Securities Law Commons^™

Reassessing Damages In Securities Fraud Class Actions, Elizabeth C. Burch

ExpressO

No coherent doctrinal statement exists for calculating open-market damages for securities fraud class actions. Instead, courts have tried in vain to fashion common-law deceit and misrepresentation remedies to fit open-market fraud. The result is a relatively ineffective system with a hallmark feature: unpredictable damage awards. This poses a significant fraud deterrence problem from both a practical and a theoretical standpoint.

In 2005, the Supreme Court had the opportunity to clarify open-market damage principles and to facilitate earlier dismissal of cases without compensable economic losses. Instead, in Dura Pharmaceuticals v. Broudo, it further confused the damage issue by (1) perpetuating the …

Ringing The Bell On The Nyse: Might A Nonprofit Stock Exchange Have Been Efficient?, Stephen F. Diamond

ExpressO

Abstract

This spring the New York Stock Exchange, Inc. (Exchange or NYSE) completed an historic restructuring. On March 7, 2006, the NYSE completed its merger with Archipelago Holdings Inc. (Archipelago), a publicly traded electronic trading platform. As a result, the old NYSE itself became the New York Stock Exchange LLC, a wholly owned subsidiary of NYSE Group, Inc. (NYSE Group). The former members, or seat holders, of the NYSE received one of three forms of consideration: all cash, all stock in NYSE Group, or a package of cash and stock. The NYSE Group then allowed those former members to offer …

Primer Congreso Nacional De Organismos Públicos Autónomos, Bruno L. Costantini García

Bruno L. Costantini García

Memorias del Primer Congreso Nacional de Organismos Públicos Autonomos

Bond Repudiation, Tax Codes, The Appropriations Process And Restitution Post-Eminent Domain Reform, John H. Ryskamp

ExpressO

This brief comment suggests where the anti-eminent domain movement might be heading next.

Insurance Against Misinformation In The Securities Market, Tom Baker

All Faculty Scholarship

Prepared at the request of the Task Force to Modernize Securities Legislation in Canada, this study describes and evaluates evaluate a new capital markets insurance concept: securities misinformation insurance. This new insurance would compensate investors for losses caused by securities law violations. The most powerful objection to this new concept is that investors do not need a new insurance program for securities misinformation losses. Individual and institutional investors already can spread securities misinformation losses by holding a diversified portfolio. Nevertheless, a securities misinformation insurance program has the potential to provide systemic benefits: improved compliance with securities laws (resulting from cost …

Dialectical Regulation, Robert B. Ahdieh

Faculty Scholarship

While theories of regulation abound, woefully inadequate attention has been given to growing patterns of "intersystemic" and "dialectical" regulation in the world today. In this rapidly expanding universe of interactions, independent regulatory agencies, born of autonomous jurisdictions, nonetheless face a combination of jurisdictional overlap with, and regulatory dependence on, one another. Here, the cross-jurisdictional interaction of regulators is no longer the voluntary interaction embraced by transnationalists; it is, instead, an unavoidable reality of acknowledgement and engagement, potentially culminating in the integration of discrete sets of regulatory rules into a collective whole.

Such patterns of regulatory engagement are increasingly evident, across …

Brand New Deal: The Branding Effect Of Corporate Deal Structures, Victor Fleischer

Michigan Law Review

Consider the unusual legal structures of the following four deals: When Google went public in 2004, it used an Internet auction to sell its stock to shareholders. When Ben & Jerry's went public in 1984, it sold its stock only to Vermont residents. Steve Jobs's contract with Apple entitles him to an annual cash salary of exactly one dollar. Stanley Works, a Connecticut toolmaker, considered reincorporating in Bermuda to reduce its tax liability. Under public pressure, it changed its mind and remains legally incorporated in Connecticut. What do these deals have in common? In each case, the legal infrastructure of …

The Chameleon Effect: Beyond The Bonding Hypothesis For Cross-Listed Securities, Cally Jordan

ExpressO

This paper is based on a presentation made at the New York Stock Exchange Conference on the Future of Global Equity Trading, March 12, 2004, Sarasota, FL.

Looking back, was it a momentary enthusiasm? The dramatic increase in cross-listed securities, particularly in the United States, was one of the remarkable phenomena of the 1990s capital markets. The bonding, or corporate governance, hypothesis was one of the more intriguing theories to surface to explain the phenomenon. Cross-listing, the hypothesis suggested, might be a bonding mechanism by which firms, incorporated in a jurisdiction with “weak protection” of minority shareholder rights or poor …

Managing Risk On A $25 Million Bet: Venture Capital, Agency Costs, And The False Dichotomy Of The Corporation, Robert P. Bartlett Iii

ExpressO

An implicit dichotomy of the corporation exists in legal scholarship. On one side of the dichotomy rests the publicly-held corporation suffering from a significant conflict of interest between its managers and dispersed shareholders; on the other side, the closely-held corporation plagued by inter-shareholder conflict.

