Securities Law Commons^™

Dodd-Frank's Conflict Minerals Rule: The Tin Ear Of Government-Business Regulation, Henry Lowenstein

Marketing and Hospitality, Resort and Tourism Management

This paper examines an unusual provision included in the Dodd-Frank Wall Street Reform and Consumer Protection Act (2010), Section 1502 known as the Conflict Minerals Rule. This provision, having nothing to do with the subject matter of the act itself, attempts to place a chilling effect on the trade of four identified minerals from the Democratic Republic of Congo. The provision and its subsequent rule, surprisingly delegated to the U.S. Securities and Exchange Commission (an agency lacking subject matter expertise in minerals) presents a case and object lesson of almost every cost, procedural and legal error that can take place …

Lawyers And Fools: Lawyer-Directors In Public Corporations, Lubomir P. Litov, Simone M. Sepe, Charles K. Whitehead

Cornell Law Faculty Publications

The accepted wisdom—that a lawyer who becomes a corporate director has a fool for a client—is outdated. The benefits of lawyer-directors in today’s world significantly outweigh the costs. Beyond monitoring, they help manage litigation and regulation, as well as structure compensation to align CEO and shareholder interests. The results have been an average 9.5% increase in firm value and an almost doubling in the percentage of public companies with lawyer-directors.

This Article is the first to analyze the rise of lawyer-directors. It makes a variety of other empirical contributions, each of which is statistically significant and large in magnitude. First, …

Recanting Confidential Witnesses In Securities Litigation, Gideon Mark

Loyola University Chicago Law Journal

This Article examines the contentious and recurring issue of how courts should handle confidential witnesses in securities litigation who recant the information attributed to them in complaints or deny that they ever provided such information to plaintiffs’ counsel and/or investigators. The use by plaintiffs of confidential witnesses has become ubiquitous in recent years, as a primary unintended effect of the Private Securities Litigation Reform Act of 1995. That legislation raised the bar for pleading securities fraud and established an automatic stay of all discovery and other proceedings during the pendency of a motion to dismiss, absent application of one of …

Pleading Securities Fraud Claims--Only Part Of The Story, Marc I. Steinberg

Loyola University Chicago Law Journal

No abstract provided.

The Private Securities Litigation Reform Act And Particularity: Why Are Some Courts In An Alternate Universe?, Charles W. Murdock

Loyola University Chicago Law Journal

The focus of this Article is to suggest that the judicial decision-making process is often not as rational and objective as we would like to believe. Bias often affects the decision making of judges, sometimes to the extent that it appears that the writer of the opinion is living in an alternate universe.

As we progress professionally, and become more steeped in our biases, we sometimes move toward creating a world that exists in our heads and has little relation to the “real” world. While this assertion will be developed in the context of courts’ interpreting “particularly” in the Private …

The Virtues Of Private Securities Litigation: An Historic And Macroeconomic Perspective, Steven A. Ramirez

Loyola University Chicago Law Journal

In the wake of the Great Depression, the federal securities laws operated to mandate disclosure of material facts to investors and extend broad private remedies to victims of securities fraudfeasors. The revelation of massive securities fraud underlying the Great Depression animated the federal securities laws as investment plunged after 1929 and failed to recover for years. For over sixty years after the enactment of the federal securities laws, no episode of massive securities fraud with significant macroeconomic harm occurred. The federal securities laws thereby operated to facilitate financial stability and prosperity, in addition to a superior allocation of capital. Unfortunately, …

Pleading Securities Fraud Claims: The Good, The Bad, And The Ugly, Sharon Nelles, Hilary Huber

Loyola University Chicago Law Journal

No abstract provided.

The Importance Of The Prefiling Phase For Securities-Fraud Litigation, John M. Wunderlich

Loyola University Chicago Law Journal

The pleading burden that governs securities-fraud litigation is significantly higher than those standards that govern traditional civil cases. The heightened pleading burden applicable to securities cases has transformed the motion to dismiss into something like summary judgment. In fact, to contend with this heightened pleading burden, plaintiffs typically must spend more time in the prefiling phase gathering sufficient, reliable evidence of securities fraud.

With almost two decades of litigation under the securities laws’ heightened pleading burden, empirical studies are revealing that certain kinds of evidence are more likely to defeat a motion to dismiss than others. But dismissal statistics and …

Class-Action Tolling, Federal Common Law, And Securities Statutes Of Repose: A Recommendation, Wendy Gerwick Couture

Loyola University Chicago Law Journal

This Essay focuses on a narrow, but potentially outcome-determinative, question: Does the filing of a securities class action toll the three-year outer time limit applicable to claims under sections 11 and 12(a)(2) of the Securities Act and the five-year outer time limit applicable to claims under section 10(b) of the Securities Exchange Act, such that potential class members—after a decision on class certification—can assert an individual federal action, even if those outer time limits would have elapsed absent tolling? There is currently a circuit split on this issue, with the Tenth Circuit answering “yes” and the Second Circuit answering “no.” …

The Significance And Impact Of Price Distortion And The Fraud-On-The-Market Theory After Halliburton Ii, Charles W. Murdock

Loyola University Chicago Law Journal

This past summer, the United States Supreme Court handed down its decision in Halliburton v. Erica P. John Fund, Inc. (“Halliburton II”), in which the Court held that a defendant may establish lack of price impact at the certification stage to establish a lack of reliance based upon the fraud-on-the-market theory. This was the third decision in three years dealing with the fraud-on-the-market approach to establishing commonality with respect to reliance by plaintiffs on management’s misrepresentations. In so doing, the Supreme Court retained market efficiency as an element of the fraud-on-the-market theory, but also reflected a broader and less restrictive …

Navigating Alternatives To Securities Fraud Class Actions: State Law And Opt-Out Litigation, Jeffrey Paul Mahoney

Loyola University Chicago Law Journal

No abstract provided.

