Securities Law Commons^™

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 …

Supervision And Compliance Of Brokerage Firms, Christine Lazaro

Faculty Publications

Supervision is a cornerstone of broker-dealer regulation. It serves a number of important goals: primarily ensuring that the firms follow the governing rules and regulations so that investors can have confidence in the firms with which they do business. Unfortunately, FINRA supervision rules often do not set out specifically how a firm is to supervise its brokers. This article will set forth the general supervision rules governing brokerage firms, as well as the rules that govern specific behavior and conflicts.

The Customer's Nonwaivable Right To Choose Arbitration In The Securities Industry, Jill I. Gross

Elisabeth Haub School of Law Faculty Publications

Arbitration has been the predominant form of dispute resolution in the securities industry since the 1980s. Virtually all brokerage firms include predispute arbitration agreements (PDAAs) in their retail customer contracts, and have successfully fought off challenges to their validity. Additionally, the industry has long mandated that firms submit to arbitration at the demand of a customer, even in the absence of a PDAA.

More recently, however, brokerage firms have been arguing that forum selection clauses in their agreements with sophisticated customers (such as institutional investors and issuers) supersede firms' duty to arbitrate under FINRA Rule 12200. Circuit courts currently are …

The Customer's Nonwaivable Right To Choose Arbitration In The Securities Industry, Jill I. Gross

Brooklyn Journal of Corporate, Financial & Commercial Law

Arbitration has been the predominant form of dispute resolution in the securities industry since the 1980s. Virtually all brokerage firms include predispute arbitration agreements (PDAAs) in their retail customer contracts, and have successfully fought off challenges to their validity. Additionally, the industry has long mandated that firms submit to arbitration at the demand of a customer, even in the absence of a PDAA.

More recently, however, brokerage firms have been arguing that forum selection clauses in their agreements with sophisticated customers (such as institutional investors and issuers) supersede firms’ duty to arbitrate under FINRA Rule 12200. Circuit courts currently are …

Is The Quest For Corporate Responsibility A Wild Good Chase? The Story Of Lovenheim V. Iroquois Brands, Ltd., D.A. Jeremy Telman

Akron Law Review

In Part I, this Article explores the law of shareholder proposals and the reasons why the SEC and the courts permit proposals relating to social or ethical issues (social proposals) so long as those issues relate to the corporation’s business. The focus here is on the regulation of such social proposals. Other regulations permitting the exclusion of shareholder proposals will be discussed only to the extent that they interact with the Rule relating to social proposals. Part II presents the complete narrative of the Lovenheim case, providing details that are not captured in the decision or in the limited secondary …

Is The Quest For Corporate Responsibility A Wild Goose Chase? The Story Of Lovenheim V. Iroquois Brands, Ltd., D.A. Jeremy Telman

Akron Law Review

This Article is a Law Story. Law Stories have many purposes, but their main goal is to supplement and demystify the case method of legal pedagogy. The case method has been criticized for presenting students with the law more or less as a fait accompli. The case method assumes a pre-existing body of law that students passively learn rather than learning to think of the law as something that they will have a hand in shaping...In Part II, this Article explores the law of shareholder proposals and the reasons why the SEC and the courts permit proposals relating to social …

Adding A Due Diligence Defense To § 13(B) And Rule 13b 2 – 2 Of The Securities Exchange Act Of 1934, Michael Evans

Washington and Lee Law Review

No abstract provided.

Downstream Securities Regulation, Anita Krug

All Faculty Scholarship

Securities regulation wears two hats. Its “upstream” side governs firms in connection with their obtaining financing in the securities markets. That is, it regulates firms’ and issuers’ offers and sales of securities, whether in public offerings to retail investors or in private offerings to institutional investors. Its “downstream” side, by contrast, governs financial services providers, who assist with investors’ activities in those markets. Their services include providing advice regarding securities investments, as investment advisers do; aggregating investors’ assets for purposes of enabling those investors to invest their assets collectively, as mutual funds do; and acting as “middlemen” between buyers and …

Greed, Envy, And The Criminalization Of Insider Trading, John P. Anderson

Journal Articles

In October 2011, a U.S. district court sentenced Raj Rajaratnam to eleven years in federal prison for insider trading. This is the longest sentence for insider trading in U.S. history, but it is significantly less than the nineteen to twenty-four-year term requested by the government. Such harsh prison terms (equal in some cases to those meted out for murder or rape) require sound justification in a liberal society. Yet jurists, politicians, and scholars have failed to offer a clear articulation of either the economic harm or the moral wrong committed by the insider trader. This Article looks to fill this …