This Article argues that understanding the agency problems that can exist within a firm demands a rejection of this traditional dichotomy and the theories of the firm built upon it. Using venture capital finance, this Article demonstrates for the first time how this dichotomy obscures how all firms - public and private - often face the …

Measuring Efficiency In Corporate Law: The Role Of Shareholder Primacy, Jill E. Fisch

All Faculty Scholarship

The shareholder primacy norm defines the objective of the corporation as maximization of shareholder wealth. Law and economics scholars have incorporated the shareholder primacy norm into their empirical analyses of regulatory efficiency. An increasingly influential body of scholarship uses empirical methodology to evaluate legal rules that allocate power within the corporation. By embracing the shareholder primacy norm, empirical scholars offer normative assessments about regulatory choices based on the effect of legal rules on measures of shareholder value such as stock price, net profits, and Tobin’s Q.

This Article challenges the foundations of using the shareholder primacy norm to judge corporate …

The Dutch Auction Myth, Peter B. Oh

ExpressO

The initial public offering process is under assault. Critics of this process have woven a complex set of interconnected objections to the orthodox method for conducting IPOs, pricing of shares, and allocating them to preferred investors. These critics instead point to online auctions as an alternative IPO method that can provide more equitable access, efficient prices, and egalitarian allocations. These claims rest on Google’s recent IPO and W.R. Hambrecht + Co.’s OpenIPO mechanism, conventionally regarded as impure variants of what is known as a descending-bid or Dutch auction (Dutch IPO).

This article assesses the empirical and theoretical case for Dutch …

Entrenched Managers & Corporate Social Responsibility, Shane M. Shelley

ExpressO

A growing number of academics have suggested U.S. corporate governance laws bestow too much power on managers. Much of the research focuses on the relationship between corporate governance arrangements, which supply a means to managerial power, and the financial performance of corporations. This exclusive focus on financial performance may be misguided. Although profits serve as a proxy for the benefits corporations provide society, they do not always adequately reflect the costs of the activities that generated them. In this sense, financial performance may not give an accurate, or at least complete, picture of the real value of corporations. Whether managers …

Overvalued Equity And The Case For An Asymmetric Insider Trading Regime, Thomas A. Lambert

ExpressO

The forty-year debate over whether insider trading should be regulated has generally proceeded in all-or-nothing terms: Either all insider trading should be permitted (subject only to private restrictions imposed by issuers themselves), or none should. This Article argues for an asymmetric insider trading policy under which insider trading that decreases the price of an overvalued stock is generally permitted, but insider trading that increases the price of an undervalued stock is generally prohibited. Concluding that the net investor benefits of price-decreasing insider trading exceed those of price-enhancing insider trading, the Article argues that an asymmetric insider trading regime likely represents …

The Marginal Incentive Of Insider Trading: An Economic Reinterpretation Of The Case Law, Kristoffel R. Grechenig

ExpressO

Commentators on insider trading are divided into two camps, one in favor of regulation, the other in favor of deregulation. The arguments for the two positions are manifold but not irreconcilable. I show that important gains to social welfare come with insider trading on negative information (sales), whereas losses often result from the use of positive information (purchases). Thus, I look at a regulation that allows insiders to use negative but not positive non-public information. Because positive information will be disclosed much sooner than negative information, the marginal incentive (and marginal gain to social welfare, respectively) of insider trading as …

Equal Treatment Of Foreign Shareholders In Transnational Securities Class Action Against A Foreign Issuer—A Chinese Example, Clark Yao

ExpressO

As the world economy and financial markets become increasingly more integrated, cross-boarder securities transaction becomes a daily event. Because Unite States has the world’s largest and arguably most liquid capital markets, it has attracted a significant number of foreign companies to cross-list their stocks in a U.S. stock exchange. Unavoidably, such transactions will not only bring out fortune, but also disputes between transacting parties. Relying on the powerful federal securities law , U.S. investors who have bought or sold such stocks have routinely sued foreign stock issuers through class action when the stock prices went down, alleging their loss is …

Legislation And Legitimation: Congress And Insider Trading In The 1980s, Thomas W. Joo

ExpressO

Legislation and Legitimation:

Congress and Insider Trading in the 1980s

Abstract

Orthodox corporate law-and-economics holds that American corporate and securities regulation has evolved inexorably toward economic efficiency. That position is difficult to square with the fact that regulation is the product of government actors and institutions. Indeed, the rational behavior assumptions of law-and-economics suggest that those actors and institutions would tend to place their own self-interest ahead of economic efficiency. This article provides anecdotal evidence of such self-interest at work. Based on an analysis of legislative history—primarily Congressional hearings—this article argues that Congress had little interest in the economic policy …

Current Economic Issues In Securities Litigation, Scott D. Hakala

Scott D Hakala

This paper discusses the economic framework for determining economic loss in securities litigation and the then current case law. This includes discussions regarding assessing materiality and reliance, the use of event study analyses to identify loss causationg and the interaction of legal and economic principles.

