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Full-Text Articles in Securities Law

Accusers As Adjudicators In Agency Enforcement Proceedings, Andrew N. Vollmer Oct 2018

Accusers As Adjudicators In Agency Enforcement Proceedings, Andrew N. Vollmer

University of Michigan Journal of Law Reform

Largely because of the Supreme Court’s 1975 decision in Withrow v. Larkin, the accepted view for decades has been that a federal administrative agency does not violate the Due Process Clause by combining the functions of investigating, charging, and then resolving allegations that a person violated the law. Many federal agencies have this structure, such as the Securities and Exchange Commission (SEC) and the Federal Trade Commission.

In 2016, the Supreme Court decided Williams v. Pennsylvania, a judicial disqualification case that, without addressing administrative agencies, nonetheless raises a substantial question about one aspect of the combination of functions at ...


Third-Party Institutional Proxy Advisors: Conflicts Of Interest And Roads To Reform, Matthew Fagan Apr 2018

Third-Party Institutional Proxy Advisors: Conflicts Of Interest And Roads To Reform, Matthew Fagan

University of Michigan Journal of Law Reform

With the rise of institutional activist investors in recent decades—including a purported 495 activist campaigns against U.S. corporations in 2016 alone—the role that third-party institutional proxy advisors play in corporate governance has greatly increased. The United States Office of Government Accountability estimates that clients of the top five proxy advisory firms account for about $41.5 trillion in equity throughout the world. For several years, discussions have developed regarding conflicts of interest faced by proxy advisors. For example, Institutional Shareholder Services, the top proxy advisory firm in the world, frequently provides advice to institutional investors on how ...


Reforming Sec Alj Proceedings, Joanna Howard Mar 2017

Reforming Sec Alj Proceedings, Joanna Howard

University of Michigan Journal of Law Reform

This Note considers the current constitutional challenges to SEC administrative proceedings and suggests process reforms to enhance fairness for respondents. Challenges have developed since the Dodd-Frank Act expanded the SEC’s ability to use administrative proceedings. Arguments that there is a pre-existing flaw in the method of appointing administrative law judges provide the most potential for success. The Tenth Circuit’s December 2016 decision against the SEC in Bandimere has created a split, diverging from the D.C. Circuit’s analysis of that question in Lucia. Resolution by the Supreme Court may be inevitable. Even if the challengers do ultimately ...


Public Pensions And Fiduciary Law: A View From Equity, T. Leigh Anenson Sep 2016

Public Pensions And Fiduciary Law: A View From Equity, T. Leigh Anenson

University of Michigan Journal of Law Reform

Controversies involving fund management may be the next frontier of public pension litigation. Recent scandals involving fraud, bribery, and corruption of public pension officials and other third parties have drawn the public eye toward the management of retirement assets. Individual and entity custodians, including pension boards of trustees, are charged with making investment and other decisions relating to pension funds. Unlike private pensions, there is no federal oversight of asset managers or others in control of retirement funds. Yet these funds hold more than three trillion dollars in assets. Until now, the guardians of these monies have operated almost invisibly ...


No More Quid Pro Quo: Abandoning The Personal Benefit Requirement In Insider Trading Law, Shannon Seiferth Jan 2016

No More Quid Pro Quo: Abandoning The Personal Benefit Requirement In Insider Trading Law, Shannon Seiferth

University of Michigan Journal of Law Reform

A circuit split between the Second Circuit’s 2014 decision, United States v. Newman, and the Ninth Circuit’s 2015 decision, United States v. Salman, illustrates problems in insider trading law dating back over thirty years to the Supreme Court’s decision in Dirks v. SEC. Dirks held that when a corporate insider provides information to an outside party who then trades on the information, it must be shown that the insider received some form of a personal benefit for providing the information in order to impute liability. The courts in Newman and Salman disagreed on the sort of evidence ...


Fraud Is Already Illegal: Section 621 Of The Dodd-Frank Act In The Context Of The Securities Laws, Nathan R. Schuur Feb 2015

Fraud Is Already Illegal: Section 621 Of The Dodd-Frank Act In The Context Of The Securities Laws, Nathan R. Schuur

University of Michigan Journal of Law Reform

In the aftermath of the financial crisis, lawmakers and the public focused on abuses in the securitization industry. Abacus, a Synthetic CDO created by Goldman Sachs & Co., became a symbol of what many felt was a corrupt system when it became known that Goldman and Fabrice Tourre, a Vice President at its Correlation Trading Desk, had assisted a hedge fund in designing the security to fail. Perceived failings of the securities laws to prevent transactions like Abacus spurred Congress to enact Section 621 of the Dodd-Frank Act, which prohibits conflicts of interest in asset-backed securitizations. But the law is unnecessary ...


