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Articles 1 - 30 of 58
Full-Text Articles in Securities Law
In The Midst Of Bankruptcy: How Cryptocurrency's Classification Affects Creditors Who Were Once Customers, Mia Qu
Washington Law Review
In 2022, Congress proposed the Digital Commodities Consumer Protection Act to amend the Commodity Exchange Act and define a new type of commodity: digital commodity. The definition of digital commodity encompasses cryptocurrency and provides the Commodity Futures Trading Commission with jurisdiction over digital asset transactions. This definition of digital commodity has two important implications. First, it signals the lawmakers’ tendency to generalize cryptocurrency as a commodity. Second, it brings complications into how creditors—especially individual crypto account holders—can recover in the recent bankruptcy cases involving prominent crypto companies. This Comment contains four components. First, it provides a brief explanation of cryptocurrency …
Structural Barriers To Inclusion In Arbitrator Pools, Nicole G. Iannarone
Structural Barriers To Inclusion In Arbitrator Pools, Nicole G. Iannarone
Washington Law Review
Critics increasingly challenge mandatory arbitration because the pools from which decisionmakers are selected are neither diverse nor inclusive. Evaluating diversity and inclusion in arbitrator pools is difficult due to the black box nature of mandatory arbitration. This Article evaluates inclusion in arbitrator pools through a case study on securities arbitration. The Article relies upon the relatively greater transparency of the Financial Industry Regulatory Authority (FINRA) forum. It begins by describing the unique role that small claims securities arbitration plays in maintaining investor trust and confidence in the securities markets before describing why ensuring that the FINRA arbitrator pool is both …
What’S (Still) Wrong With Credit Ratings?, Frank Partnoy
What’S (Still) Wrong With Credit Ratings?, Frank Partnoy
Washington Law Review
Scholars and regulators generally agree that credit rating agency failures were at the center of the recent financial crisis. Congress responded to these failures with reforms in the 2010 Dodd-Frank Act. This Article demonstrates that those reforms have failed. Instead, regulators have thwarted Congress’s intent at every turn. As a result, the major credit rating agencies continue to be hugely profitable, yet generate little or no informational value. The fundamental problems that led to the financial crisis—overreliance on credit ratings, a lack of oversight and accountability, and primitive methodologies—remain as significant as they were before the financial crisis. This Article …
Small Investments, Big Losses: The States' Role In Protecting Local Investors From Securities Fraud, Carlos Berkejó
Small Investments, Big Losses: The States' Role In Protecting Local Investors From Securities Fraud, Carlos Berkejó
Washington Law Review
The securities regulation landscape has changed dramatically in recent years. Federal laws have increasingly preempted the regulatory power of states, while at the same time expanding the universe of securities offerings that are not subject to registration at the federal level. These political and policy choices reflect a balancing of two sometimes competing goals: protecting investors and facilitating capital formation. While policies centered on preemption and deregulation might reduce the cost of raising capital, these could also lead to more pervasive securities fraud. Any resulting increase in fraudulent practices is likely to disproportionately affect small securities offerings that are local …
Are The Sec's Administrative Law Judges Biased? An Empirical Investigation, Urska Velikonja
Are The Sec's Administrative Law Judges Biased? An Empirical Investigation, Urska Velikonja
Washington Law Review
The Dodd-Frank Act significantly expanded the SEC’s enforcement flexibility by authorizing the agency to choose whether to bring an enforcement action in court or in an administrative proceeding. The change has faced strong opposition. Federal courts have enjoined several enforcement actions filed in administrative proceedings for constitutional infirmities, and cases are currently winding their way through the appellate process. But even if any constitutional problems were remedied, controversy would persist. Judges, lawmakers, practitioners, and academics have raised doubts as to whether litigation before administrative law judges (“ALJs”) is fair to defendants. In advancing their arguments, they have relied heavily on …
The Learned Hand Unformula For Short-Swing Liability, Andrew Chin
The Learned Hand Unformula For Short-Swing Liability, Andrew Chin
Washington Law Review
Section 16(b) of the Securities Exchange Act of 1934 allows for the recovery of short-swing profits realized by certain insiders from trading in a corporation’s stock within a period of less than six months. Three generations of corporate law students have been taught the “lowest-in, highest-out” formula that is intended to maximize the disgorgement of short-swing profits under section 16(b). Arnold Jacobs’s 1987 treatise presented two hypothetical examples where the formula fell short of the intended maximum, but courts, commentators, and practitioners have largely ignored these theoretical challenges to the formula’s validity. This Article identifies Gratz v. Claughton as the …
The Learned Hand Unformula For Short-Swing Liability, Andrew Chin