Algunas Consideraciones Sobre Los Poderes Del Juez En El Ape, Martin Paolantonio

Martin Paolantonio

Nota jurisprudencial analizando el alcance de los poderes del juez concursal y su posible interferencia con decisiones de autoridades públicas con jurisdicción sobre el sujeto insolvente

El Abogado Y La Creación De Valor En Los Negocios, Martin Paolantonio

Martin Paolantonio

Una aproximación a la función del profesional de derecho como "ingeniero de los costos de transacción" y generador de valor en los negocios

El Análisis Económico Del Derecho Y La Estructura Societaria, Martin Paolantonio

Martin Paolantonio

Un análisis de la estructura societaria, revisando la aplicación y capacidad predictiva de la teoría de agencia y la economía de los costos de transacción. Aplicación a la contratación financiera y la estructura de capital

The Next Epidemic: Bubbles And The Growth And Decay Of Securities Regulation, Erik F. Gerding

Publications

This article explores how speculative bubbles undermine the effectiveness of securities regulations and spawn epidemics of securities fraud. A brief historical survey demonstrates that stock market bubbles almost invariably coincide with epidemics of securities fraud, and provides a compelling argument that the outbreak of fraud in the Enron era did not stem merely from factors unique to the 1990s, but from the dynamics of an asset price bubble as well.

Drawing on perspectives from securities law practice and economic theory, the article argues that bubbles dilute the deterrent effect of antifraud rules and promote deregulation. Both effects alter the calculus …

The Essential Role Of Securities Regulation, Zohar Goshen, Gideon Parchomovsky

All Faculty Scholarship

This Article posits that the essential role of securities regulation is to create a competitive market for sophisticated professional investors and analysts (information traders). The Article advances two related theses-one descriptive and the other normative. Descriptively, the Article demonstrates that securities regulation is specifically designed to facilitate and protect the work of information traders. Securities regulation may be divided into three broad categories: (i) disclosure duties; (ii) restrictions on fraud and manipulation; and (iii) restrictions on insider trading-each of which contributes to the creation of a vibrant market for information traders. Disclosure duties reduce information traders' costs of searching and …

Tracing, Peter B. Oh

Articles

Tracing is a method that appears within multiple fields of law. Distinct conceptions of tracing, however, have arisen independently within securities and remedial law. In the securities context plaintiffs must trace their securities to a specific offering to pursue certain relief under the Securities Act of 1933. In the remedial context victims who trace their misappropriated value into a wrongdoer's hands can claim any derivative value, even if it has appreciated.

This article is the first to compare and then cross-apply tracing within these two contexts. Specifically, this article argues that securities law should adopt a version of the rules-based …

Regulatory Responses To Investor Irrationality: The Case Of The Research Analyst, Jill E. Fisch

All Faculty Scholarship

An extensive body of behavioral economics literature suggests that investors do not behave with perfect rationality. Instead, investors are subject to a variety of biases that may cause them to react inappropriately to information. The policy challenge posed by this observation is to identify the appropriate response to investor irrationality. In particular, should regulators attempt to protect investors from bad investment decisions that may be the result of irrational behavior?

This Article considers the appropriate regulatory response to investor irrationality within the concrete context of the research analyst. Many commentators have argued that analyst conflicts of interest led to biased …

Supersize Pay, Incentive Compatibility, And The Volatile Shareholder Interest, William W. Bratton

All Faculty Scholarship

No abstract provided.

Remapping The Charitable Deduction, David Pozen

Faculty Scholarship

If charity begins at home, scholarship on the charitable deduction has stayed at home. In the vast legal literature, few authors have engaged the distinction between charitable contributions that are meant to be used within the United States and charitable contributions that are meant to be used abroad. Yet these two types of contributions are treated very differently in the Code and raise very different policy issues. As Americans' giving patterns and the U.S. nonprofit sector grow increasingly international, the distinction will only become more salient.

This Article offers the first exploration of how theories of the charitable deduction apply …

The "Duty" To Be A Rational Shareholder, David A. Hoffman

All Faculty Scholarship

How and when do courts determine that corporate disclosures are actionable under the federal securities laws? The applicable standard is materiality: would a (mythical) reasonable investor have considered a given disclosure important. As I establish through empirical and statistical testing of approximately 500 cases analyzing the materiality standard, judicial findings of immateriality are remarkably common, and have been stable over time. Materiality's scope results in the dismissal of a large number of claims, and creates a set of cases in which courts attempt to explain and defend their vision of who is, and is not, a reasonable investor. Thus, materiality …

El Principio De Veracidad Publicitaria Y La Prohibición De Inducir A Error Al Consumidor, Pierino Stucchi

Pierino Stucchi

No abstract provided.

Rediscovering The Economics Of Loss Causation , Richard Kaplan, Madge Thorsen, Scott Hakala

ExpressO

Abstract This article explores the economic principles and theories underlying loss causation in the context of securities fraud litigation. It explains the difference between “investment loss” and recoverable “inflationary loss” and posits that the latter consists of the difference between inflation in stock prices caused by the fraud at the time of purchase and inflation in the price at the time of sale. It reviews scenarios in which inflationary loss due to fraud may occur and would be recognized as a matter of economic theory as well as a matter of law. It urges that Dura v. Broudo Pharmaceuticals, 125 …

Model Of Time-Inconsistent Misconduct: The Case Of Lawyer Misconduct, Manuel A. Utset

Scholarly Publications

No abstract provided.