Law Commons^™

The Pioneers, Waves, And Random Walks Of Securities Law In The Supreme Court, Elizabeth Pollman

Seattle University Law Review

After the pioneers, waves, and random walks that have animated the history of securities laws in the U.S. Supreme Court, we might now be on the precipice of a new chapter. Pritchard and Thompson’s superb book, A History of Securities Law in the Supreme Court, illuminates with rich archival detail how the Court’s view of the securities laws and the SEC have changed over time and how individuals have influenced this history. The book provides an invaluable resource for understanding nearly a century’s worth of Supreme Court jurisprudence in the area of securities law and much needed context for …

Three Stories: A Comment On Pritchard & Thompson’S A History Of Securities Laws In The Supreme Court, Harwell Wells

Seattle University Law Review

Adam Pritchard and Robert Thompson’s A History of Securities Laws in the Supreme Court should stand for decades as the definitive work on the Federal securities laws’ career in the Supreme Court across the twentieth century.1 Like all good histories, it both tells a story and makes an argument. The story recounts how the Court dealt with the major securities laws, as well the agency charged with enforcing them, the Securities and Exchange Commission (SEC), and the rules it promulgated, from the 1930s into the twenty-first century. But the book does not just string together a series of events, “one …

Stakeholderism Silo Busting, Aneil Kovvali

Articles by Maurer Faculty

The fields of antitrust, bankruptcy, corporate, and securities law are undergoing tumultuous debates. On one side in each field is the dominant view that each field should focus exclusively on a specific constituency—antitrust on consumers, bankruptcy on creditors, corporate law on shareholders, and securities regulation on financial investors. On the other side is a growing insurgency that seeks to broaden the focus to a larger set of stakeholders, including workers, the environment, and political communities. But these conversations have largely proceeded in parallel, with each debate unfolding within the framework and literature of a single field. Studying these debates together …

Stay In The Fight With Civility And Professionalism, David Spratt

Articles in Law Reviews & Other Academic Journals

No abstract provided.

De Facto Shareholder Primacy, Jeff Schwartz

Maryland Law Review

No abstract provided.

The Regulatory Accountability Act Loses Steam But The Trump Executive Order On Alj Selection Upturned 71 Years Of Practice, Jeffrey Lubbers

Articles in Law Reviews & Other Academic Journals

No abstract provided.

From Equality To Duty: On Altering The Reach, Impact, And Meaning Of The Texas Gulf Legacy, Lisa Fairfax

All Faculty Scholarship

As the first federal court decision to hold that insider trading represented a violation of the federal securities laws, the historical importance of SEC v. Texas Gulf Sulphur Co. is clear. However, its current relevance may not be so clear. This is because while there are some aspects of Texas Gulf that have endured and remain a fixture of federal insider trading jurisprudence, the Supreme Court has firmly repudiated the normative rationale for insider trading articulated by Texas Gulf. This essay contends that this repudiation has important descriptive and normative implications. Perhaps most importantly, this essay contends that Texas Gulf …

Ice Skating Up Hill: Constitutional Challenges To Sec Administrative Proceedings, Thomas Glassman

Thomas S Glassman

Since the inception of the Dodd-Frank Act the Securities and Exchange Commission has come under fire for its increased use of administrative proceedings in adjudicating the agency’s enforcement actions. That criticism has come to several suits in federal court claiming constitutional challenges to the system generally and most recently, the Administrative Law Judges themselves. Until June of 2015, when Hill v. the SEC took place in federal court, the Government was unbeaten in when arguing against these constitutional challenges. Hill, however found that it was likely the SEC had hired their Administrative Law Judges unconstitutionally. The SEC Administrative Law Judges …

Democratizing Startups, Seth C. Oranburg

Seth C Oranburg

The Jumpstart Our Business Startups Act of 2012 intends to “help entrepreneurs raise the capital they need to put Americans back to work and create an economy that’s built to last.” The goal is to “democratize startups” by making capital available to diverse entrepreneurs in new geographies. Yet the net effect of securities regulations and market conditions is the opposite. Startup companies are encouraged to stay private so capital is consolidating in large, mature firms instead of recycling into new startups. Evidence of consolidation is that once-rare “Unicorns” (billion-dollar startups) now number over 111. More money is going into huge …