Securities Litigation As A Window Into Supreme Court Litigation, Thomas Goldstein

Loyola University Chicago Law Journal

No abstract provided.

Implications For Market Efficiency And Damages Analysis Of Plaintiff Interpretations Of Halliburton Ii's Statement That "Market Efficiency Is A Matter Of Degree", David Tabak

Loyola University Chicago Law Journal

On June 23, 2014, the Supreme Court issued its ruling in Halliburton Co. v. Erica P. John Fund, Inc. (“Halliburton II”) that prior case law “affords defendants an opportunity to rebut the presumption by showing, among other things, that the particular misrepresentation at issue did not affect the stock’s market price.”1 While this has generally been considered the key holding, it has not gone unnoticed that the Court affirmed its prior ruling in Basic, Inc. v. Levinson,2 mentioning that the “presumption of reliance thus does not rest on a ‘binary’ view of market efficiency”3 and, referring to the Brief for …

The Improbable Birth And Conceivable Death Of The Securities Arbitration Clinic, Jill I. Gross

Elisabeth Haub School of Law Faculty Publications

This Article explores the birth, life, and possible death of securities arbitration clinics (SACs) in the United States. Part II of this Article describes the history of the securities arbitration clinic in the United States. Part III describes how a SAC operates and how SAC students help investors. Part IV reviews the pedagogical advantages and disadvantages of a SAC, and addresses the reluctance of many law schools to embrace this type of clinic. Part V concludes by predicting whether these clinics have a future in light of the modern challenges to clinical legal education.

State Liability For Regulatory Change: How International Investment Rules Are Overriding Domestic Law, Lise Johnson, Oleksandr Volkov

Columbia Center on Sustainable Investment Staff Publications

With governments around the world pushing efforts to negotiate and approve mega-investment treaties, it is important to be clear on just what these investment treaties do and do not mean. One issue that is increasingly apparent is that investment treaties are not merely tools to provide protections against abusive regimes and egregious conduct, but are mechanisms through which a small and typically powerful set of private actors can change the substantive content of the law outside the normal domestic legislative and judicial frameworks.

Global Expansion Of National Securities Laws: Extraterritoriality And Jurisdictional Conflicts, Junsun Park

The University of New Hampshire Law Review

[Excerpt] “As securities fraud has grown increasingly transnational, it has become necessary to expand the reach of anti-fraud provisions to persons and entities participating in global securities markets. So far, however, no single antifraud provision exists to govern the entire global marketplace. Although each country strives to combat international securities fraud by using its own regulatory regime, problems can develop when extraterritorial application of national securities laws leads to regulatory overlapping or conflicts. In light of these problems, it is necessary to set forth clear guidelines for determining whether national securities laws can apply extraterritorially and, if so, how far …

A New Crime For Corporate Misconduct?, Peter J. Henning

Law Faculty Research Publications

No abstract provided.

Prudential Regulation And The Knowledge Problem: Towards A New Paradigm Of Systemic Risk Regulation, Michael T. Cappucci

Michael T Cappucci

In this article I examine the regulatory structure created by Title I of the Dodd-Frank Act and ask whether the prudential regulatory authority given to the Financial Stability Oversight Council is an effective tool for accomplishing the mission of identifying and containing risk in the financial system. Prudential regulation, the principal tool at the disposal of the FSOC, was developed in the 19th century to counteract moral hazard in the banking system. Over time, prudential supervision has become policymakers’ regulation of choice, to the point where it is now employed in the oversight and regulation of non-bank financial firms. However, …

Sec Preventative Measures Against Securities Violations And Fraud Post-Jobs Act, Kristie Benner

Kristie Benner

The purpose of the Securities Act and the Exchange Act is to supply investors with the necessary information to make informed decisions regarding an entity’s offerings. After the 2010 financial crisis, the economic crisis devastated the economy leaving many without jobs. In response to this economic recession, President Obama signed the Jumpstart Our Business Startups Act (JOBS Act) into law in 2012 as one method of stimulating the economy. This Act deregulated the securities laws for small businesses in the hopes of creating jobs and invigorating the economy. These changes allow a small business more access to capital by reducing …

Financial Institution Executive Compensation: The Problem Of Financially Motivated Excessive Risk-Taking, The Regulatory Response, And Common Sense Solutions, Jesse D. Gossett

Jesse D Gossett

This article addresses the issue of executive compensation at financial institutions as it relates to encouraging excessive risk-taking at these firms. First, I examine the economics of compensation and its relationship to risk-taking at financial firms. Next, I take a critical look at compensation provisions of Dodd-Frank (and to a lesser extent, Sarbanes-Oxley) and describe not only what Dodd-Frank does, but more importantly what it does not do. I then make specific recommendations for rules regulators should adopt under Dodd-Frank for the purpose of using compensation plans as a way of reducing excessive risk at financial institutions. I make these …