The Learned Hand Unformula For Short-Swing Liability, Andrew Chin
Washington Law Review
Section 16(b) of the Securities Exchange Act of 1934 allows for the recovery of short-swing profits realized by certain insiders from trading in a corporation’s stock within a period of less than six months. Three generations of corporate law students have been taught the “lowest-in, highest-out” formula that is intended to maximize the disgorgement of short-swing profits under section 16(b). Arnold Jacobs’s 1987 treatise presented two hypothetical examples where the formula fell short of the intended maximum, but courts, commentators, and practitioners have largely ignored these theoretical challenges to the formula’s validity. This Article identifies Gratz v. Claughton as the …
State Equity Crowdfunding And Investor Protection, Christopher H. Pierce-Wright
State Equity Crowdfunding And Investor Protection, Christopher H. Pierce-Wright
Washington Law Review
Since Kansas enacted the first blue sky law in 1911, securities regulation has sought to protect investors from fraud and speculation. Historically, this meant precluding substantial numbers of small businesses from raising capital in the form of equity investments. In order to facilitate small-business capital formation, in 2012 the federal government passed the Jumpstart Our Business Startups Act (JOBS Act). Although Title III of the JOBS Act required the Securities and Exchange Commission to undergo rulemaking to allow for small-dollar equity investments, the agency dragged its feet. In the interim, states anxious to jumpstart their own economies took the initiative. …
Selling Advice And Creating Expectations: Why Brokers Should Be Fiduciaries, Arthur B. Laby
Selling Advice And Creating Expectations: Why Brokers Should Be Fiduciaries, Arthur B. Laby
Washington Law Review
Investors face a dizzying array of choices regarding where to invest their funds and increasingly rely on experts for advice. Most advice about securities is provided by investment advisers or broker-dealers, legal categories with little meaning to most people but fraught with consequences. Although advisers and brokers often perform the same function, advisers are subject to a strict fiduciary standard to act in their clients’ best interest while brokers are subject to a less rigorous standard of suitability to ensure that their recommendations are suitable for customers. In 2010, the Dodd-Frank Act authorized the U.S. Securities and Exchange Commission (SEC) …
Fair Notice: Providing For Electronic Document Transmissions To Shareholders In Washington State, James L. Proctor Jr.
Fair Notice: Providing For Electronic Document Transmissions To Shareholders In Washington State, James L. Proctor Jr.
Washington Journal of Law, Technology & Arts
In 2008, Washington State amended Wash. Rev. Code § 23B.01.410 to allow electronic transmission of materials accompanying corporate notices to shareholders. This amendment, combined with an earlier change allowing corporations operating within the state to notify shareholders through certain types of electronic transmissions, incorporated several Securities and Exchange Commission (SEC) suggestions to expand the authorized uses of Internet-based technology to communicate with shareholders. However, corporations operating across state lines are subject to a complex variety of state notice requirements. These differences create an uneven national standard for which types of electronic communication constitute sufficient notice. This statutory variance compels corporations …
United States V. Berger: The Rejection Of Civil Loss Causation Principles In Connection With Criminal Securities Fraud, James A. Jones Ii
United States V. Berger: The Rejection Of Civil Loss Causation Principles In Connection With Criminal Securities Fraud, James A. Jones Ii
Washington Journal of Law, Technology & Arts
In United States v. Berger, a Ninth Circuit panel declined to apply the civil loss causation principles established by the United States Supreme Court in Dura Pharmaceuticals, Inc. v. Broudo in connection with sentencing in a criminal securities fraud prosecution. The Ninth Circuit declined to follow Second and Fifth Circuit decisions endorsing the application of Dura Pharmaceuticals to criminal sentencing, creating a circuit split. This Article examines this split over how to apply the loss causation principles of Dura Pharmaceuticals in connection with sentencing in criminal securities fraud prosecutions. In addition, this Article discusses the implications of each approach …
Outsider Hacking And Insider Trading: The Expansion Of Liability Absent A Fiduciary Duty, James A. Jones Ii
Outsider Hacking And Insider Trading: The Expansion Of Liability Absent A Fiduciary Duty, James A. Jones Ii
Washington Journal of Law, Technology & Arts
In January 2008, the United States District Court for the Southern District of New York held that trading put options of a company’s stock based on inside information allegedly obtained by hacking into a computer network did not violate antifraud provisions of federal securities law. The court ruled that the defendant’s alleged “hacking and trading” did not amount to a violation of section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, promulgated thereunder, because there was no proof the hacker breached a fiduciary duty in obtaining the information. The United States Court of Appeals for the Second …
