Securities Law Commons^™

Taming Unicorns, Matthew Wansley

Articles

Until recently, most startups that grew to become valuable businesses chose to become public companies. In the last decade, the number of unicorns—private, venture-backed startups valued over one billion dollars—has increased more than tenfold. Some of these unicorns committed misconduct that they successfully concealed for years. The difficulty of trading private company securities facilitates the concealment of misconduct. The opportunity to profit from trading a company’s securities gives short sellers, analysts, and financial journalists incentives to uncover and reveal information about misconduct the company commits. Securities regulation and standard contract provisions restrict the trading of private company securities, which undermines …

Whose Debt Is It Anyway?, Luís C. Calderón Gómez

Articles

Every year, companies issue hundreds of billions of dollars of debt with a feature carrying unclear tax consequences. So do individuals, who frequently tie their most significant financial asset to this type of instrument. Yet this instrument is not an exotic or innovative financial derivative, but is simple vanilla debt with two or more borrowers, or “co-obligated debt”. Co-obligated debt poses a conceptual problem for the law because it does not fit neatly into the simple and dyadic legal framework underlying the law’s conception of debt, where one creditor lends money to one borrower in exchange for a direct promise …

Is Bitcoin Prudent? Is Art Diversified? Offering Alternative Investments To 401(K) Participants, Edward A. Zelinsky

Articles

Whether 401(k) plans’ investment menus should feature “alternative” investments is a fact-driven inquiry applying ERISA’s fiduciary standards of prudence, loyalty, and diversification. Central to this fact-driven inquiry is whether the alternative investment class in question is broadly accepted by investors in general and by professional defined benefit trustees in particular. A similarly salient concern when making this inquiry is the financial unsophistication of many, perhaps most, 401(k) participants. Accounting for these considerations, this Article concludes that REITs, private equity funds, and hedge funds can, with limits, today be offered as investment choices to 401(k) participants, but that cryptocurrencies (including Bitcoin), …

Taking Misappropriation Seriously: State Common Law Disgorgement Actions For Insider Trading, Jeanne L. Schroeder

Articles

In two recent cases, Kokesh v. SEC, and Liu v. SEC, the U.S. Supreme Court cut back substantially on one of the Securities and Exchange Commission’s most important enforcement powers. This is the ability to seek disgorgement from persons who violate the federal securities laws, depriving them of their ill-gotten gains.

Previously, the Supreme Court had developed a largely property-based theory of insider trading. Why is insider trading evil? Because material nonpublic information is property that the trader has fraudulently obtained and must not use for his own purposes

In this article I bring these thoughts together. I …

The Growth & Regulatory Challenges Of Decentralized Finance, Aaron J. Wright

Articles

Proceedings of the 2021 Spring Conference: The Impact of Blockchain on the Practice of Law Panel 1: The Growth & Regulatory Challenges of Decentralized Finance

The Rise Of Decentralized Autonomous Organizations: Opportunities And Challenges, Aaron J. Wright

Articles

The Author explores the nature of DAOs and highlights several areas where states and regulators can adapt existing legal regimes to potentially accommodate DAOs. Part of the Blockchain & Procedural Law seminars (Max Planck Institute Luxembourg for Procedural Law).

Abolish Ice . . . And Then What?, Peter L. Markowitz

Articles

In recent years, activists and then politicians began calling for the abolition of the United States’s interior immigration-enforcement agency: U.S. Immigration and Customs Enforcement (ICE). Many people have misinterpreted the call to “Abolish ICE” as merely a spontaneous rhetorical device used to express outrage at the current Administration’s brutal immigration policies. In fact, abolishing ICE is the natural extension of years of thoughtful organizing by a loose coalition of grassroots immigrant-rights groups. These organizations are serious, not only about their literal goal to eliminate the agency, but also about not replacing it with another dedicated agency of immigration police. Accordingly, …

Blockchain-Based Token Sales, Initial Coin Offerings, And The Democratization Of Public Capital Markets, Jonathan Rohr, Aaron Wright

Articles

Best known for their role in the creation of cryptocurrencies like bitcoin, blockchains are revolutionizing the way technology entrepreneurs finance their business enterprises. In 2017 alone, tech entrepreneurs raised over $6 billion through the sale of blockchain-based digital tokens, with some sales lasting mere seconds before selling out. In a token sale, also referred to as an “initial coin offering” or “ICO,” organizers of a project sell digital tokens to members of the public to finance the development of new technological platforms and services. After the initial sale, cryptocurrency exchanges scattered across the globe list tokens for trading and facilitate …

Three Against Two: On The Difference Between Property And Contract And The Example Of Deposit Accounts In Bankruptcy, Jeanne L. Schroeder, David G. Carlson

Articles

In Citizen's Bank v. Strumpf (1995), Justice Scalia announced that deposit accounts are not "property". Five years later, the Uniform Commercial Code was amended to make deposit accounts collateral for the depositary bank maintaining the account, thereby crowding the field previously occupied by the common law right of setoff. Security interests attach to personal "property." Security interests attach to deposit accounts. Deposit accounts, by syllogistic logic, are property. Does this mean that the UCC has overruled the Supreme Court? We argue not. A deposit account is a mere contract in the two-person universe that contract law presupposes. A deposit account …

Check Clearing And Voidable Preference Law Under The Bankruptcy Code, David G. Carlson

Articles

Every business practice must withstand the critique of federal voidable preference law. This article surveys how well check clearing system fares under this adjunct to the principle that unsecured creditors should share equally in a bankruptcy proceeding. Check clearing involves extending short-term credit by depositary banks to their customers. Banks routinely extend unsecured and secured credit. The fate of a bank in its customer's bankruptcy differs, depending on what kind of credit is extended. In the case of an overdraft, banks have preference risk, but they also have powerful defenses to muster against liability. In the case credit is advanced …

Critique Of Money Judgment Part Three: Restraining Notices, David G. Carlson

Articles

New York is virtually unique in permitting lawyers to issue court orders restraining debtors and third parties from conveying away any assets that could be used to satisfy a money judgment. In effect, these orders command the recipient to do nothing, whereas a turnover or garnishment orders the recipient to do something — pay the creditor or sheriff or surrender illiquid property to the sheriff. The weakness and strength of this debt collection tool is assessed at length. The Article also analyzes in detail New York’s Exempt Income Protection Act, enacted in 2008 to force banks to protect the exempt …

Procedure In Eclipse: Group-Based Adjudication In A Post-Conception Era, Myriam E. Gilles

Articles

No abstract provided.

The Wisdom Of Crowds? Groupthink And Nonprofit Governance, Melanie B. Leslie

Articles

Scandals involving nonprofit boards and conflicts of interest continue to receive considerable public attention. Earlier this year, for example, musician Wyclef Jean's Yele Haiti charity became the target of intense criticism after the charity disclosed that it had regularly transacted business with Jean and entities controlled by Jean and other directors. Although scandals caused by self-dealing undermine public confidence in the charitable sector, they continue to erupt. Why do charitable boards sanction transactions with insiders?

This Article argues that much of the blame lies with the law itself. Because fiduciary duty law is currently structured as a set of fuzzy …

Postpetition Security Interests Under The Bankruptcy Code, David G. Carlson

Articles

Section 364(c) and (d) of the Bankruptcy Code provides for the creation of security interests in real and personal property under federal law. In this Article, David Gray Carlson discusses the quality and nature of these federal security interests, their remarkable immunity from reversal on appeal, and the ability of postpetition lenders to obtain preferences over other creditors through "cross-collateralization" clauses and the like.

Fixture Priorities, David G. Carlson

Articles

No abstract provided.