Securities Law Commons^™

The Panuwat Snowball: Correlation Does Not Equal Materiality, Tanner Gattuso

Catholic University Law Review

Insider trading is a term of art referencing the fraudulent practice of trading securities in a company on the basis of material, nonpublic information about that same company in breach of some duty owed to another. The practice erodes the public’s trust in the integrity of our capital markets for a reason that is rather intuitive: it is inherently unfair to allow an individual to make a quick and certain profit by exploiting material, nonpublic information to which he privy due solely to his position in a company or some other relationship of trust and confidence. In this context, unrelenting …

Federal Data Privacy Regulation: Do Not Expect An American Gdpr, Matt Buckley

DePaul Business & Commercial Law Journal

No abstract provided.

Legal Representation And The Metaverse: The Ethics Of Practicing In Multiple Realities, Madeline Brom

DePaul Business & Commercial Law Journal

No abstract provided.

Welcome Address, Lauren Mckenzie

DePaul Business & Commercial Law Journal

No abstract provided.

Front Matter

DePaul Business & Commercial Law Journal

No abstract provided.

Cryptocurrency: Regulate Or Facilitate? How States' Approaches To Cryptocurrency Can Be Applied On A Federal Level, Kelly Mahoney

Journal of the National Association of Administrative Law Judiciary

Within the past two years, the cryptocurrency market exceeded a record $2 trillion. As of November 2021, there are seventy-five million Bitcoin (a type of cryptocurrency) users and counting. Many states have implemented regulations and policies in response to this massive growth of the crypto market. While some states like Wyoming and Texas welcome cryptocurrency other states, such as New York and Washington, are more apprehensive and seek to constrain cryptocurrency due to its volatility and novelty. In contrast, federal agencies are still debating on how to address cryptocurrency, and glimpses of federal regulation can be seen through the 2021 …

Regulating Best Interest: Sec Confronts The Brave New Markets, Rayaan Hossain

University of Miami Business Law Review

This Note comments on how recent developments in securities regulation deal with today’s securities industry challenges. As usual, the law advances much slower than technology. After decades of debate over heightened standards for broker-dealers giving investment advice, the Securities and Exchange Commission (“SEC”) introduced Regulation Best Interest (Reg BI). Our modern market demands that broker-dealers execute quick trades on behalf of their clients as well as provide broader investment advice. The popularity of online trading platforms (“OTPs”) only exacerbated the need for regulatory changes. The theme of this paper surmises how Reg BI responds to the rise of the retail …

Spacs, Forward-Looking Statements, And Rule 419: Is Sec Rulemaking Needed?, Nicholas Vota

St. John's Law Review

(Excerpt)

On October 8, 2020, FirstMark Horizon Acquisition Corp. (“FirstMark” or “Company”) closed an initial public offering (“IPO”) of 41,400,000 units. Each unit was priced at $10.00 and “consist[ed] of one share of Class A common stock of the Company . . . and one-third of one redeemable warrant of the Company.” Each whole warrant provided its holder with the right to purchase “one share of Class A [c]ommon [s]tock for $11.50 per share.” FirstMark generated $414,000,000 in connection with the IPO. These funds were then placed in a trust account and maintained by a trustee.

In a filing submitted …

Sec V. Panuwat: The Federal Pursuit Of Shadow Trading, Kayla Kershen

Brooklyn Journal of Corporate, Financial & Commercial Law

In 2021, the SEC filed a complaint against a biopharmaceutical executive, Matthew Panuwat, for trading on material non-public information in violation of both the federal securities laws and his employer’s company policies. However, because the subject of the confidential information was not his employer, but a similarly situated peer company, Panuwat’s conduct constitutes “shadow trading.” The SEC’s enforcement, and the Northern District of California’s subsequent approval, indicate that company insiders may face liability for shadow trading. However, as written, the SEC arguably bases its attachment of federal liability on the company policies that Panuwat was bound by and violated. This …

Entire Fairness Or Bust: The Burst Of The 2020-2021 Spac Bubble, Nicole Lynch

Brooklyn Journal of Corporate, Financial & Commercial Law

Special Purpose Acquisition Companies (SPACs) have skyrocketed in recent years as an alternative for taking private companies public through an initial public offering (IPO). SPACs are blank-check companies that raise capital through public exchanges for the “special purpose” of acquiring a privately held company. Once acquired, the private company will take the SPAC’s place on the public exchange, effectively accomplishing the same thing as a traditional IPO but without all the onerous reporting requirements and upfront costs. For these reasons, SPACs have become the next big thing in securities markets despite being around since the 1990s. Throughout 2020 and 2021, …

