Securities Law Commons^™

Should Issuers Be On The Hook For Laddering? An Empirical Analysis Of The Ipo Market Manipulation Litigation, Adam C. Pritchard, Stephen J. Choi

Articles

On December 6, 2000, the Wall Street Journal ran a front-page story exposing abuses in the market for initial public offerings (IPOs). The story revealed "tie-in" agreements between investment banks and initial investors seeking to participate in "hot" offerings. Under those agreements, initial investors would commit to buy additional shares of the offering company's stock in secondary market trading in return for allocations of shares in the IPO. As the Wall Street Journal related, those "[c]ommitments to buy in the after-market lock in demand for additional stock at levels above the IPO price. As such, they provide the rocket fuel …

Corporate Governance, Executive Compensation And Securities Litigation, Eric L. Talley, Gudrun Johnsen

Faculty Scholarship

It is generally accepted that good corporate governance, executive compensation and the threat of litigation are all important mechanisms for incentivizing managers of public corporations. While there are significant and robust literatures analyzing each of these policy instruments in isolation, their mutual relationship and interaction has received somewhat less attention. Such neglect is mildly surprising in light of a strong intuition that the three devices are structurally related to one another (either as complements or substitutes). In this paper, we construct an agency cost model of the firm in which corporate governance protections, executive compensation levels, and litigation incentives are …

Oklahoma Uniform Securities Act Of 2004, Stephanie Chapman, Stephen Hetrick

Oklahoma Law Review

No abstract provided.

Extraterritorial Jurisdiction And U.S. Securities Law: Seeking Limits For Application Of The 10(B) And 10b-5 Antifraud Provisions, Brandy L. Fulkerson

Kentucky Law Journal

No abstract provided.

Mome In Hindsight, Ronald J. Gilson, Reinier Kraakman

Faculty Scholarship

Two decades ago, the Virginia Law Review published our article “The Mechanisms of Market Efficiency” (MOME), in which we tried to discern the institutional underpinnings of financial market efficiency. We concluded that the level of market efficiency with respect to a particular fact depends on which of several market mechanisms — universally informed trading, professionally informed trading, derivatively informed trading, and uninformed trading (each of which we explain below) — operates to reflect that fact in market price. Which mechanism is operative, in turn, depends on how widely the fact is distributed among traders, which, I turn, depends on the …

Rules, Principles, And The Accounting Crisis In The United States, William W. Bratton

Georgetown Law Faculty Publications and Other Works

The Sarbanes-Oxley Act and the Securities Exchange Commission move too quickly when they prod the Financial Accounting Standards Board, the standard setter for US GAAP, to move immediately to a principles-based system. Priorities respecting reform of corporate reporting in the US need to be ordered more carefully. Incentive problems impairing audit performance should be solved first through institutional reform insulating the audit from the negative impact of rent-seeking and solving adverse selection problems otherwise affecting audit practice. So long as auditor independence and management incentives respecting accounting treatments remain suspect, the US reporting system holds out no actor plausibly positioned …

Measuring Share Price Accuracy, Merritt B. Fox

Faculty Scholarship

This Article concerns how to measure share price accuracy. It is prompted by the fact that many scholars believe that the prices established in the stock market affect the efficiency of the real economy. In their view, more accurate prices increase the amount of value added by capital-utilizing enterprises as these enterprises use society's scarce resources for the production of goods and services. More accurate share prices help improve both the quality of choice among new proposed investment projects in the economy and the operation of existing real assets currently in corporate hands.

The proposition that more accurate share prices …

Predatory Lending: What’S Wall Street Got To Do With It?,

Patricia A. McCoy

In this article, we examine the contention that the secondary market will exert sufficient market discipline to drive predatory home loan lenders from the subprime marketplace. Using a so‐called lemons model, we identify the potential risks that investors encounter if they buy securities backed by predatory home loans. We then explain how structured finance, deal provisions, pricing mechanisms, and legal protections shield investors from much of the risk that those loans entail.

