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Full-Text Articles in Securities Law
Stock Market Futurism, Merritt B. Fox, Gabriel Rauterberg
Stock Market Futurism, Merritt B. Fox, Gabriel Rauterberg
Faculty Scholarship
The U.S. stock market is undergoing extraordinary upheaval. The approval of the application of the Investors Exchange (IEX) to become the nation’s newest stock exchange, including its famous “speed bump,” was one of the SEC’s most controversial decisions in decades. Other exchanges have proposed a raft of new innovations in its wake. This evolving equity market is a critical piece of national infrastructure, but the regulatory scheme for its institutions is increasingly frayed. In particular, current regulation draws sharp distinctions among different kinds of markets for trading stocks, treating stock exchanges as self-regulatory organizations immune from private civil litigation, while …
Lessons From Sec V. Citigroup: The Optimal Scope For Judicial Review Of Agency Consent Decrees, Dorothy S. Lund
Lessons From Sec V. Citigroup: The Optimal Scope For Judicial Review Of Agency Consent Decrees, Dorothy S. Lund
Faculty Scholarship
On November 28, 2011, Judge Jed S. Rakoff of the United States District Court for the Southern District of New York in Manhattan declined to approve a consent judgment between the Securities and Exchange Commission (SEC) and Citigroup. Because Citigroup had not admitted or denied the allegations in the consent decree, Judge Rakoff concluded that he was unable to make an informed judgment about the merits of the settlement. Judge Rakoffs decision has garnered serious criticism from legal observers and rekindled discussion about the scope of judicial review of agency consent decrees, which have become a valuable agency enforcement tool. …
Reforming The Securities Class Action: On Deterrence And Its Implementation, John C. Coffee Jr.
Reforming The Securities Class Action: On Deterrence And Its Implementation, John C. Coffee Jr.
Faculty Scholarship
Securities class actions impose enormous penalties, but they achieve little compensation and only limited deterrence. This is because of a basic circularity underlying the securities class action: When damages are imposed on the corporation, they essentially fall on diversified shareholders, thereby producing mainly pocket-shifting wealth transfers among shareholders. The current equilibrium benefits corporate insiders, insurers, and plaintiffs' attorneys, but not investors. The appropriate answer to this problem is not to abandon securities litigation, but to shift the incidence of its penalties so that, in the secondary market context, they fall less on the corporation and more on those actors who …
Governance Failures Of The Enron Board And The New Information Order Of Sarbanes-Oxley, Jeffrey N. Gordon
Governance Failures Of The Enron Board And The New Information Order Of Sarbanes-Oxley, Jeffrey N. Gordon
Faculty Scholarship
Analysis of the corporate governance crisis that manifested itself in the United States at the turn of the millennium requires separating its various strands. The Enron Corporation ("Enron") debacle and the dot corn bubble and collapse, for example, share some common elements but in other ways they are quite different. In both cases investors became aggressively enamored of an unsustainable business model. In the dot com case it was the belief that an innovator in a rapidly growing market could attain powerful first mover advantages that would produce an eventual cascade of profits, so that a current and increasing stream …
Regulation Fd And Foreign Issuers: Globalization's Strains And Opportunities, Merritt B. Fox
Regulation Fd And Foreign Issuers: Globalization's Strains And Opportunities, Merritt B. Fox
Faculty Scholarship
The globalization of the market for securities has a persistent way of straining the traditional rationales for securities regulation. At the same time, the choices it forces upon us create the opportunity to better test empirically the desirability of the regulations being imposed. Regulation FD, which stands for "fair disclosure," is the most recent example where these twin effects of globalization arise. Regulation FD is arguably the most important change to the U.S. disclosure regime since the adoption of integrated disclosure almost two decades ago. Regulation FD is intended to stop the practice of "selective disclosure," whereby an issuer withholds …
The Political Economy Of Statutory Reach: U.S. Disclosure Rules In A Globalizing Market For Securities, Merritt B. Fox
The Political Economy Of Statutory Reach: U.S. Disclosure Rules In A Globalizing Market For Securities, Merritt B. Fox
Faculty Scholarship
This Article addresses the appropriate reach of the U.S. mandatory securities disclosure regime. While disclosure obligations are imposed on issuers, they are triggered by transactions: the public offering of, or public trading in, the issuers' shares. Share transactions are taking on an increasingly transnational character. The barriers to a truly global market for equities continue to lessen: financial information is becoming increasingly globalized and it is becoming increasingly inexpensive and easy to effect share transactions abroad. There are approximately 41,000 issuers of publicly traded shares in the world. For an ever larger portion of these issuers, there will be significant …
The Future Of The Private Securities Litigation Reform Act: Or, Why The Fat Lady Has Not Yet Sung, John C. Coffee Jr.