The Perfect Storm: A Look At The Robinhood Shutdown And The Shady Security Practices Of Payment For Order Flow, Gamification, And Clickwrap Agreements, Justin M. Taylor

University of Massachusetts Law Review

SEC guidelines and Federal Courts have stated, and recently upheld, that brokerdealers do not owe a fiduciary duty to retail investors if they do not provide them with investment advice, but this opens up retail investors to significant and costly mistreatment by financial institutions with no avenue for recourse. Using payment for order flow, gamification, and click-wrap agreements by broker-dealers creates a conflict of interest between themselves and the retail investors they act on behalf of. This article argues that retail investors should have an avenue of recourse against financial institutions when they breach their duty to these investors by …

Forum Selection Provisions And The Preclusion Of Derivative Claims Under Section 14(A) Of The Securities Exchange Act: Should Federal Courts Intervene?, Noah P. Mathews

Fordham Law Review

This Note examines whether a forum selection provision in a corporation’s bylaws that requires shareholders to bring derivative claims in the Delaware Court of Chancery is enforceable when invoked by directors to dismiss derivative claims under the Securities Exchange Act (the “Exchange Act”)—claims over which federal courts have exclusive jurisdiction. In Seafarers Pension Plan ex rel. Boeing Co. v. Bradway, the U.S. Court of Appeals for the Seventh Circuit held that enforcing this type of bylaw would violate the act’s antiwaiver provision, which voids any stipulation that allows a person to waive compliance with the act. In Lee ex …

Spac Mergers, Ipos, And The Pslra's Safe Harbor: Unpacking Claims Of Regulatory Arbitrage, Amanda M. Rose

William & Mary Law Review

Communications in connection with an initial public offering (IPO) are excluded from the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 (PSLRA). Unsurprisingly, IPO issuers do not share projections publicly—the liability risk is too great. By contrast, communications in connection with a merger are not excluded from the safe harbor, and special purpose acquisition companies (SPACs) routinely share their merger targets’ projections publicly. Does the divergent application of the PSLRA’s safe harbor in traditional IPOs and SPAC mergers create an opportunity for “regulatory arbitrage” and, if so, what should be done about it? …

“Finfluencers In The Wild” A Call For Regulation Addressing The Growth Of Online Investment Advice, Mia Stefanou

Brooklyn Law Review

Illustrated in part by the abnormal market volatility that resulted from the popularity of meme stocks in early 2021, a new era of securities trading is taking place. With increasing frequency, investors look to social media discourse for investment advice. The current regulatory regime in the United States fails to address the increasing prominence of a new type of market participant—the “finfluencer.” This new breed of advisor is the social media influencer who provides investment advice to other users online. This note discusses the global conversations surrounding the emergence of this group, examines the US governance framework, specifically the Investment …

The Unreasonableness Of Reasonable: Rethinking The Reasonable Investor Standard, Alexandra Li

Northwestern University Law Review

This Note explores the “reasonable investor” standard in light of recent developments in pandemic-era securities litigation. Scholars have long criticized the reasonable investor standard for determining materiality. Given the dramatic backdrop of the COVID-19 pandemic, the limitations of the standard are becoming ever more evident. This Note provides a brief history of the development of the current standard and highlights some of its problems through two recent COVID-19 securities fraud cases. This Note argues that the reasonable investor standard is no longer sufficient to protect investors. Through examining tort law and First Amendment jurisprudence, this Note differentiates between the “reasonable” …

The Securities Law Disclosure Conundrum For Publicly Traded Litigation Finance Companies, Robert F. Weber

University of Michigan Journal of Law Reform

The Article examines a peculiar legal dilemma—implicating securities law, legal ethics, and evidence law—that arises when litigation finance companies (LFCs) become public companies. LFCs provide funding to litigants and law firms for prosecuting lawsuits in exchange for a share of the lawsuit recoveries. In recent years, LFCs have significantly altered the landscape of the civil justice system in common law jurisdictions. But their assets, which are just rights to proceeds from lawsuits, are notoriously opaque— who really can predict what a jury will do when it comes to liability and damages? When LFCs go public, this opacity frustrates public investors’ …

Securities And Exchange Commission Vs. Kim Kardashian, Cryptocurrencies And The "Major Questions Doctrine", Jerry W. Markham

