Law Commons^™

Shareholder Inspection Rights: From Credible Basis To Rational Belief, Lin (Lynn) Bai

Faculty Articles and Other Publications

Jurisdictions are split on the standard of proof for shareholder inspection lawsuits when inspections are for the purpose of investigating managerial misconduct. Delaware and its followers apply a credible basis standard that calls for extrinsic evidence, beyond mere suspicion, curiosity, or disagreement with management, to permit an inference of misconduct. A minority of jurisdictions require shareholders to show merely a rational belief that mismanagement likely happened. Rational belief can be satisfied by sound logic without referencing extrinsic evidence. The Delaware Supreme Court rejected rational belief for fear that a permissive standard would lead to a cascade of frivolous inspections, although …

Total Return Meltdown: The Case For Treating Total Return Swaps As Disguised Secured Transactions, Colin P. Marks

Pepperdine Law Review

Archegos Capital Management, at its height, had $35 billion in assets. But in the spring of 2021, in part through its use of total return swaps, Archegos sparked a $30 billion dollar sell-off that left many of the world’s largest banks footing the bill. Mitsubishi UFJ Group estimated a loss of $300 million; UBS, Switzerland’s biggest bank, lost $861 million; Morgan Stanley lost $911 million; Japan’s Nomura lost $2.85 billion; but the biggest hit came to Credit Suisse Group AG which lost $5.5 billion. Archegos, itself lost $20 billion over two days. The unique characteristics of total return swaps and …

Angels And Devils: The Early Crypto Entrepreneurs, Darian M. Ibrahim

Popular Media

No abstract provided.

Special Purpose Acquisition Companies: Wall Street’S Latest Shell Game, Daniel J. Morrissey

Arkansas Law Review

Special Purpose Acquisition Companies (“SPACs”) have been called “Wall Street’s biggest gold rush of recent years.” In reality, they are just another version of an old strategy to exploit a loophole in the federal securities laws that issuers of stock have used to avoid full registration with the SEC, the federal agency set up to administer and enforce the securities laws. The SPAC process circumvents that important protection for investors by taking private firms public through the back door—merging them into shell corporations. Those are companies whose shares are widely held but have no operations or assets.

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 …

Giving Shareholders The Right To Say No, Albert H. Choi, Adam C. Pritchard

Articles

When a public company releases misleading information that distorts the market for the company’s stock, investors who purchase at the inflated price lose money when (and if) the misleading information is later corrected. Under Rule 10b‑5 of the Securities Exchange Act of 1934, investors can seek compensation from corporations and their officers who make materially misleading statements that the investors relied on when buying or selling a security. Compensation is the obvious goal, but the threat of lawsuits can also benefit investors by deterring managers from committing fraud.

Blacking Out Congressional Insider Trading: Overlaying A Corporate Mechanism Upon Members Of Congress And Their Staff To Curtail Illegal Profiting, Nicholas Gervasi

Fordham Journal of Corporate & Financial Law

Congressional insider trading involves members of Congress or their staff trading on material, nonpublic information attained while executing their official responsibilities. This type of private profit-making, while in a government role, casts doubt on the efficacy and impartiality of lawmakers to regulate companies they hold shares of. Egregious acts of illegal profiting from insider trading based on information entrusted to the government escape prosecution and liability due to fundamental gaps in the common law and the Congress specific statutes lack enforcement. Recent calls on Congress by the public and multiple bipartisan proposed bills in both chambers have begun to address …

Foreign Judgments And Foreign Arbitral Awards Enforceability As A Factor And A Guarantee For Foreign Investments: The Case Of Saudi Arabia, Mohammed Rashed Mohammed Arhama Alshamsi

Maurer Theses and Dissertations

Foreign investments are considered an efficient and effective instrument to diversify and strengthen the economy; foreign investors generally need guarantees before entering a new market. One of these guarantees is a stable, transparent, predictable legal and judicial system. Such a system must be open to foreign laws and judgments as well as foreign arbitral awards, and it must also be flexible to increase foreign investments. Saudi Arabia has tried since the 50s’ to be more attractive to foreign investors and investments by enacting legislation and creating a modern court system to diversify their economy. However, the discretion of Saudi judges …

A Tokenized Future: Regulatory Lessons From Crowdfunding And Standard Form Contracts, Darian M. Ibrahim

Faculty Publications

This Article examines the world of risk investing in the cryptoeconomy. The broader crypto market is booming despite the latest downturn. People and institutions are buying in. The question is now how to regulate it.

This Article first tackles the question of whether coins, tokens, and other investable cryptoassets are securities. Second, for those cryptoassets that are not securities, this Article seeks to find a regulatory solution that balances promoting innovation with investor protection, just as the Securities and Exchange Commission (SEC) would do. To strike the right balance, this Article adopts a proposal by Ian Ayres and Alan Schwartz …

Lawyers On The Edge: What Happened To Rudy Giuliani?, Jacob Burns Center For Ethics In The Practice Of Law

Event Invitations 2022

Please join The Jacob Burns Center for Ethics in the Practice of Law for the second in their series of book talks, Lawyers on the Edge, with Andrew Kirtzman, author of Giuliani: The Rise and Tragic Fall of America's Mayor.