While the secondary market does impose some discipline on the subprime home loan market, it is not enough to bring predatory lending to a halt. We provide rationales …

Marriage And The Ethics Of Office, Scott T. Fitzgibbon

Scott T. FitzGibbon

This Article alms to retrieve the neglected concept of the "office," as in "the judicial office" or "corporate officer" or the"office of deacon or lector." It aims to present a thorough account of what that term means. It inquires into the ethics of office, advancing the thesis that to hold and exercise office is a good thing, not only in the obvious instrumental ways-it serves a function and it gets results-but also as a part of the "final," non instrumental good of the officeholder and even, in some arrangements, of the recipient of the officeholder's services. Office is an aspect …

Rethinking Corporate Federalism In The Era Of Corporate Reform, Renee Jones

Renee Jones

No abstract provided.

Counselor, Gatekeeper, Shareholder, Thief: Why Attorneys Who Invest In Their Clients In A Post-Enron World Are "Selling Out," Not "Buying In,", A. Christine Hurt

Faculty Scholarship

No abstract provided.

Regulating Irrational Exuberance And Anxiety In Securities Markets , Peter H. Huang

All Faculty Scholarship

This paper analyzes the regulatory implications of irrational exuberance and anxiety in securities markets. U.S. federal securities laws mandate the disclosure of certain information, but regulate only the cognitive form and content of that information. An important and unstudied question is how to regulate securities markets where some investors respond not only cognitively to the form and content of information, but also emotionally to the form and content of information. This paper investigates that question when some investors feel exuberance or anxiety that is unjustified by cognitive processing of the available information. This paper develops the implications for mandatory securities …

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 …

Understanding Price-Based Antidilution Protection: Five Principles To Apply When Negotiating A Down-Round Financing, Robert P. Bartlett

Scholarly Works

As most venture capital investors are aware, the economic downturn of the past two years—and the concomitant decrease in private company valuations—has created an opportunity for significant returns on new venture investments seldom seen since the early 1990s. Yet while the investment opportunities of the current economic environment may have attractive financial valuations, they frequently come with the added cost of significant transactional complexity. In particular, the issuance of securities by a private company at a price that is below the price previously paid by the company's investors (typically referred to as a “down-round” financing) may trigger one or more …

Reforming Securities Class Actions From The Bench: Judging Fiduciaries And Fiduciary Judging, Lisa L. Casey

BYU Law Review

No abstract provided.

Unfit To Serve: Permanently Barring People From Serving As Officers And Directors Of Publicly Traded Companies After The Sarbanes-Oxley Act, Philip F.S. Berg

Vanderbilt Law Review

On June 4, 2003, lifestyle guru Martha Stewart was indicted on multiple criminal and civil charges by the Securities and Exchange Commission (SEC or Commission). The charges, including obstruction of justice and civil insider trading, stemmed from Stewart's sale of ImClone stock shortly before the Food and Drug Administration rejected a drug produced by ImClone and sent the company's stock price tumbling. Although Stewart could face a number of serious penalties under her criminal indictment, the primary remedy sought by the SEC for her civil insider trading charges is rather uncommon-a bar from serving as a director of Martha Stewart …

The Use Of Public Interest Enforcement Orders By Securities Regulators In Canada, Mary G. Condon

Commissioned Reports, Studies and Public Policy Documents

The purpose of this study is to examine the use of discretionary enforcement powers by securities regulators in Canada, in order to assess the implications of multiple regulators for the enforcement of securities law.

The Petrochina Syndrome: Regulating Capital Markets In The Anti-Globalization Era, Stephen F. Diamond

Cornell Law Faculty Publications

No abstract provided.

The Thin Line Between Love And Hate: Why Affinity-Based Securities And Investment Fraud Constitutes A Hate Crime, Lisa M. Fairfax

Faculty Scholarship

This article explores the parallels between the prototypical hate crime and affinity fraud—securities and investment fraud that targets identifiable religious, racial and ethnic groups—and asserts that those parallels justify treating affinity fraud as a hate crime.