Communications Decency Act Provides No Safe Harbor Against Antifraud Liability For Hyperlinks To Third-Party Content Under The Securities And Exchange Act, Sheri Wardwell
Washington Journal of Law, Technology & Arts
In 2008, the U.S. Securities and Exchange Commission (SEC) released interpretive guidelines regarding antifraud liability for statements and disclosures made on company Web sites. The SEC noted that a company may incur both criminal and civil liability under section 10(b) of the Securities Exchange Act and Rule 10b-5 for hyperlinks to third-party content. However, the Communications Decency Act, 47 U.S.C. § 230(c), expressly preempts civil liability for interactive computer service providers that post hyperlinks to third-party content on their Web sites. This Article examines whether section 230 immunizes companies from civil liability for hyperlinks to third-party content despite the SEC’s …
Whole Foods, Unwholesome Practices: Will Sock Puppeteers Be Held Accountable For Pseudonymous Web Postings?, Chelsea Peters
Whole Foods, Unwholesome Practices: Will Sock Puppeteers Be Held Accountable For Pseudonymous Web Postings?, Chelsea Peters
Washington Journal of Law, Technology & Arts
The Federal Trade Commission recently exposed Whole Foods’ CEO John Mackey for having made pseudonymous posts on financial message boards for over seven years. Mackey’s practice of “sock puppeting,” or posting under a false identity to praise and build support for one’s company, is becoming more common among high-powered corporate executives who have few other outlets in which to vent their frustrations and spar with their critics. In July, the SEC began an informal investigation into Mackey’s posts. This article examines the liabilities sock puppeteers may face under current securities regulations, particularly § 10b-5 of the Securities Exchange Act of …
The Judicial Application Of The Causation Test Of The False Statement Doctrine In Securities Litigation In China, Ling Dai
Washington International Law Journal
As part of the reform of China’s centrally planned economy, one of the primary purposes in establishing a stock market was to help state-owned enterprises raise sufficient capital from the public. The protection of investors’ interests was not essential in the initial contemplation of securities laws, though the listed companies have a duty of disclosure under the 1998 Securities Law. After the Supreme People’s Court promulgated its judicial interpretation of the false statement doctrine in civil securities cases in 2002, the lower courts started to interpret and apply the elements of the false statement doctrine in securities cases brought by …
Caught Between A Rock And A Soft Place: Regulating Legal Ethics To Police Corporate Governance In The United States And Hong Kong, Susan E. Carroll
Caught Between A Rock And A Soft Place: Regulating Legal Ethics To Police Corporate Governance In The United States And Hong Kong, Susan E. Carroll
Washington International Law Journal
Both the United States and Hong Kong have suffered through corporate governance scandals in recent years. The two nations have tried different methods of regulating legal ethics in order to curtail future corporate governance scandals. The United States, via the Sarbanes-Oxley Act of 2002, empowered the Securities and Exchange Commission ("SEC") to dictate disclosure requirements to U.S. lawyers who represent listed corporations. This mandate creates conflicts between lawyers' duty to keep clients' secrets and their duty to disclose client information for the protection of public interests. Hong Kong took a completely different approach. The Hong Kong Stock Exchange negotiated the …
Whistling In The Dark? Corporate Fraud, Whistleblowers, And The Implications Of The Sarbanes-Oxley Act For Employment Law, Miriam A. Cherry
Whistling In The Dark? Corporate Fraud, Whistleblowers, And The Implications Of The Sarbanes-Oxley Act For Employment Law, Miriam A. Cherry
Washington Law Review
Passed in 2002 in the wake of the accounting scandals that resulted in billions of dollars of lost value to shareholders, the Sarbanes-Oxley Act has as its major goal the prevention of corporate corruption. This Article analyzes the impact of section 806, the portion of the Sarbanes-Oxlcy Act that provides protections for employees who report securities fraud, and describes the effect that Sarbanes-Oxley has on existing employment law. In addition, this Article contributes to the debate over the general effectiveness of the Sarbanes-Oxley Act, a topic of contention among both academics and press commentators. This Article argues that the Act …
Securities Supervision And Judicial Review [In China], Zhongle Zhan, Fengying Li, Inseon Paik
Securities Supervision And Judicial Review [In China], Zhongle Zhan, Fengying Li, Inseon Paik
Washington International Law Journal
Since its founding in 1992, the China Securities Regulatory Commission ("CSRC") has, by the design of the central government of China, become the primary regulator of the Chinese securities market. The CSRC has, however, made some controversial decisions in enforcing its securities regulations. In particular, this article addresses the legal implications of the CSRC's failure to comply with controlling securities regulations in rejecting the Hainan Kaili Central Construction Company's listing application and the ramifications of such selective regulatory enforcement. The article provides an analysis of the current relationship between Chinese administrative and securities law.