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. exchange regardless of where those investors …

Revisiting 'Truth In Securities Revisited': Abolishing Ipos And Harnessing Private Markets In The Public Good, Adam C. Pritchard

Articles

My thesis is that the transition between private- and public-company status could be less bumpy if we unify the public-private dividing line under the Securities Act and Exchange Act. The insight builds on Cohen's thought experiment where Congress first enacted the Exchange Act. My proposed public-private standard would take the company-registration model to its logical conclusion. The customary path to public-company status is through an IPO, typically with simultaneous listing of the shares on an exchange. There is nothing about public offerings, however, that makes them inherently antecedent to public-company status. What if companies became public, with required periodic disclosures …

Facebook, The Jobs Act, And Abolishing Ipos, Adam C. Pritchard

Articles

Initial public offerings (IPOs)-the first sale of private firms' stock to the public-are a bellwether of investor sentiment. Investors must be bullish if they are putting their money into untested start-ups. IPOs are frequently cited in the business press as a key barometer of the health of financial markets. Politicians, too, see a steady flow of IPOs as an indicator that capital is fueling the entrepreneurial initiative that sustains the growth of new businesses. Growing businesses create jobs, so Republicans and Democrats can find common ground on the importance of promoting IPOs. That bipartisan consensus was on display this spring …

Bien Venue: Sec V. Johnson And The Policy For Broad Procedural Requirements In Public Securities Actions, Kelly Kylis

Catholic University Law Review

No abstract provided.

Securities Law And The New Deal Justices, Adam C. Pritchard, Robert B. Thompson

Articles

In this Article, we explore the role of the New Deal Justices in enacting, defending, and interpreting the federal securities laws. Although we canvass most of the Court's securities law decisions from 1935 to 1955, we focus in particular on PUHCA, an act now lost to history for securities practitioners and scholars. At the time of the New Deal, PUHCA was the key point of engagement for defining the judicial view toward New Deal securities legislation. Taming the power of Wall Street required not just the concurrence of the legislative branch, but also the Supreme Court, a body that the …

Law, Share Price Accuracy, And Economic Performance: The New Evidence, Merritt B. Fox, Randall Morck, Bernard Yeung, Artyom Durnev

Michigan Law Review

Mandatory disclosure has been at the core of U.S. securities regulation since its adoption in the early 1930s. For many decades, this fixture of our financial system was accepted with little examination. Over the last twenty years, however, mandatory disclosure has been subject to intensifying intellectual crosscurrents. Some commentators hold out the U.S. system as the standard for the world. They argue that adoption by other countries of a U.S.-styled system, with its greater corporate transparency, would enhance their economic performance. Other commentators, in contrast, insist that the U.S. mandatory disclosure regime represents a mistake, not a model. These crosscurrents …

The Securities Acts' Treatment Of Notes Maturing In Less Than Nine Months: A Solution To The Enigma, Wendy Gerwick Couture

Articles

No abstract provided.

Internalizing Outsider Trading, Ian Ayres, Stephen Choi

Michigan Law Review

Investing in the United States has become a hobby for many. Individual ownership of equity, moreover, has increased over the past decade due in part to the introduction of internet-based trading. While providing the possibility for greater returns compared with bank savings accounts, among other investment alternatives, the public capital markets also pose greater risks for investors. Many individual investors lack both the resources and the incentive to analyze the value of any particular security in the market. Such investors thus trade at a systematic disadvantage relative to more informed parties. In response, regulators have asserted that certain informational disparities …

Defining The Duty: Attorneys' Obligations Under Rule 10b-5, Cynthia A. Bedrick

Indiana Law Journal

No abstract provided.

The Political Economy Of Statutory Reach: U.S. Disclosure Rules In A Globalizing Market For Securities, Merritt B. Fox

Michigan Law Review

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 o n 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 …

Should Mandatory Written Opinions Be Required In All Securities Arbitrations?: The Practical And Legal Implications To The Securities Industry , Lynn Katzler

American University Law Review

No abstract provided.

The Obsolescence Of Wall Street: A Contextual Approach To The Evolving Structure Of Federal Securities Regulation, Joel Seligman

Michigan Law Review

As a matter of analytical style, this article illustrates a contextualist approach. For a considerable period of time, the dominant analytical style in corporate and securities .law has been a variant of economic, or law and economics, analysis. The virtue of this type of analysis is that it focuses on what its authors deem to be crucial variables and reaches conclusions derived from the core of a specific legal problem. The defect of this type of analysis is that so much is assumed or often assumed away.