Andrew Kirtzman, journalist and author, has been following the career of Rudy Giuliani since the 1990s. His new biography traces Giuliani from the beginning of his rise to his role as Donald Trump’s personal lawyer.

Professor Jessica Roth, Co-Director of the Jacob Burns Center for Ethics in the Practice of Law, will lead a discussion with Kirtzman about his …

Ftx And The Future Of Crypto, Heyman Center On Corporate Law And Governance

Event Invitations 2022

Join cryptocurrency and blockchain expert Aaron Wright, bankruptcy attorney Allen Kadish, securities regulation and fintech expert Professor Yuliya Guseva, and white collar crime expert Professor Andrew Jennings for a lively online conversation moderated by Cardozo Professor Matthew Wansley. We'll dive into cryptocurrency exchanges, the issues faced by FTX, why it collapsed, how bankruptcy will play out, and whether its executives face any legal liability.

Lawyers On The Edge: What Happened To Rudy Giuliani?, Jacob Burns Center For Ethics In The Practice Of Law

Flyers 2022-2023

Click here to view the event invitation.

Corporate Response To The War In Ukraine: Stakeholder Governance Or Stakeholder Pressure?, Anete Pajuste, Anna Toniolo

Emory Corporate Governance and Accountability Review

This Article empirically investigates the corporate response to the Russian invasion of Ukraine in the framework of the stakeholder capitalism debate. Some describe corporate leaders’ decision to withdraw from Russia as an example of stakeholder governance, maintaining that they placed social responsibility over profits. Others question the authenticity of corporate support for Ukraine and argue that companies left Russia mainly driven by operational and reputational concerns.

Against this backdrop, we conduct an empirical study of reactions to the outbreak of the war from companies in the S&P500 and STOXX600 indices. We explore whether managers effectively decided mostly on ethical and …

Ftx: How The Sec Should React, Darian M. Ibrahim

Popular Media

No abstract provided.

Law School News: Omshehe Wins Top National Prize With Securities Regulation Article 11-4-2022, Michael M. Bowden

Life of the Law School (1993- )

No abstract provided.

Private Inequity: Reform Rule 506 To Safely Accommodate Investment By Nonaccredited Investors, Allen C. Page

William & Mary Business Law Review

In 2012, Congress enacted Title III of the Jumpstart Our Business Startups Act (the “JOBS Act”), which it named the Crowdfund Act, to create an exemption from registration under the Securities Act of 1933 that, in the words of President Barack Obama, would allow “ordinary Americans . . . to go online and invest in entrepreneurs that they believe in.” While perhaps well-intentioned in principle, Regulation Crowdfunding imposes material limitations and costs on the issuer, leading most issuers to conclude that the inclusion of unaccredited investors in a crowdfunding campaign is not worth the complexity and expense. Furthermore, the most …

Just Say No? Shareholder Voting On Securities Class Actions, Albert H. Choi, Stephen J. Choi, Adam C. Pritchard

Articles

The U.S. securities laws allow security-holders to bring a class action suit against a public company and its officers who make materially misleading statements to the market. The class action mechanism allows individual claimants to aggregate their claims. This procedure mitigates the collective action problem among claimants, and also creates potential economies of scale. Despite these efficiencies, the class action mechanism has been criticized for being driven by attorneys and also encouraging nuisance suits. Although various statutory and doctrinal solutions have been proposed and implemented over the years, the concerns over the agency problem and nuisance suits persist. This paper …

Attack On The Spac: The Push To Regulate Special Purpose Acquisition Companies As Investment Companies Under The Investment Company Act, Sean Meyer

University of Cincinnati Law Review

No abstract provided.

Gamestop And The Reemergence Of The Retail Investor, Jill E. Fisch

Faculty Scholarship at Penn Carey Law

The GameStop trading frenzy in January 2021 was perhaps the highest profile example of the reemergence of capital market participation by retail investors, a marked shift from the growing domination of those markets by large institutional investors. Some commentators have greeted retail investing, which has been fueled by app-based brokerage accounts and social media, with alarm and called for regulatory reform. The goals of such reforms are twofold. First, critics argue that retail investors need greater protection from the risks of investing in the stock market. Second, they argue that the stock market, in term, needs protection from retail investors. …

Making Whistleblowers Whole, Jennifer Pacella

UC Irvine Law Review

If ever there was a time in history in which whistleblowers have taken center stage, it has been the past two years. From COVID-19 to Trump’s first impeachment trial, whistleblowers have played a vital role in bringing to light information otherwise impossible to obtain. While the value that whistleblowers bring to government, organizations, and society has always been immeasurable, it is still the case that whistleblowers ultimately suffer a disastrous fate. They have made the decision to speak out against wrongdoing, often risking their jobs, livelihoods, and ability to thrive in their respective industry due to harassment, demotion, exclusion, or …

Special Purpose Acquisition Companies (Spacs) And The Sec, Neal Newman, Lawrence J. Trautman

Faculty Scholarship

Special Purpose Acquisition Companies (SPACs) are simply enterprises that raise money from the public with the intention of purchasing an existing business and becoming publicly traded in the securities markets. If the SPAC is successful in raising money and the acquisition takes place, the target company takes the SPAC’s place on a stock exchange in a transaction that resembles a public offering. Also known as “blank-check” or “reverse merger” companies, this process avoids many of the pitfalls of a traditional initial public offering.