Recent Intensification Of Investor Protection In The Korean Securities Market: The Mandatory And Fair Disclosure Systems, Kwang-Rok Kim
Recent Intensification Of Investor Protection In The Korean Securities Market: The Mandatory And Fair Disclosure Systems, Kwang-Rok Kim
Washington International Law Journal
This Article analyzes the Korean fair disclosure system and the Korean mandatory disclosure system under the Korean Securities and Exchange Act ("KSEA"). After the turbulence in the financial markets resulting from the economic crises of late 1997, the South Korean government realized that the Korean economy had failed to keep pace with the world economy. The Korean economy underwent many changes after being offered financial relief from the International Monetary Fund. As part of these changes, the government adopted a series of structural reform measures to improve the standard of corporate governance and enhance corporate management. The KSEA now provides …
Private Enforcement Of Securities Fraud Law In China: A Critique Of The Supreme People's Court 2003 Provisions Concerning Private Securities Litigation, Guiping Lu
Washington International Law Journal
On January 9, 2003, China's Supreme People's Court issued a new ruling with detailed provisions governing private securities litigation involving disclosure of false or misleading information. The new ruling is expected to play an important role in regulating and developing China's securities markets by providing a necessary judicial safeguard against infringement upon investors' interests. The new ruling, however, is unlikely to achieve its expected effect due to various procedural and substantive hurdles to investor access to judicial recourse. The built-in procedural hurdles either make it very difficult for securities investors to bring private actions, or, in some circumstances, deprive them …
The Tender Offer In Korea: An Analytic Comparison Between Korea And The United States, Kwang-Rok Kim
The Tender Offer In Korea: An Analytic Comparison Between Korea And The United States, Kwang-Rok Kim
Washington International Law Journal
Even though the tender offer system in Korea was established in 1976, there were very few tender offer transactions until 1997. However, after Korea's economic crisis in late 1997, the Korean government not only took a series of structural reform measures to improve the securities market system, but also widely opened the financial markets to foreign countries by abolishing or amending restrictions on foreign investment. The 1998 reforms to the Korea Securities Exchange Act included significant changes to tender offer regulations, making hostile takeovers more feasible. Since that time, the tender offer has been used as a tool to acquire …
An Outsider's View Of China's Insider Trading Law, Charles Zhen Qu
An Outsider's View Of China's Insider Trading Law, Charles Zhen Qu
Washington International Law Journal
China's insider trading law can be found in the country's first unified securities industry law, Securities Law of the People's Republic of China, which came into force on July 1, 1999. The provisions of this law relating to insider trading, however, do not seem to help achieve the legislative purpose of the Securities Law, namely, to protect the interest of investors and promote the development of a socialist economy. The inadequacy of the current regime lies in the overly narrow definitions of "insider" and "inside information," the lack of workability of civil liability provisions, and the failure of China's Securities …
Disappearing Without A Trace: Sections 11 And 12(A)(2) Of The 1933 Securities Act, Hillary A. Sale
Disappearing Without A Trace: Sections 11 And 12(A)(2) Of The 1933 Securities Act, Hillary A. Sale
Washington Law Review
The judicially created tracing requirement thwarts the remedial sections of the 1933 Securities Act (the "Securities Act") by requiring shareholders to prove the impossible—that their securities were actually issued in the questioned offering. Since 1967, courts addressing this issue have, without question, adopted a requirement for section 11 that plaintiff-shareholders trace their shares to the offering. Recently, courts have expanded it to apply to section 12(a)(2) as well. For any but the first purchases of a share of stock, this requirement has always been virtually impossible to meet. Courts have also used the 1995 opinion in Gustafson v. Alloyd Co. …
Malone V. Brincat: The Fiduciary Disclosure Duty Of Corporate Directors Under Delaware Law, Nicole M. Kim
Malone V. Brincat: The Fiduciary Disclosure Duty Of Corporate Directors Under Delaware Law, Nicole M. Kim
Washington Law Review
In Malone v. Brincat, the Supreme Court of Delaware significantly broadened the fiduciary disclosure duty of corporate directors under Delaware law. Malone allows shareholders to bring either a direct or a derivative action against directors for the public release of misleading financial statements reported to the Securities Exchange Commission, regardless of whether the alleged misstatements were made in connection with a request for shareholder action. The court also held that a federal preemption statute, the Securities Litigation Uniform Standards Act of 1998, did not preempt the shareholders' action in Delaware state court. This Note argues that the Supreme Court …
