Securities Law Commons^™

Tying Law For The Digital Age, Daniel A. Crane

Notre Dame Law Review

Tying arrangements, a central concern of antitrust policy since the early days of the Sherman and Clayton Acts, have come into renewed focus with respect to the practices of dominant technology companies. Unfortunately, tying law’s doctrinal structure is a self-contradictory and incoherent wreck. A conventional view holds that this mess is due to errant Supreme Court precedents, never fully corrected, that expressed hostility to tying based on faulty economic understanding. That is only part of the story. Examination of tying law’s origins and development shows that tying doctrine was built on a now-dated paradigm of what constitutes a tying arrangement. …

Administrative Law Judges And The Erosion Of The Administrative State: Why Jarkesy May Be The Straw That Breaks The Camel's Back, Nicholas D'Addio

Catholic University Law Review

The Trump-era unitary executive movement sought to expand presidential

power and shrink the influence of the administrative state through deregulation.

This movement ripples into the present moment, as Trump’s overhaul of the

federal judiciary installed a comprehensive system to delegitimize

administrative agency action— a system that is certain to endure. The

independence and role of administrative law judges (ALJs) has proven a key

target of the movement. Most recently, in the 2022 case of Jarkesy v. Securities

and Exchange Commission, the Fifth Circuit held that the dual-tiered for-cause

removal protections of SEC ALJs violated the Take Care Clause of Article …

A Look Back In Time: Analyzing The Success And Value Of The 2014 Amendments To Rule 2a-7 And Reporting On Form N-Cr In Light Of The March 2020 Market Events, Jocelyn Near

Catholic University Law Review

Money market funds have frequently been a target of regulation by the Securities and Exchange Commission (“SEC”). Perhaps the most expansive regulation came as a response to the 2008 financial crisis, in which the Reserve Primary Fund “broke the buck.” The SEC’s misguided 2014 reforms exacerbated the inherent risks of money market funds, including the risk of runs and first mover advantage, particularly with the implementation of Form N-CR. Form N-CR requires a money market fund to publicly report when various events occur, including when a retail or government money market fund’s current net asset value per share deviates downward …

Emerging Technologies And Perfection Of Security Interests: A Financial University Of Uncertainty, Elizabeth M. Wagenbach

Brooklyn Law Review

Since the founding of Bitcoin in 2009, digital assets, such as cryptocurrency, have exploded in popularity. Cryptocurrency has been associated with stories of immense profit and immense loss. The lucky transactors have been able to capitalize on the price fluctuations of cryptocurrency, while the unlucky transactors became victims of the same volatility, losing tremendous amounts of money. The novelty and ingenuity of cryptocurrency has been coupled with mass confusion to transactors and regulators alike. These early days of cryptocurrency have been characterized by a sort of regulatory tug of war that is a direct result of confusion of what cryptocurrency …

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 …

Jarkesy V. Sec: Are Federal Courts Pushing The U.S. Toward The Next Financial Crisis?, Jennifer Hill

Pepperdine Law Review

In the wake of both the Great Depression and the Financial Crisis of 2008, Congress established and expanded the powers of the Securities and Exchange Commission (SEC). As part of this expansion, the SEC in-house administrative proceedings, designed to adjudicate SEC violations before the SEC’s administrative law judges (ALJs), were born. These in-house proceedings have faced multiple constitutional attacks in the past decade. In the most recent iteration of such challenges, Jarkesy v. SEC, the Fifth Circuit held that the SEC’s in-house proceedings were unconstitutional on three grounds: (1) the in-house proceedings deprived petitioners of their constitutional right to jury …

Covid-19 Risk Factors And Boilerplate Disclosure, Stephen J. Choi, Mitu Gulati, Xuan Liu, Adam C. Pritchard

Law & Economics Working Papers

The SEC mandates that public companies assess new information that changes the risks that they face and disclose these if there has been a “material” change. Does that theory work in practice? Or are companies copying and repeating the same generic disclosures? Using the shock of the COVID-19 pandemic, we explore these questions. Overall, we find considerable rote copying of boilerplate disclosures. Further, the factors that correlate with deviations from the boilerplate seem related more to the resources that companies have (large companies change updated disclosures more) and litigation risks (companies vulnerable to shareholder litigation update more) rather than general …

Where You Lead, I Will Follow: Professional Athletes' Ability To Influence Loyal Fans' Cryptocurrency Investments And The Broader Need For Cryptocurrency Regulation, Anna D'Eramo

Jeffrey S. Moorad Sports Law Journal

No abstract provided.