The Law And Ethics Of High-Frequency Trading, Steven R. Mcnamara

Steven R. McNamara

Michael Lewis’s recent book Flash Boys has resurrected the controversy concerning “high-frequency trading” (HFT) in the stock markets. While HFT has been important in the stock markets for about a decade, and may have already peaked in terms of its economic significance, it touched a nerve with a public suspicious of financial institutions in the wake of the financial crisis of 2008-2009. In reality, HFT is not one thing, but a wide array of practices conducted by technologically adept electronic traders. Some of these practices are benign, and some even bring benefits such as liquidity and improved price discovery to …

Re-Envisioning Investors’ Anti-Director Rights Index: Theory, Criticism, And Implications, Sang Yop Kang

Sang Yop Kang

‘Law and Finance’ theory – which offers analytical frameworks to measure the protection of public investors and the quality of corporate governance – has dominated the comparative corporate governance scholarship in the last decade. So far, many proponents and critics have had debates on the relevance of the theory and the implications of the theory’s empirical studies. Several important points in relation to shareholder protection, however, have been highly neglected in these debates. In particular, the significance of one-share-one-vote (OSOV) rule has been inappropriately underestimated. In response, this Article explores (1) why OSOV is an utmost critical component in corporate …

Halliburton, Basic And Fraud On The Market: The Need For A New Paradigm, Charles W. Murdock

Charles W. Murdock

Summary: Halliburton, Basic and Fraud on the Market: The Need for a New Paradigm

If defrauded securities plaintiffs cannot bring a class-action lawsuit, there often will be no effective remedy since the amount at stake for individual plaintiffs is not sufficient to warrant the substantial costs of litigation. To surmount the problem of individualized reliance and establish commonality, federal courts for twenty-five years have been employing the Basic fraud-on-the-market theory which posits that, in an efficient market, investors rely on the integrity of the market price.

While class certification at one time was a matter of course, today it is …

The Rise And Rise Of The One Percent: Getting To Thomas Piketty's Wealth Dystopia, Shi-Ling Hsu

Shi-Ling Hsu

Thomas Piketty's Capital in the Twenty-first Century, which is surely one of the very few economics treatises ever to be a best-seller, has parachuted into an intensely emotional and deeply divisive American debate: the problem of inequality in the United States. Piketty's core argument is that throughout history, the rate of return on private capital has usually exceeded the rate of economic growth, expressed by Piketty as the relation r > g. If true, this relation means that the wealthy class – who are the predominant owners of capital – will grow their wealth faster than economies grow, which …

Insider Trading And Evolutionary Psychology: Strong Reciprocity, Cheater Detection, And The Expanding Boundaries Of The Law, Steven R. Mcnamara

Steven R. McNamara

Insider trading law has expanded in recent years to cover instances of trading on non-public information that fall outside of the fiduciary duty framework set forth in the landmark cases of Chiarella and Dirks. The trend towards a broader insider trading law moves the law closer towards what evolutionary psychology tells us humans desire when engaging in collective action: that individuals benefit in proportion to the effort or investment they make in a common enterprise. Insider trading law can therefore be understood as a societal response to cheating in group activities, and the recent expansion of the law as …

Culture Wars: Rate Manipulation, Institutional Corruption, And The Lost Normative Foundations Of Market Conduct Regulation, Justin O'Brien

Seattle University Law Review

The global investigations into the manipulation of the London Interbank Offered Rate (Libor) have raised significant questions about how conflicts of interest are managed for regulated entities contributing to benchmarks. An alternative framework, which brings the management of the rate process under direct regulatory supervision, is under consideration, coordinated by the International Organization of Securities Commissions taskforce. The articulation of global principles builds on a review commissioned by the British government that suggests rates calculated by submission can be reformed. This paper argues that this approach is predestined to fail, precisely because it ignores the lessons of history. In revisiting …

Are Defined Contribution Pension Plans Fit For Purpose In Retirement?, Jeremy R. Cooper

Seattle University Law Review

This Article considers the historical basis for the shift from defined benefit plans to defined contribution plans, the structural and practical shortcomings of defined contribution plans, alternate pension models, and adjustments to existing retirement plan models that may offer a degree of protection to plan contributors. Like the United States, Australia is now realizing the limitations of a defined contribution retirement system insofar as it relates the provision of reliable retirement income for a population with increasing life expectancy. Unlike defined contribution plans, defined benefit plans provide a benefit based typically on time served and a predetermined proportion of either …