Admit Or Deny: A Call For Reform Of The Sec's "Neither-Admit-Nor-Deny" Policy, Priyah Kaul Feb 2015

Admit Or Deny: A Call For Reform Of The Sec's "Neither-Admit-Nor-Deny" Policy, Priyah Kaul

University of Michigan Journal of Law Reform

For four decades, the SEC’s often-invoked policy of settling cases without requiring admissions of wrongdoing, referred to as the “neither-admit-nor-deny” policy, went unchallenged by the courts, the legislature, and the public. Then in 2011, a harshly critical opinion from Judge Jed Rakoff in SEC v. Citigroup incited demands for reform of this policy. In response to Judge Rakoff’s opinion, the SEC announced a modified approach to settlements. Under the modified approach, the Commission may require an admission of wrongdoing if a defendant’s misconduct was egregious or if the public markets would benefit from an admission. Many supporters ...


Reconciling Tax Law And Securities Regulation, Omri Marian Sep 2014

Reconciling Tax Law And Securities Regulation, Omri Marian

University of Michigan Journal of Law Reform

Issuers in registered securities offerings must disclose the expected tax consequences to investors investing in the offered securities (“nonfinancial tax disclosure”). This Article advances three arguments regarding nonfinancial tax disclosures. First, nonfinancial tax disclosure practice, as the Securities and Exchange Commission (the SEC) has sanctioned it, does not fulfill its intended regulatory purposes. Currently, nonfinancial tax disclosures provide irrelevant information, sometimes fail to provide material information, create unnecessary transaction costs, and divert valuable administrative resources to the enforcement of largely-meaningless requirements. Second, the practical reason for this failure is the SEC and tax practitioners’ unsuccessful attempt to address investors’ heterogeneous ...


The Two Faces Of Janus: The Jurisprudential Past And New Beginning Of Rule 10b-5, John Patrick Clayton Apr 2014

The Two Faces Of Janus: The Jurisprudential Past And New Beginning Of Rule 10b-5, John Patrick Clayton

University of Michigan Journal of Law Reform

Section 10(b) of the Securities Exchange Act and its implementing Rule 10b-5 are the primary antifraud provisions for both private and public enforcement of the federal securities laws. Neither the statute nor the rule expressly provides for a private right of action, but federal courts have long recognized such an implied right, and the Securities and Exchange Commission has supported the implied private right of action as a “necessary supplement” to its own efforts. However, after a decade of applying an expansive interpretation to Section 10(b), in the early 1970s the U.S. Supreme Court began to narrowly ...


The Future Of Securities Class Actions Against Foreign Companies: China And Comity Concerns, Dana M. Muir, Junhai Liu, Haiyan Xu Jun 2013

The Future Of Securities Class Actions Against Foreign Companies: China And Comity Concerns, Dana M. Muir, Junhai Liu, Haiyan Xu

University of Michigan Journal of Law Reform

In Morrison v. National Australia Bank Ltd., the U.S. Supreme Court limited the application of U.S. securities fraud law in transnational situations. The Supreme Court noted that its decision was influenced by international comity considerations. In this Article, we evaluate the availability of class actions in China in cases involving alleged securities fraud. Because we find that the availability of those actions is too limited to fully protect U.S. shareholders, we argue that U.S. investors should be permitted to bring securities fraud class actions against non-U.S. companies whose securities are traded on a U.S ...


Federal Discovery Stays, Gideon Mark Feb 2012

Federal Discovery Stays, Gideon Mark

University of Michigan Journal of Law Reform

In federal civil litigation, unless a discretionary stay is granted, discovery often proceeds while motions to dismiss are pending. Plaintiffs with non-meritorious cases can compel defendants to spend massively on electronic discovery before courts ever rule on such motions. Defendants who are unable or unwilling to incur the huge up-front expense of electronic discovery may be forced to settle non-meritorious claims. To address multiple electronic discovery issues, Congress amended the Federal Rules of Civil Procedure in 2006 and the Federal Rules of Evidence in 2008. However, the amendments failed to significantly reduce costs and failed to address the critical issue ...