During late 2020 and 2021 an unprecedented surge in the popularity and issuance of Special Purpose Acquisition …

A Proposed Sec Cyber Data Disclosure Advisory Commission, Lawrence J. Trautman, Neal Newman

Faculty Scholarship

Constant cyber threats result in: intellectual property loss; data disruption; ransomware attacks; theft of valuable company intellectual property and sensitive customer information. During March 2022, The Securities and Exchange Commission (SEC) issued a proposed rule addressing Cybersecurity Risk Management, Strategy, Governance, and Incident Disclosure, which requires: 1. Current reporting about material cybersecurity incidents; 2. Periodic disclosures about a registrant’s policies and procedures to identify and manage cybersecurity risks; 3. Management’s role in implementing cybersecurity policies and procedures; 4. Board of directors’ cybersecurity expertise, if any, and its oversight of cybersecurity risk; 5. Registrants to provide updates about previously reported cybersecurity …

Is Everything Securities Fraud?, Emily Strauss

UC Irvine Law Review

“An odd fact of the U.S. legal system for public companies is that every crime is also securities fraud: If a company does a bad thing, and regulators find out about it, then the bad-thing regulators can punish it for doing the bad thing, but the securities regulators can also punish it for not disclosing the bad thing to shareholders. . . . It is a strange combination: Generally speaking the companies do the bad things on behalf of shareholders—to make more money for them—but then the securities regulators come in and fine them for defrauding shareholders.”

-Matt Levine

Securities …

Taming Unicorns, Matthew Wansley

Indiana Law Journal

Until recently, most startups that grew to become valuable businesses chose to become public companies. In the last decade, the number of unicorns—private, venture-backed startups valued over one billion dollars—has increased more than tenfold. Some of these unicorns committed misconduct that they successfully concealed for years. The difficulty of trading private company securities facilitates the concealment of misconduct. The opportunity to profit from trading a company’s securities gives short sellers, analysts, and financial journalists incentives to uncover and reveal information about misconduct the company commits. Securities regulation and standard contract provisions restrict the trading of private company securities, which undermines …

Federal Courts Take The Wheel: The Delaware Supreme Court Validates Federal Forum Provisions For '33 Act Litigation In Salzberg V. Sciabacucchi, Brittany Mann

Villanova Law Review

No abstract provided.

Purpose Proposals, Jill E. Fisch

Faculty Scholarship at Penn Carey Law

Repurposing the corporation is the hot issue in corporate governance. Commentators, investors and increasingly issuers, maintain that corporations should shift their focus from maximizing profits for shareholders to generating value for a more expansive group of stakeholders. Corporations are also being called upon to address societal concerns – from climate change and voting rights to racial justice and wealth inequality.

The shareholder proposal rule, Rule 14a–8, offers one potential tool for repurposing the corporation. This Article describes the introduction of innovative proposals seeking to formalize corporate commitments to stakeholder governance. These “purpose proposals” reflect a new dynamic in the debate …

Regulatory Capture Of Self-Regulatory Organizations (Sros) In Canada: Do Sros Serve Public Or Industry Interests?, Oluwadamilola Adesanya, Western University

Master of Laws Research Papers Repository

The Canadian securities industry relies heavily on self-regulation, with two self-regulatory organizations (SROs), the Investment Industry Regulatory Organization of Canada (IIROC) and the Mutual Fund Dealers Association of Canada (MFDA) regulating the industry. The former regulates all investment dealers and trading on Canada's debt and equities markets, while the latter governs domestic distributors of mutual funds, except fixed-income products. As expected in an SRO model of regulation, the structure of both IIROC and the MFDA presents a risk that industry members may influence or capture its operations, advancing industry interests at the cost of its public interest mandate.

This Article …

When Are We Going To Learn: The Role Of Lawyers In Corporate Fraud, Alexander Klein

University of St. Thomas Journal of Law and Public Policy

No abstract provided.

Quinquagenaries, Anthony Duggan

Dalhousie Law Journal

This article is part of a symposium to mark the 50th anniversary, or quinquagenary, of the Dalhousie Law Journal. The invitation to participate in the symposium asked authors to reflect on developments in their field over the past 50 years. My field is the law of secured transactions and, as it happens, the Canadian Personal Property Security Acts (PPSAs) are approaching their own quinquagenary. There have been numerous statutory and case law developments over the past 50 years, but one of the most remarkable turn of events is the influence the Canadian PPSAs have had on the reform of secured …

Don't Get Burned: Why The De-Spac Transaction Must Be Excluded From The Pslra's Safe Harbor Provision For Forward-Looking Statements, Jean-Claire Perini

Villanova Law Review

No abstract provided.