The Worst Test Of Truth: The "Marketplace Of Ideas" As Faulty Metaphor, Thomas W. Joo

Thomas W Joo

In his famous dissent in Abrams v. United States, Justice Holmes proclaimed that “the best test of truth is the power of the thought to get itself accepted in the competition of the market.” This Article critiques the basic argument against speech regulation that has developed from the “marketplace of ideas” metaphor: that speech should be “free” because markets are “free,” and because free markets produce “truth.” These assertions about markets are taken for granted, but they portray markets and market regulation inaccurately; thus economic markets provide a poor analogy for the deregulation of speech.

First Amendment jurisprudence invokes the …

Controlling Shareholders: Benevolent “King” Or Ruthless “Pirate”, Sang Yop Kang

Sang Yop Kang

Unfair self-dealing and expropriation of minority shareholders by a controlling shareholder are common business practices in developing countries (“bad-law countries”). Although controlling shareholder agency problems have been well studied so far, there are many questions unanswered in relation to behaviors and motivations of controlling shareholders. For example, a puzzle is that some controlling shareholders in bad-law countries voluntarily extract minority shareholders less than other controlling shareholders. Applying Mancur Olson’s framework of political theory of “banditry” to the context of corporate governance, this Article proposes that there are at least two categories of controlling shareholders. “Roving controllers” are dominant shareholders with …

Re-Envisioning The Controlling Shareholder Regime: Why Controlling Shareholders And Minority Shareholders Embrace Each Other, Sang Yop Kang

Sang Yop Kang

According to conventional corporate governance scholarship, controlling shareholder regimes exist in jurisdictions where minority shareholders are not well protected by controlling shareholders’ expropriation. However, Professor Ronald Gilson raises a critical point against the conventional view; if laws are inefficient and do not protect investors, as the conventional view explains, why do we observe any minority shareholders at all in such “bad-law” countries? One possible reason is that in response to controlling shareholders’ expropriation, minority shareholders discount severely shares that corporations issue. Then, a related question is: if it is true, why do some controlling shareholders in bad-law countries have many …

Present At The Creation: Reflections On The Early Years Of The National Association Of Corporate Directors, Lawrence J. Trautman

Lawrence J. Trautman Sr.

Effective corporate governance is critical to the productive operation of the global economy and preservation of our way of life. Excellent governance execution is also required to achieve economic growth and robust job creation in any country. In the United States, the premier director membership organization is the National Association of Corporate Directors (NACD). Now over 36 years old, NACD plays a major role in fostering excellence in corporate governance in the United States and beyond. Over the past thirty-six years NACD has grown from a mere realization of the importance of corporate governance to become the only national membership …

The Cost Of Securities Fraud, Urska Velikonja

William & Mary Law Review

Under the dominant account, fraudulent financial reporting by public firms harms the firms' shareholders and, more generally, capital markets. This Article contends that the account is incomplete. In addition to undermining investor confidence, misreporting distorts economic decision making by all firms, both those committing fraud and those not. False information impairs risk assessment by those who provide human or financial capital to fraudulent firms, the firms' suppliers and customers, and thus misdirects capital and labor to subpar projects. Efforts to hide fraud and avoid detection further distort fraudulent firms' business decisions, as well as decisions by their rivals, who mimic …

Scandal Enforcement At The Sec: The Arc Of The Option Backdating Investigations, Stephen Choi, Adam C. Pritchard, Anat C. Wiechman

Law & Economics Working Papers

We study the SEC’s allocation of enforcement resources in the wake of a salient public scandal. We focus on the SEC’s investigations of option backdating in the wake of numerous media articles on the practice of backdating. We find that the SEC shifted its mix of investigations significantly toward backdating investigations and away from investigations involving other accounting issues. We test the hypothesis that SEC pursued more marginal investigations into backdating at the expense of pursuing more egregious accounting issues. Our event study of stock market reactions to the initial disclosure of backdating investigations shows that those reactions declined over …

Rise Of The Intercontinentalexchange And Implications Of Its Merger With Nyse Euronext, Latoya C. Brown

Latoya C. Brown, Esq.