Liu And The New Sec Disgorgement Statute, Andrew N. Vollmer

William & Mary Business Law Review

In early 2021, Congress enacted a new statute for enforcement cases brought by the Securities and Exchange Commission. The new statute resolved important questions about the availability of disgorgement as a remedy in SEC enforcement cases, but it created other questions. The purpose of this Article is to discuss one interpretive issue that is already arising in the federal courts of appeals.

That interpretive issue is whether “disgorgement” as authorized by the new statute must abide by equitable limitations the Supreme Court imposed on disgorgement relief in SEC cases in Liu v. SEC, 140 S. Ct. 1936 (2020). The …

Retail Investors And Corporate Governance: Evidence From Zero-Commission Trading, Dhruv Aggarwal, Albert H. Choi, Yoon-Ho Alex Lee

Law & Economics Working Papers

We examine the effects of the sudden abolition of trading commissions by major online brokerages in 2019, which lowered stock market entry costs for retail investors, on corporate governance. Firms already popular with retail investors experienced positive abnormal returns around the abolition of commissions. Firms with positive abnormal returns in response to commission-free trading subsequently saw a decrease in institutional ownership, a decrease in shareholder voting, and a deterioration in environmental, social, and corporate governance (ESG) metrics. Finally, these firms were more likely to adopt bylaw amendments to reduce the percentage of shares needed for a quorum at shareholder meetings. …

Q&A: A Conversation With Sec Comissioner Hester Peirce, Hester M. Peirce

Arkansas Law Review

A Conversation with SEC Comissioner Hester Peirce

Keynote Address By Cftc Commissioner Kristin Johnson, Kristin N. Johnson

Arkansas Law Review

Today, our markets are witnessing a transformative moment marked by exceptional, rapidly evolving innovation. To better understand this transformation, we might inquire about the nature of these novel financial instruments, intermediaries, and the underlying technologies that fuel an ever-expanding adoption. Thinking critically about these issues may inform our understanding of the intermediaries or lack thereof, and financial products that characterize this moment in the history and evolution of financial markets.

Failing To Learn The Lessons Of Madoff: Problems With Applying Iqbal To Fraud Claims, Howard Gutman, Chris Garino

University of Massachusetts Law Review

The Iqbal standard requires all civil actions filed in federal courts to provide detailed proof at the pleading stage for the claim to proceed. Under this standard, cases are adjudicated without the aid of discovery or deposition of witnesses. Cases are decided at the pleading stage based on the documents and statements provided by the one accused of fraud. The tools to uncover deception are not available at this stage. This article argues that the Iqbal pleading standard fails to allow civil courts to adequately detect and adjudicate fraud claims. This article explores fraudulent financial schemes, the Iqbal standard, the …

No Peeking: Addressing Pretextual Inspection Demands By Competitor-Affiliated Shareholders, Lin (Lynn) Bai, Sean Meyer

Faculty Articles and Other Publications

This article exposes how Delaware private companies are vulnerable to pretextual inspections under the guise of valuation by shareholders who are affiliated with competitors of the companies. The Delaware Court of Chancery’s 2020 decision in Woods v. Sahara Enterprises, Inc., which deviated from established law by switching the initial burden of proof of the shareholder’s motive to the target company, exacerbated this vulnerability. This article argues for reversing that decision and proposes changes in multiple areas of law to help companies fend off prying competitors who abuse statutory shareholder inspection rights for unfair advantages in competition.

Bridging The Gap In Corporate Governance For Interlocking Directors In Colombia, Juan D. Ovalle

Emory Corporate Governance and Accountability Review

No abstract provided.