Enron, Watergate And The Regulation Of The Legal Profession, Arnold Rochvarg

All Faculty Scholarship

The most famous scandal of the twentieth century was the Watergate scandal, which most notably led to the resignation of Richard Nixon as President of the United States. The significance of Watergate, however, extends further than the resignation of Nixon. Because Watergate involved so many lawyers, it had a great impact on the regulation of the legal profession. Although the twenty-first century has just started, the strongest contender for this century's most famous scandal is the Enron scandal. Although the Enron scandal is identified mostly with misconduct by accountants and corporate officials, it too involved lawyers and has impacted on …

The Petrochina Syndrome: Regulating Capital Markets In The Anti-Globalization Era, Stephen F. Diamond

Cornell Law Faculty Working Papers

This article argues that the process of globalization has generated a legitimation deficit that can be the source of wasteful, even destructive, social and political conflict. I stylize this outcome as "the PetroChina Syndrome," after a leading example of the kind of activity generated in response to globalization, the PetroChina Campaign, where a coalition of labor, human rights, environmental, anti-slavery and religious groups worked together to oppose the initial public offering of a major Chinese oil company led by Goldman Sachs. The article begins with a discussion of this important but largely unexplored dimension of the anti-globalization era triggered by …

Shutting The Barn Door Before The Horse Is Stolen: How And Why State Public Utility Commissions Should Regulate Transactions Between A Public Utility And Its Affiliates, Judy Sheldrew

Nevada Law Journal

No abstract provided.

The Mechanisms Of Market Inefficiency: An Introduction To The New Finance, Lynn A. Stout

Cornell Law Faculty Publications

During the 1970s and early 1980s, the Efficient Capital Market Hypothesis (ECMH) became one of the most widely-accepted and influential ideas in finance economics. More recently, however, the idea of market efficiency has fallen into disrepute as a result of market events and growing empirical evidence of inefficiencies. This essay argues that the weaknesses of the efficient market theory are, and were, apparent from a careful inspection of its initial premises, including the presumptions of homogeneous investor expectations, effective arbitrage, and investor rationality. By the same token, a wide range of market phenomena inconsistent with the ECHM can be explained …

Preliminary Imprimaturs: Prevailing Party Status Based On Preliminary Injunctions, Bart Forsyth

Washington and Lee Law Review

No abstract provided.

Shareholder Oppression & Dividend Policy In The.Close Corporation, Douglas K. Moll

Washington and Lee Law Review

No abstract provided.

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 …

Standing Up To Wall Street (And Congress), Richard W. Painter

Michigan Law Review

In 1992, Arthur Levitt co-chaired a fundraising dinner for William Clinton. The dinner raised $750,000 (p. 7). Clinton was elected President, and Levitt got the job he wanted: Chairman of the Securities and Exchange Commission. Levitt, a former Chairman of the American Stock Exchange and a connected Democrat, was well qualified for the job. His, however, became a pyrrhic victory when accountants, issuers, broker-dealers, and other special interests used their own political connections to frustrate just about everything he sought to do. Levitt tells the story of his struggle against these well-funded interests in Take on the Street. One of …

Securities Fraud As Corporate Governance: Reflections Upon Federalism, Robert B. Thompson, Hillary A. Sale

Vanderbilt Law Review

State law gives corporate managers extremely broad power to direct increasingly large pools of collective business assets. Not surprisingly, economic incentives, norms, markets, and law all work to constrain the breadth of the power and the potential for abuse of what is other people's money.' State corporate law has occupied the center stage in the legal portion of this landscape, with federal securities law playing a supporting role-at least in the academic presentation of the debate. The New Deal's securities legislation eschewed a general federal corporations statute in favor of a more focused federal role emphasizing disclosure and antifraud protections …

Manual De Derecho Procesal Civil, Edward Ivan Cueva

Edward Ivan Cueva

No abstract provided.