The Future Of The Private Securities Litigation Reform Act: Or, Why The Fat Lady Has Not Yet Sung, John C. Coffee Jr.
Faculty Scholarship
Much commentary about securities litigation shares the implicit premise that the Private Securities Litigation Reform Act of 1995 (Reform Act) is, for better or worse, a fait accompli – that is, legislation whose meaning is fixed and whose impact, while still debatable, is not contingent on future events. This Article sees it differently: the Reform Act is more like wet clay that has been shaped into an approximation of a human form by an apprentice craftsmen and has now been turned over to the master sculptor for the details that will spell the difference between high art and merely competent …
Competition Versus Consolidation: The Significance Of Organizational Structure In Financial And Securities Regulation, John C. Coffee Jr.
Competition Versus Consolidation: The Significance Of Organizational Structure In Financial And Securities Regulation, John C. Coffee Jr.
Faculty Scholarship
It's as predictable as the swallows' return to Capistrano. At the outset of each new Administration, a Presidential Task Force proposes a restructuring of the federal administrative agencies. New developments in rapidly evolving markets, it is argued, require a consolidation of agencies to generate a broader perspective, to create a "level playing field," and to end the possibility of a "race to the bottom" (to the extent that market participants can opt for one regulatory system over another). The proposal draws little overt criticism, but turf-conscious agencies quietly mobilize their constituencies to oppose the reform. The first sign of trouble …
Insider Trading Deterrence Versus Managerial Incentives: A Unified Theory Of Section 16(B), Merritt B. Fox
Insider Trading Deterrence Versus Managerial Incentives: A Unified Theory Of Section 16(B), Merritt B. Fox
Faculty Scholarship
Part I of this article assesses the social costs of a crude rule of thumb. Because section 16(b) applies to a given class of paired transactions, it deters both transactions based on inside information and transactions not so based. Each time section 16(b) is stretched to include a class of paired transactions, it deters some additional innocent transactions. This side effect will take the form of officers' and directors' purchasing fewer shares in their own companies and refusing to accept as large a portion of their compensation in a form based on share price. There are strong theoretical and empirical …
Corporate Takeovers: Who Wins; Who Loses; Who Should Regulate, John C. Coffee Jr., Joseph A. Grundfest, Roberta Romano, Murray L. Weidenbaum
Corporate Takeovers: Who Wins; Who Loses; Who Should Regulate, John C. Coffee Jr., Joseph A. Grundfest, Roberta Romano, Murray L. Weidenbaum
Faculty Scholarship
On December 3, 1987, during its 11th Annual Policy Conference in Washington, DC, the American Enterprise Institute convened a panel discussion on "Corporate Takeovers and Insider Trading: Who Should Regulate?" The panelists were John C. Coffee, Jr., professor of law at Columbia University; Joseph A. Grundfest, commissioner at the Securities and Exchange Commission; Roberta Romano, professor of law at Yale Law School; and Murray L. Weidenbaum, Mallinckrodt Distinguished University Professor and director of the Center for the Study of American Business at Washington University. The panel was moderated by Christopher C. DeMuth, president of AEI. The following discussion is drawn …
Shelf Registration, Integrated Disclosure, And Underwriter Due Diligence: An Economic Analysis, Merritt B. Fox
Shelf Registration, Integrated Disclosure, And Underwriter Due Diligence: An Economic Analysis, Merritt B. Fox
Faculty Scholarship
In a recent article, Professor Barbara Banoff mounted a spirited defense of the Securities and Exchange Commission's decision to adopt permanently Rule 415 under the Securities Act of 1933 (Securities Act). Rule 415 permits the registration of securities that an issuer intends to "put on the shelf'' rather than sell immediately. By having a block of "shelf registered" securities available, an issuer avoids the delay of the registration process once the decision is made to proceed with a sale. Shelf registration also gives an issuer the flexibility to seek bids from a group of competing underwriters and bypasses the traditional …
Market Failure And The Economic Case For A Mandatory Disclosure System, John C. Coffee Jr.
Market Failure And The Economic Case For A Mandatory Disclosure System, John C. Coffee Jr.
Faculty Scholarship
Recent academic commentary on the securities laws has much in common with the battles fought in historiography over the origins of the First World War. The same progression of phases is evident. First, there is an orthodox school, which tends to see historical events largely as a moral drama of good against evil. Next come the revisionists, debunking all and explaining that the good guys were actually the bad. Eventually, a new wave of more professional, craftsmanlike scholars arrives on the scene to correct the gross overstatements of the revisionists and produce a more balanced, if problematic, assessment.