This paper examines the impending merger between the IntercontinentalExchange (ICE) and NYSE Euronext against the backdrop of the current structure of the global financial services industry. The paper concludes that the merger embodies what the financial services industry is becoming and captures the model that will allow exchanges to remain competitive in today’s marketplace: mega-exchanges with broader asset classes and electronic platforms. As technology and globalization threaten their vitality, exchanges will need to continue reinventing and adapting. Increasingly over the last decade they have done so by merging and by moving, at least a part of, their operations on screen. …

The Regulation Of U.S. Money Market Funds: Lessons From Europe, Latoya C. Brown

Latoya C. Brown, Esq.

The recent financial crisis challenged long held perceptions of money market funds (“MMFs”) as stable and highly liquid instruments. Regulators in the US and in Europe now seek to impose additional rules on MMFs to avoid another significant failure as happened to the Reserve Fund. In the US, the debate is drawing even more media attention as question of which regulatory body - such as the Securities and Exchange Commission, the Treasury Department, and the Financial Stability Oversight Council – should lead the way has taken interesting twists and turns. This paper examines primary reform options being proposed in the …

Are Short Sellers Really The Enemy Of Efficient Securities Markets Or Are They Just Public Patsies?, Abel C. Ramirez Jr.

Abel C Ramirez Jr.

When the 2008 global financial crisis caused the stock market to drastically decline, short selling generated intense political and economic scrutiny that negatively characterized the practice as a predatory scheme. When the 2008 global financial crisis caused the stock market to drastically decline, short selling generated intense political and economic scrutiny that negatively characterized the practice as a predatory scheme. As a legitimate investment strategy, short selling is a method by which investors can capitalize on over-valued stocks that decline – this is NOT the same as “contributing” to the stock’s decline, which short selling’s detractors might believe.

Legality Of Put Option Under The Securities Contract Regulation Act, 1956, Harshad Pathak

Harshad Pathak

No abstract provided.

Lessons From Single-Company Event Studies: The Importance Of Controlling For Company-Specific Events, Scott D. Hakala

Scott D Hakala

Single-company event studies are commonly employed in applied practice, such as in analyzing market efficiency, reliance, and damages in securities litigation. However, the presence of significant company-specific events among the observations used to estimate the market model results in significantly biased, overstated standard errors (a well-known omitted variables problem) and less reliable coefficient estimates in such studies. This is a frequently over-looked or neglected issue that renders the statistical inferences in single-company event studies employing using more traditional event study techniques biased and often unreliable. This paper demonstrates through simulation and actual examples that, even allowing for errors in implementation, …

Trust And The Reform Of Securities Regulation, Ronald J. Colombo

Ronald J Colombo

Trust is a critically important ingredient in the recipes for a successful economy and a well-functioning securities market. Due to scandals, ranging in nature from massive incompetence, to massive irresponsibility, to massive fraud, investor trust is in shorter supply today than in years past. This is troubling, and commentators, policy makers, and industry leaders have all recognized the need for trust's restoration.

As in times of similar crises, many have turned to law and regulation for the answers to our problems. The imposition of additional regulatory oversight, safeguards, and remedies, some advocate, can help resuscitate investor trust. These advocates have …

Heedless Globalism: The Sec's Roadmap To Accounting Convergence, William W. Bratton

All Faculty Scholarship

The Securities Exchange Commission (SEC) has introduced a "Roadmap" that describes a process leading to mandatory use of International Financial Reporting Standards (IFRS) by domestic issuers by 2014. The SEC justifies this initiative on the grounds that global standardization yields cost savings and an ultimate gain in comparability, facilitating the search for global opportunities by u.s. investors and making u.s. capital markets more attractive to foreign issuers. This Article shows that the offered justification is inadequate. The SEC frames the matter as a choice between two institutional frameworks for standard setting, holding out high quality sets of standards, asking which …

Re-Examining Investor Protection In The Eu And Us, John Ja Burke

John JA Burke

The year 2009 is a propitious time to evaluate systems of investor protection in financial markets as global bank losses exceed the 1 trillion mark and market losses equally exceed the 1 trillion mark. Prior to the Global Financial Crisis, the European Union enacted sweeping legislation to reform its system of investor protection. The Markets in Financial Instruments Directive [MiFID] is the regulatory equivalent of the deregulatory 1987 “Big Bang” that shaped the current European financial markets. It also applies to one of the world’s largest trading regions. This article examines select investor protection provisions of MiFID and their analogues …