William & Mary Business Law Review

The SEC has brought some highly publicized enforcement actions against Kim Kardashian and other celebrity social media influencers who received undisclosed payments for their endorsement of cryptocurrencies. This Article describes those cases and analyzes whether the SEC exceeds its authority under the Constitutional “major questions doctrine” recently applied by the Supreme Court in West Virginia v. EPA. That doctrine prohibits a federal agency from regulating activities that raise a major question that Congress, rather than the agency, must resolve. Such a question is one in which there is major political and economic interest and over which the agency has …

The Future Of China's U.S.-Listed Firms: Legal And Political Perspectives On Possible Decoupling, Rebecca Parry, Qingxiu Bu

William & Mary Business Law Review

There is a long history of Chinese firms raising capital on leading U.S. exchanges. These shares have proved attractive and are estimated at $1 trillion value, in spite of deep mismatches between Chinese internal approaches to corporate governance and those taken under U.S. securities regulations. Chinese listings of nonstate firms, particularly in the technology sector, had depended on a largely laissez-faire initial approach to the expansion through foreign listings, including tolerance of the opaque Variable Interest Entity (VIE) structures adopted as a means to bypass Chinese restrictions on foreign ownership. Concerns regarding data security had, however, prevented compliance by Chinese …

Conflicts Of Interest At An Organization’S Highest Authority: How The District Of Columbia’S Rules Of Professional Conduct Can Fail To Protect Private Organizations, Christopher Deubert

Catholic University Law Review

This Article examines how the District of Columbia’s incomplete incorporation of the Model Rules of Professional Conduct into its own Rules of Professional Conduct has created a scenario in which wrongdoing inside a private organization can flourish. In 2002, following the Enron scandal, the American Bar Association (ABA) revisited and revised its Model Rules of Professional Conduct. The ABA nevertheless took a conservative route, rejecting rules long proposed by experts which would have permitted attorneys aware of corporate crimes, fraud, and other wrongdoing to report their concerns to individuals or entities outside the organization’s reporting structure. Additional scandals unfolded contemporaneous …

When Does A Non-Fungible Token (Nft) Become A Security?, Brian Elzweig, Lawrence J. Trautman

Georgia State University Law Review

Non-fungible tokens (NFTs) gained prominence in the news cycle during March 2021 when $69 million was paid in a cryptocurrency known as Ether for a unique digital art piece titled Everydays: The First 5000 Days. Regulating NFTs is complicated because the technology encompasses varied applications. Therefore, it is the particular use of a given NFT that will determine its appropriate regulatory regime. For example, NFTs may take the form of collectibles, data associated with a physical item, financial instruments, or permanent records associated with a person, such as marriage licenses or property deeds. Just like digital art in the form …

To Spac Or Not To Spac: Liberalizing The Regulation Of Capital Markets, Allison N. Swecker

Vanderbilt Journal of Transnational Law

The merger and acquisition world has experienced an uptick in deal flow since 2016, reaching unprecedented levels in 2020 due to enhanced private equity funding and market volatility. While the market volatility spurred by COVID-19 halted traditional initial public offerings (IPOs), the special purpose acquisition company (SPAC) market exploded. The flurry of SPAC activity in the United States triggered the development of SPAC markets worldwide. Unfortunately, SPACs’ great rise to fame in the past few years has come at a cost-—fraud. As such, the US Securities and Exchange Commission (SEC) is left grappling with how to best regulate the market …

Taking Stock Of Startup Stock Options: Addressing Disclosure And Liquidity Concerns Of Startup Employees, John R. Dorney

Vanderbilt Law Review

U.S. capital markets are becoming increasingly private. Initial public offerings have steadily declined since the 1990s, and private companies are remaining private over twice as long as they have in the past. Furthermore, private company financing has reached unprecedented levels. Private securities offerings now greatly outpace the value of publicly traded securities. Additionally, recent regulatory changes seem to be accelerating this shift from the public to the private markets. One result of this shift is that private company valuations have grown immensely, so much so that private companies with valuations of over $1 billion exist and are known as “unicorns.” …

The Evolution Of Chapter 11: How Corporate Restructuring Has Evolved And Its Important Role In The Recovery Of A Struggling Economy, Eduardo Cervantes

DePaul Business & Commercial Law Journal

No abstract provided.

Covid-19 Vs. Constitution; Limited Government's Unlimited Response, John A. Losurdo

DePaul Business & Commercial Law Journal

No abstract provided.

The "No License, No Chips" Policy: When A Refusal To Deal Becomes Reasonable, Sheng Tong

DePaul Business & Commercial Law Journal

No abstract provided.

The Dark Triad: Private Benefits Of Control, Voting Caps And The Mandatory Takeover Rule, Jorge Brito Pereira

DePaul Business & Commercial Law Journal

No abstract provided.