cyberthreat, Lawrence J. Trautman

Lawrence J. Trautman Sr.

Cyber security is an important strategic and governance issue. However, because most corporate CEOs and directors have no formal engineering or information technology training, it is understandable that their lack of actual cybersecurity knowledge is problematic. Particularly among smaller companies having limited resources, knowledge regarding what their enterprise should actually be doing about cybersecurity can’t be all that good. My goal in this article is to explore the unusually complex subject of cybersecurity in a highly readable manner. First, an examination of recent threats is provided. Next, governmental policy initiatives are discussed. Third, some basic tools that can be used …

4th And 205: How A Rush Of Global Comments Blocked The Sec’S First Attempted Punt Of Attorney-Client Privilege Under Sarbanes-Oxley, John Paul Lucci

Touro Law Review

No abstract provided.

Downstream Securities Regulation, Anita Krug

All Faculty Scholarship

Securities regulation wears two hats. Its “upstream” side governs firms in connection with their obtaining financing in the securities markets. That is, it regulates firms’ and issuers’ offers and sales of securities, whether in public offerings to retail investors or in private offerings to institutional investors. Its “downstream” side, by contrast, governs financial services providers, who assist with investors’ activities in those markets. Their services include providing advice regarding securities investments, as investment advisers do; aggregating investors’ assets for purposes of enabling those investors to invest their assets collectively, as mutual funds do; and acting as “middlemen” between buyers and …

An Officer Walks Into A Bar: Acknowledging The Need For Deterrence In Officer And Director Bars, Steven W. Shuldman

Fordham Law Review

The U.S. Securities and Exchange Commission (SEC) is the civil regulatory agency responsible for helping to defend and protect the American investor. One significant threat to investor security occurs when an individual, acting as an officer or director, violates a fiduciary duty to his or her employer and its shareholders, risking investor money. These actions could involve insider trading, fraudulent statements in public filings, or other self-serving conduct.
Recognizing the importance of deterring such misconduct, Congress gave the SEC the authority to bar certain individuals from serving as officers and directors of public companies. An individual should be barred if …