The Unjustified Judicial Creation Of Class Certification Merits Trials In Securities, Michael J. Kaufman, John M. Wunderlich Dec 2010

The Unjustified Judicial Creation Of Class Certification Merits Trials In Securities, Michael J. Kaufman, John M. Wunderlich

University of Michigan Journal of Law Reform

The class action device is vital to deterring securities fraud and remedying its victims, who almost never suffer losses sufficient to justify an individual suit. Nonetheless, the federal courts have begun to convert the class certification process into a premature trial on the merits, thereby precluding victims of securities fraud from pursuing otherwise valid claims of financial wrongdoing. In particular, in a series of important decisions, the federal courts have required plaintiffs to prove the essential elements of their securities fraud claims at the preliminary class certification stage.

This Article demonstrates why this trend should end. The judicial creation of ...


Turning A Short-Term Fling Into A Long-Term Commitment: Board Duties In A New Era, Nadelle Grossman Jul 2010

Turning A Short-Term Fling Into A Long-Term Commitment: Board Duties In A New Era, Nadelle Grossman

University of Michigan Journal of Law Reform

Corporate boards face significant pressure to make decisions that maximize profits in the short run. That pressure comes in part from executives who are financially rewarded for short-term profits despite the long-term risks associated with those profit-making activities. The current financial crisis, where executives at AIG and numerous other institutions ignored the long-term risks associated with their mortgage backed securities investments, arose largely because those executives were compensated for the short-term profits generated by those investments despite their longer-term risks. Pressure on boards for short-term profits also comes from activist investors who seek to make quick money off of trading ...


Give Smaller Companies A Choice: Solving Sarbanes-Oxley Section 404 Inefficiency, Paul P. Arnold Jul 2009

Give Smaller Companies A Choice: Solving Sarbanes-Oxley Section 404 Inefficiency, Paul P. Arnold

University of Michigan Journal of Law Reform

This Note argues that smaller public companies should have the option to opt out of Section 404 of the Sarbanes-Oxley Act of 2002. Optional compliance is economically preferable to the current approach of mandatory compliance. Companies that choose to comply with Section 404 will send a signal to the financial markets that their internal controls meet the high standards Section 404 demands, and investors will reward such companies if they actually value the benefit of that company's additional controls. Similarly, companies that benefit less from additional internal accounting will be able to avoid Section 404's high costs. To ...


Beyond The Busihess Judgment Rule: Protecting Bidder Firm Shareholders From Value-Reducing Acquisitions, Ryan Houseal Oct 2003

Beyond The Busihess Judgment Rule: Protecting Bidder Firm Shareholders From Value-Reducing Acquisitions, Ryan Houseal

University of Michigan Journal of Law Reform

During the takeover transactions of the 1980s, bidder firms paid target firm shareholders average premiums of approximately 50% for their shares. Did the sizable premiums paid to target firm shareholders during the 1980s reflect post-takeover improvement in the target's performance? Or were the premiums a result of the mismanagement of the bidder firms' assets?

The answer will help determine whether additional legal mechanisms should be established to protect bidder firm shareholders from the threat of management's consummation of value reducing acquisitions. Accordingly, this Note examines various studies which attempt to identify the source of the premiums paid to ...


A Commerce Clause Challenge To New York's Tax Deduction For Investment In Its Own Tuition Savings Program, Amy Remus Scott Dec 1999

A Commerce Clause Challenge To New York's Tax Deduction For Investment In Its Own Tuition Savings Program, Amy Remus Scott

University of Michigan Journal of Law Reform

The Internal Revenue Code provides guidelines for states to create and maintain college tuition savings programs which offer federal tax benefits to investors. Several states have enacted tuition savings plans in accordance with these guidelines. In addition to the federal tax benefits allowed, New York offers a state tax deduction to New York residents who invest in its plan, the New York College Choice Tuition Savings Program. New York does not offer the deduction, however, to residents who invest in comparable programs offered by other states. The tax deduction thus creates an incentive for residents to invest in the in-state ...


Moving Toward A Clearer Definition Of Insider Trading: Why Adoption Of The Possession Standard Protects Investors, Lacey S. Calhoun Jul 1999

Moving Toward A Clearer Definition Of Insider Trading: Why Adoption Of The Possession Standard Protects Investors, Lacey S. Calhoun

University of Michigan Journal of Law Reform

In recent years, insider trading has become a publicized focus of securities law enforcement. The definition of insider trading has emerged slowly through case law, and the term has been clarified by new theories of liability. The use and possession tests are two standards of liability used to judge the treatment of inside information. The use standard offers a defense to insider trading liability while the possession standard premises liability on mere possession of inside information. This Note argues that courts should adopt the possession standard because this standard better protects investors, a primary goal of the Securities Exchange Act ...