Climate, Clarity, Controversy: A Constitutional, Statutory, And Policy Analysis Of The Sec’S Proposed Climate Disclosure Rules, Astoneia O. Moss

Emory Corporate Governance and Accountability Review

The burgeoning ESG movement has heightened investors’ interest in how companies steward the environment in which they operate; manage their human capital; and implement strategies to effectively manage and fulfill the desires of stakeholders. As a result, the SEC has sought to implement a mandatory climate-related disclosure regime to provide investors with public companies’ climate-related data to assist in the investment decision-making process. The proposed climate-related disclosure rule has faced criticism from businesses, politicians, and legal scholars on constitutional, statutory, and policy grounds. This Comment concludes that based on the statutory language of the Securities Act of 1933 and Securities …

The Need For Corporate Guardrails In U.S. Industrial Policy, Lenore Palladino

Seattle University Law Review

U.S. politicians are actively “marketcrafting”: the passage of the Bipartisan Infrastructure Law, the CHIPS and Science Act, and the Inflation Reduction Act collectively mark a new moment of robust industrial policy. However, these policies are necessarily layered on top of decades of shareholder primacy in corporate governance, in which corporate and financial leaders have prioritized using corporate profits to increase the wealth of shareholders. The Administration and Congress have an opportunity to use industrial policy to encourage a broader reorientation of U.S. businesses away from extractive shareholder primacy and toward innovation and productivity. This Article examines discrete opportunities within the …

Transaction-Specific Tax Reform In Three Steps: The Case Of Constructive Ownership, Thomas J. Brennan, David M. Schizer

Faculty Scholarship

Similar investments are often taxed differently, rendering our system less efficient and fair. In principle, fundamental reforms could solve this problem, but they face familiar obstacles. So instead of major surgery, Congress usually responds with a Band-Aid, denying favorable treatment to some transactions, while preserving it for others. These loophole-plugging rules have become a staple of tax reform in recent years. But unfortunately, they often are ineffective or even counterproductive. How can Congress do better? As a case study, we analyze Section 1260, which targets a tax-advantaged way to invest in hedge funds. This analysis is especially timely because a …

Table Of Contents, Seattle University Law Review

Seattle University Law Review

Table of Contents

Public Primacy In Corporate Law, Dorothy S. Lund

Seattle University Law Review

This Article explores the malleability of agency theory by showing that it could be used to justify a “public primacy” standard for corporate law that would direct fiduciaries to promote the value of the corporation for the benefit of the public. Employing agency theory to describe the relationship between corporate management and the broader public sheds light on aspects of firm behavior, as well as the nature of state contracting with corporations. It also provides a lodestar for a possible future evolution of corporate law and governance: minimize the agency costs created by the divergence of interests between management and …

Shareholder Primacy Versus Shareholder Accountability, William W. Bratton

Seattle University Law Review

When corporations inflict injuries in the course of business, shareholders wielding environmental, social, and governance (“ESG”) principles can, and now sometimes do, intervene to correct the matter. In the emerging fact pattern, corporate social accountability expands out of its historic collectivized frame to become an internal subject matter—a corporate governance topic. As a result, shareholder accountability surfaces as a policy question for the first time. The Big Three index fund managers, BlackRock, Vanguard, and State Street, responded to the accountability question with ESG activism. In so doing, they defected against corporate legal theory’s central tenet, shareholder primacy. Shareholder primacy builds …

Stakeholder Governance As Governance By Stakeholders, Brett Mcdonnell

Seattle University Law Review

Much debate within corporate governance today centers on the proper role of corporate stakeholders, such as employees, customers, creditors, suppliers, and local communities. Scholars and reformers advocate for greater attention to stakeholder interests under a variety of banners, including ESG, sustainability, corporate social responsibility, and stakeholder governance. So far, that advocacy focuses almost entirely on arguing for an expanded understanding of corporate purpose. It argues that corporate governance should be for various stakeholders, not shareholders alone.