Insider Trading Deterrence Versus Managerial Incentives: A Unified Theory Of Section 16(B), Merritt B. Fox

Michigan Law Review

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 …

Securities Regulation: Challenges In The Decades Ahead, J. William Hicks

Indiana Law Journal

No abstract provided.

Looking A Gift Of Stock In The Mouth: Donative Transfers And Rule 10b-5, Carol J. Sulcoski

Michigan Law Review

This Note explores whether a gift of stock can constitute a "sale" for the purposes of section lO(b) of the 1934 Act and rule lOb-5 promulgated thereunder. Part I reviews the relevant 1934 Act provisions, and concludes that although the statute's language and legislative history do not mention gifts of stock as such, they support the inclusion of gifts within the statute's scope. Part II examines a limited line of cases holding that a bona fide charitable gift is not a sale under section 16(b) of the 1934 Act. This Part concludes that section 16(b) cases are not dispositive of …

The Plight Of Small Issuers (And Others) Under Regulation D: Those Nagging Problems That Need Attention, Rutheford B. Campbell Jr.

Law Faculty Scholarly Articles

Regulation D traces its roots to section 4(2) and section 3(b) of the Securities Act of 1933. Both of these sections are designed to relieve an issuer from the pains of registration under the 1933 Act in situations where Congress deemed such registration inappropriate. Therefore, under section 4(2), no registration is required for "transactions by an issuer not involving any public offering." Section 3(b) is not a self-executing exemption but instead permits the Securities and Exchange Commission to enact rules and regulations exempting issuers from registration requirements "if it finds that ... [registration] is not necessary in the public interest …

Stallion Syndicates As Securities, Rutheford B. Campbell Jr.

Law Faculty Scholarly Articles

To people outside the horse business, the word “syndicate” may conjure up images of sinister characters and organized crime. People who invest in horses, however, attach quite a different meaning to the word syndicates. Mention of a syndicate may remind them of Secretariat, Niatross, Aladdinn or Easy Jet, depending upon the particular breed of horse that interests them. They also think of something else: money, big money.

Although one cannot seriously contend that syndicates alone are responsible for the spectacular monetary growth of the horse business, they certainly have facilitated that growth. Syndicates have been and continue to be the …

Implied Private Right Of Action Under Section 17 Of The Securities Exchange Act Of 1934, Andrew Bor

Vanderbilt Law Review

The Securities Exchange Act of 1934 created the Securities and Exchange Commission (SEC) and vested it with broad regulatory and enforcement powers. While one of the purposes of the Act is to protect investors, the SEC has long recognized that it lacks the resources to fully accomplish that goal. Consequently, plaintiffs injured by actions in violation of the Act have sought remedies in the federal courts that have been willing to imply private rights of action under the securities laws. Recently, however, the Supreme Court has indicated that it will restrict the scope of remedies available to private litigants, thus …

Case Note: Securities Law - Pensions - An Involuntary Noncontributory Employee Pension Fund Is A "Security" Under The Federal Securities Laws, Peter J. Kurshan

Fordham Urban Law Journal

In this case note, Peter J. Kurshan analyzes Daniel v. International Brotherhood of Teamsters, 410 F. Supp. 541 (N.D. Ill. 1976), appeal docketed, No. 76-1855 (7th Cir. April 29, 1976). Plaintiff union member John Daniel was denied the right to receive union pension benefits after working for twenty-two and one half years. The trustees of the Local 705 Fund denied the benefits because Daniel's employment was not continuous. They contended that Daniel did not meet the conditions of the union pension plan, since he had been laid off involuntarily for several months. As a result, Daniel brought a class action …

Foreign Bribes And The Securities Acts' Disclosure Requirements, Michigan Law Review

Michigan Law Review

The Securities Act of 1933 and the Securities Exchange Act of 1934 require most major corporations to disclose to investors all material information concerning company operations. Although they were not intended to regulate the conduct of business, these disclosure obligations can have a deterrent effect upon improper corporate activities. The recent revelation that a significant number of corporations have been making bribes and similar payments abroad has created interest in the feasibility of employing the disclosure requirements to curtail this practice. This Note will show that, despite recent pressures for change, the Securities and Exchange Commission has continued to view …

Judicial Control Of Cash Tender Offers-A Few Practical Recommendations, Ronald W. Oakes

Indiana Law Journal

No abstract provided.