Decreasing The Costs Of Jurisdictional Gridlock: Merger Of The Securities And Exchange Commission And The Commodity Futures Trading Commission, Mark Frederick Hoffman May 1995

Decreasing The Costs Of Jurisdictional Gridlock: Merger Of The Securities And Exchange Commission And The Commodity Futures Trading Commission, Mark Frederick Hoffman

University of Michigan Journal of Law Reform

Jurisdictional conflict exists between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), primarily due to the language of the 1974 CFTC Act. This Act grants the CFTC exclusive jurisdiction to regulate certain financial instruments which, given the increasing complexity and "hybrid" nature of such instruments, might simultaneously be subject to SEC regulation. This Note first explores the history of the two agencies and the statutory language giving rise to the jurisdictional conflict. This Note then examines several instances of jurisdictional conflict that resulted in extensive costs for the respective agencies and the United States' financial ...


A Failure Of Communication: An Argument For The Closing Of The Nyse Floor, Gerald T. Nowak Jan 1993

A Failure Of Communication: An Argument For The Closing Of The Nyse Floor, Gerald T. Nowak

University of Michigan Journal of Law Reform

Part I of this Note describes and analyzes the stock exchange communication process as it has existed in the past and as it currently exists, paying particular attention to the role of the floor broker and the stock specialist.'" Part II examines certain alternatives, evaluating such systems as to their potential as a replacement for the physical exchanges. Part III suggests an SEC rule granting specific exemption from exchange reporting requirements to low-volume automated systems in the hope of spurring innovation in the business of trading securities.


Augmenting Erisa With Market Discipline: Transforming Pension Plan Interests Into Securities, Keir N. Dougall May 1991

Augmenting Erisa With Market Discipline: Transforming Pension Plan Interests Into Securities, Keir N. Dougall

University of Michigan Journal of Law Reform

Part I of this Note provides general background information about pension plans and details the problems that ERISA creates because of its dependence on trust law. Part II canvasses recent problems in pension plan governance that courts and pension plan members have faced in takeover defense and social investment contexts, demonstrating that ERISA's use of trust law cannot respond adequately to these problems. Parts I and II draw on an analysis of ERISA presented by Professors Fischel and Langbein but argue that their proposals for changing ERISA inadequately address the problems they identify. Part III argues that the economic ...


Protecting Nonshareholder Interests In The Market For Corporate Control: A Role For State Takeover Statutes, Frank J. Garcia Apr 1990

Protecting Nonshareholder Interests In The Market For Corporate Control: A Role For State Takeover Statutes, Frank J. Garcia

University of Michigan Journal of Law Reform

Part I of this Note describes a phenomenon of modern corporate activity first identified over fifty years ago as the "separation of ownership and control." This separation gives rise to the need for a governing corporate norm; recognizing the normative aspect of this phenomenon has direct implications for the takeover debate.

Part II analyzes the problem of a target board's fiduciary duty as the modern version of the fundamental normative issue of corporate law. It argues that the norm of shareholder wealth maximization, assumed as the starting point by those most in favor of an active and minimally regulated ...


Beyond Managerialism: Investor Capitalism?, Alfred F. Conard Oct 1988

Beyond Managerialism: Investor Capitalism?, Alfred F. Conard

University of Michigan Journal of Law Reform

Capitalism, in most large public corporations, has been subtly transformed from a system of dominance by the suppliers of capital to a system of dominance by the managers, dubbed "managerialism." In many respects, managerialism is beneficial to investors and other enterprise constituencies, since managers' rewards typically grow with the profitability of the enterprise. But managerialism permits drastic wastes of resources when managers hang on to their jobs after they have become inefficient or spend lavishly to defend themselves against takeover bids. Derivative suits, shareholder proposals, independent directors, and other prescriptions have failed to stifle managerial abuses. This is the message ...


Auditor Changes And Opinion Shopping- A Proposed Solution, Dale R. Rietberg Oct 1988

Auditor Changes And Opinion Shopping- A Proposed Solution, Dale R. Rietberg

University of Michigan Journal of Law Reform

This Note argues that the existing regulatory mechanism has failed to address adequately the problem of opinion shopping, and that better means of ensuring the reliability of financial statements are needed. Part I describes the nature and extent of the opinion-shopping problem, including a discussion of its larger, macroeconomic impact. Part II argues that the underlying causes of the problem are systemic and that present safeguards against opinion shopping are inadequate. Finally, Part III examines some alternative solutions and proposes a system of Accounting Issue Inquiry Centers under the direction and auspices of the SEC. These Centers would be designed ...