This Article examines and approves of that broadened understanding of corporate purpose. However, it argues that we should understand stakeholder governance as extending well …

Corporate Law In The Global South: Heterodox Stakeholderism, Mariana Pargendler

Seattle University Law Review

How do the corporate laws of Global South jurisdictions differ from their Global North counterparts? Prevailing stereotypes depict the corporate laws of developing countries as either antiquated or plagued by problems of enforcement and misfit despite formal convergence. This Article offers a different view by showing how Global South jurisdictions have pioneered heterodox stakeholder approaches in corporate law, such as the erosion of limited liability for purposes of stakeholder protection in Brazil and India, the adoption of mandatory corporate social responsibility in Indonesia and India, and the large-scale program of Black corporate ownership and empowerment in South Africa, among many …

A Different Approach To Agency Theory And Implications For Esg, Jonathan Bonham, Amoray Riggs-Cragun

Seattle University Law Review

In conventional agency theory, the agent is modeled as exerting unobservable “effort” that influences the distribution over outcomes the principal cares about. Recent papers instead allow the agent to choose the entire distribution, an assumption that better describes the extensive and flexible control that CEOs have over firm outcomes. Under this assumption, the optimal contract rewards the agent directly for outcomes the principal cares about, rather than for what those outcomes reveal about the agent’s effort. This article briefly summarizes this new agency model and discusses its implications for contracting on ESG activities.

The Limits Of Corporate Governance, Cathy Hwang, Emily Winston

Seattle University Law Review

What is the purpose of the corporation? For decades, the answer was clear: to put shareholders’ interests first. In many cases, this theory of shareholder primacy also became synonymous with the imperative to maximize shareholder wealth. In the world where shareholder primacy was a north star, courts, scholars, and policymakers had relatively little to fight about: most debates were minor skirmishes about exactly how to maximize shareholder wealth.

Part I of this Essay discusses the shortcomings of shareholder primacy and stakeholder governance, arguing that neither of these modes of governance provides an adequate framework for incentivizing corporations to do good. …

Table Of Contents, Seattle University Law Review

Seattle University Law Review

Table of Contents

A History Of Corporate Law Federalism In The Twentieth Century, William W. Bratton

Seattle University Law Review

This Article describes the emergence of corporate law federalism across a long twentieth century. The period begins with New Jersey’s successful initiation of charter competition in 1888 and ends with the enactment of the Sarbanes-Oxley Act in 2002. The federalism in question describes the interrelation of state and federal regulation of corporate internal affairs. This Article takes a positive approach, pursuing no normative bottom line. It makes six observations: (1) the federalism describes a division of subject matter, with internal affairs regulated by the states and securities issuance and trading regulated by the federal government; (2) the federalism is an …

How To Interpret The Securities Laws?, Zachary J. Gubler

Seattle University Law Review

In discussions of the federal securities laws, the SEC usually gets most of the attention. This makes some sense. After all, it is the agency charged with administrating the securities laws and regulating the industry as a whole. It makes the majority of the laws; it engages in enforcement actions; it reacts to crises; and it, or sometimes even its individual commissioners, intervene publicly in policy debates. Often overlooked in such discussion, however, is the role of the Supreme Court in shaping securities law, and a new book by Adam Pritchard and Robert Thompson demonstrates why this is an oversight. …

The Pioneers, Waves, And Random Walks Of Securities Law In The Supreme Court, Elizabeth Pollman

Seattle University Law Review

After the pioneers, waves, and random walks that have animated the history of securities laws in the U.S. Supreme Court, we might now be on the precipice of a new chapter. Pritchard and Thompson’s superb book, A History of Securities Law in the Supreme Court, illuminates with rich archival detail how the Court’s view of the securities laws and the SEC have changed over time and how individuals have influenced this history. The book provides an invaluable resource for understanding nearly a century’s worth of Supreme Court jurisprudence in the area of securities law and much needed context for …

Overseeing The Administrative State, Jill E. Fisch

Seattle University Law Review

In a series of recent cases, the Supreme Court has reduced the regulatory power of the Administrative State. Pending cases offer vehicles for the Court to go still further. Although the Court’s skepticism of administrative agencies may be rooted in Constitutional principles or political expediency, this Article explores another possible explanation—a shift in the nature of agencies and their regulatory role. As Pritchard and Thompson detail in their important book, A History of Securities Law in the Supreme Court, the Supreme Court was initially skeptical of agency power, jeopardizing Franklin Delano Roosevelt (FDR)’s ambitious New Deal plan. The Court’s acceptance …