United States V. Smith: The Use-Possession Debate In Sec Enforcement Actions Under § 10(B), Oriana N. Li
United States V. Smith: The Use-Possession Debate In Sec Enforcement Actions Under § 10(B), Oriana N. Li
Washington Law Review
The U.S. Supreme Court has yet to address an underlying issue in the evolution of insider trading law: whether Rule 10b-5 liability should attach when someone trades while "in the possession of" material, nonpublic information, or whether a more stringent standard of having actually used or traded "on the basis of" such information must be met. In United States v. Smith, the Court of Appeals for the Ninth Circuit held that a violation of Rule 10b-5 requires an actual causal connection between the possession of inside information and the decision to trade in securities. This Note argues that the …
Taking Another Look At The Regulation Of Mutual Funds In The Aftermath Of The Asian Financial Crisis, Thomas Krider
Taking Another Look At The Regulation Of Mutual Funds In The Aftermath Of The Asian Financial Crisis, Thomas Krider
Washington International Law Journal
This Comment analyzes the 1997 financial crisis in Asia and its effect on U.S. mutual fund investors. The crisis was most acute in, and this Comment focuses on, the countries of Thailand, Indonesia and South Korea. The lack of transparency in these countries led to substantial losses for U.S. investors whose money was in nontransparent organizations through their ownership of mutual funds. The International Monetary Fund responded to the Asian crisis with aid packages intended to prevent the insolvency of those countries in financial trouble. As part of the IMF's program, one of the primary requirements for receiving aid is …
Should Labor Be Allowed To Make Shareholder Proposals?, Randall S. Thomas, Kenneth J. Martin
Should Labor Be Allowed To Make Shareholder Proposals?, Randall S. Thomas, Kenneth J. Martin
Washington Law Review
In this Article, we investigate whether labor unions and related entities should be permitted to continue to make shareholder proposals using Rule 14a-8 of the federal securities laws. We focus on the claim that labor is using the shareholder proposal mechanism to further the interests of workers at the expense of other shareholders. In particular, corporate management groups have suggested that when labor is involved in collective bargaining negotiations with management, it should be barred from submitting shareholder proposals because labor proposals seek to further interests not shared by other security holders of the company. Using data on shareholder proposals …
Law And Policy Of Securities Regulation In Korea, Sang-Hyun Song
Law And Policy Of Securities Regulation In Korea, Sang-Hyun Song
Washington International Law Journal
This Article describes the regulation of securities in Korea, exploring in detail the Securities Exchange Act of 1962. The current system of registration, disclosure, and enforcement is explained, with special attention given to the regulation of market professionals and of international securities offerings. This Article identifies areas in which the current Korean securities laws need improvement, and concludes that laws governing disclosure and international securities transactions must be improved if the Korean stock market is to continue to grow apace with the Korean economy.
The Mandatory Disclosure System And Foreign Firms, Joel Seligman
The Mandatory Disclosure System And Foreign Firms, Joel Seligman
Washington International Law Journal
This Article examines the disclosure requirements for foreign and domestic securities imposed by the Securities and Exchange Commission, paying special attention to the balance between investor protection and the free flow of capital internationally. As the world economy becomes increasingly global, foreign issuers and their governments, who in the past have had to meet more stringent requirements to issue their securities in the United States, are pushing for less restrictive treatment. This Article describes the progress that has been made towards this end.
Securities Regulation In Thailand: Laws And Policies, Pises Sethsathira
Securities Regulation In Thailand: Laws And Policies, Pises Sethsathira
Washington International Law Journal
This Article provides an overview of the new regulatory structure governing capital markets in Thailand as instituted by the Securities Exchange Act of 1992 ("SEA"). Special attention is given to the rules embodied in the SEA as they affect public offerings, fraud, securities businesses, and publicly held companies. The SEA introduces several new concepts to Thai regulation of securities, and these concepts are analyzed, to the extent they can be, given the lack of experience under the new Act.