Limiting The Use Of The Rico Act As A Defense To Hostile Corporate Takeovers, Mary Ann Lesniak Oct 1983

Limiting The Use Of The Rico Act As A Defense To Hostile Corporate Takeovers, Mary Ann Lesniak

University of Michigan Journal of Law Reform

This Note argues that RICO could be a legitimate defense to a hostile corporate takeover pursuant to a cash tender off er if shareholders who retain stock will be harmed by the takeover. Part I of this Note examines the general background of the RICO Act. Part II applies the Act to a hostile cash tender offer and examines each element of a civil RICO action. Part III advocates the use of RICO's injury requirement to limit this application of the Act and analyzes the potential injuries to shareholders and management during a hostile cash tender offer. This limitation ...


Implied Private Rights Of Action Under The Securities Act Of 1933 Section 17(A), Steven M. Stankewicz Apr 1981

Implied Private Rights Of Action Under The Securities Act Of 1933 Section 17(A), Steven M. Stankewicz

University of Michigan Journal of Law Reform

This article considers the existence of a private right of action under Securities Act section 17(a). Part I examines the evolving implication doctrines, and their applicability to section 17(a).Part II discusses the need for a statutory solution and the treatment of implied rights of action under the American Law Institute's proposed Federal Securities Code.


Corruption And The Foreign Corrupt Practices Act Of 1977, Fredric Bryan Lesser Oct 1979

Corruption And The Foreign Corrupt Practices Act Of 1977, Fredric Bryan Lesser

University of Michigan Journal of Law Reform

This article first discusses the business activities and competing interests which prompted congressional action. Part II analyzes the FCPA and attempts to solve the ambiguities inherent in the criminalization provisions, thereby clarifying which activities are proscribed by the FCPA and what is meant by the Act's corruption requirement. Finally, Part III examines the possibilities for multinational agreements prohibiting bribery.


Bank Securities Activities And The Need To Separate Trust Departments From Large Commercial Banks, Thomas J. Schoenbaum Oct 1976

Bank Securities Activities And The Need To Separate Trust Departments From Large Commercial Banks, Thomas J. Schoenbaum

University of Michigan Journal of Law Reform

This article (1) analyzes the traditional Glass-Steagall Act restrictions on banks and the leading case of Investment Company Institute v. Camp, where the Supreme Court held that the offering by commercial banks of commingled agency accounts violated the Glass-Steagall Act prohibition against underwriting securities, (2) considers the. developments since that decision, and (3) offers suggestions on an approach to devising solutions to the policy questions involved.


Financial Disclosure By Small Corporations, Russell J. Bruemmer Jan 1976

Financial Disclosure By Small Corporations, Russell J. Bruemmer

University of Michigan Journal of Law Reform

This note will focus upon the desirability of compelling financial disclosure by corporations not subject to control under the existing federal securities legislation, which includes the vast majority of American corporations. While differing in degree and extent of application to corporations of varying sizes, the benefits derived from disclosure by large, widely-held corporations would also be obtained when disclosure is made by smaller, less widely-held corporations. The extension of federal or state disclosure requirements to corporations of all sizes and ownership dispersions, requiring them to place financial information before their shareholders at least once each year, is suggested.


Providing An Effective Remedy In Shareholder Suits Against Officers, Directors, And Controlling Persons, Michael H. Woolever Jan 1975

Providing An Effective Remedy In Shareholder Suits Against Officers, Directors, And Controlling Persons, Michael H. Woolever

University of Michigan Journal of Law Reform

Corporate officers, directors, and controlling persons occupy a fiduciary relationship toward the corporation and its shareholders in the exercise of control over corporate affairs. This fiduciary obligation requires that officers, directors, and controlling persons act in good faith and perform their offices in the best interests of the corporation and its shareholders and not to their own advantage. When this duty is breached, a shareholder may bring an action against these fiduciaries, either in his own name or derivatively for the benefit of the corporation. Under present law, however, it may be impossible for an American court to secure jurisdiction ...


Perlman V. Feldmann: A Case Study In Contemporary Corporate Legal History, Jan G. Deutsch Jan 1974

Perlman V. Feldmann: A Case Study In Contemporary Corporate Legal History, Jan G. Deutsch

University of Michigan Journal of Law Reform

The author gives the following introduction to this article: “When I was a law student, taking a course in introductory corporate law, what was heard around the halls was that most of corporate law would be learned if one understood Perlman v. Feldmann. I agree with that statement, and I have agreed more strongly each year I myself have taught introductory corporate law. Indeed, I now believe one would also learn a good deal about the significance of-the corporation in American life during the past two decades. Unfortunately, however, it seems to me-on the basis of having read everything of ...