Law Commons^™

The Sec's Spac Solution, Karen Woody, Lidia Kurganova

Scholarly Articles

The SPAC craze has ebbed and flowed over the past few years, creating fortunes and ruining others. The SEC stepped into the mix in 2022 and proposed rules governing SPACs. The proposed rules artfully balance the interests of investor protection while retaining some of the featured characteristics of SPACs as innovative ways to take companies public. This Article details the history of SPACs, including their benefits and risks, and analyzes the SEC’s proposed rules, arguing that the SEC is well within its Congressional authority to regulate SPACs, and that the proposed rules are both well-tailored and necessary.

Temporary Securities Regulation, Anita K. Krug

Washington and Lee Law Review

In times of crisis, including during the 2020–2021 global pandemic, the U.S. Securities and Exchange Commission (SEC) has engaged in a type of securities regulation that few scholars have acknowledged, let alone evaluated. Specifically, during recent market crises, the SEC adopted rules that are temporary, designed to help the securities markets and their participants— both public companies and public investment funds, such as mutual funds and ETFs—weather the crisis at hand but go no further. Once that goal has been accomplished, these rules usually expire, replaced by the permanent rules that they temporarily supplanted. Although the temporary-rulemaking endeavor is laudable—and …

A Tale Of Two Regulators: Antitrust Implications Of Progressive Decentralization In Blockchain Platforms, Evan Miller

Washington and Lee Law Review Online

Competition regulators have identified the potential for blockchain technology to disrupt traditional sponsor-led platforms, like app stores, that have received increased antitrust scrutiny. Enforcement actions by securities regulators, however, have forced blockchain-based platforms to adopt a strategy of progressive decentralization, delaying decentralization objectives in favor of the centralized model that competition regulators hope they will disrupt. This regulatory tension, and the implications for blockchain’s procompetitive potential, have yet to be explored. This Article first identifies the origin of this tension and its consequences through a competition law lens, and then recommends that competition regulators account for this tension in monitoring …

Profiting From Our Pain: Privileged Access To Social Impact Investing, Cary Martin Shelby

Scholarly Articles

Social impacting investing has become the latest trend to permeate the financial markets. With massive anticipated funding gaps for sustainable development goals, and a millennial-driven thirst for doing good while doing well, this trend is likely to continue in the coming decades. This burgeoning industry is poised to experience yet an additional boost, since it provides an alternative mechanism for private actors to “profit from our pain,” particularly in the wake of the COVID-19 pandemic and the Black Lives Matter movement.

As to be expected, the law has not sufficiently adapted to this new wave of innovation. Scholars have thus …

Real Insider Trading, Michael A. Perino

Washington and Lee Law Review

In popular rhetoric, insider trading cases are about leveling the playing field between elite market participants and ordinary investors. Academic critiques vary. Some depict an untethered insider trading doctrine that enforcers use to expand their power and enhance their discretion. Others see enforcers beset with agency cost problems who bring predominantly simple, easily resolved cases to create the veneer of vigorous enforcement. The debate has, to this point, been based mostly on anecdote and conjecture rather than empirical evidence. This Article addresses that gap by collecting extensive data on 465 individual defendants in civil, criminal, and administrative actions to assess …

The Independent Board As Shield, Gregory H. Shill

Washington and Lee Law Review

The fiduciary duty of loyalty bars CEOs and other executives from managing companies for personal gain. In the modern public corporation, this restriction is reinforced by a pair of institutions: the independent board of directors and the business judgment rule. In isolation, each structure arguably promotes manager fidelity to shareholder interests—but together, they enable manager prioritization. This marks a particularly striking turn for the independent board. Its origin story and raison d’être lie in protecting shareholders from opportunism by managers, but it functions as a shield for managers instead.

Numerous defects in the design and practice of the independent board …

Profiteering Off Public Health Crises: The Viable Cure For Congressional Insider Trading, Charles L. Slamowitz

Washington and Lee Law Review Online

This article takes an approachable, forward-thinking, and academic dive into congressional insider trading in the wake of the coronavirus (COVID-19) pandemic. After a confidential briefing by the Senate Health Committee warned of COVID-19, massive stock sell-offs by members of Congress and their spouses suddenly ensued. Some senators even publicly disparaged COVID-19’s viral effects while their own shares were being offloaded. By the time the American people were made aware of its dangers, vast investment holdings by congressional insiders had already been sold. Shockingly, it is unclear if congressional insiders trading on confidential coronavirus information are actually breaking the law. Congress …

The New Insider Trading, Karen E. Woody

Scholarly Articles

Pursuant to the SEC’s Rule 10b-5, in order to obtain a conviction for insider trading based upon a tipper-tippee theory, the government must prove that the tipper received a personal benefit for the tip, and that the tippee knew about that benefit. The last five years of blockbuster insider trading cases have focused on this seemingly nebulous personal benefit test, and the Supreme Court has been unable to clear the muddy waters. As a result, the parameters of insider trading remain hard to pin down and often shift depending on the facts of the most recent case. Two terms ago, …

Adversarial Failure, Benjamin P. Edwards

Washington and Lee Law Review

Investors, industry firms, and regulators all rely on vital public records to assess risk and evaluate securities industry personnel. Despite the information’s importance, an arbitration-facilitated expungement process now regularly deletes these public records. Often, these arbitrations recommend that public information be deleted without any true adversary ever providing any critical scrutiny to the requests. In essence, poorly informed arbitrators facilitate removing public information out of public databases. Interventions aimed at surfacing information may yield better informed decisions. Although similar problems have emerged in other contexts when adversarial systems break down, the expungement process to purge information about financial professionals provides …

Boards In Information Governance, Faith Stevelman, Sarah C. Haan

Scholarly Articles

This Article focuses on the evolving role of boards of directors. It charts the decline of the two leading, twentieth-century conceptual frameworks shaping corporate boards’ roles: agency cost theory, which produced the limited “monitoring board,” and “separate realms” theory, which ceded board responsibility for matters other than profit maximization to government regulation. Hedge fund activism and wild stock market swings have exposed the limits of the board’s role in agency cost theory. The 2020 pandemic, economic crises, investors’ demands for socially responsible stewardship, and corporations’ own political activism have rendered separate realms thinking untenable.

Although much theorizing in corporate law …

Social Activism Through Shareholder Activism, Lisa M. Fairfax

Washington and Lee Law Review

This article is based on the author's keynote address at the 2018-2019 Lara D. Gass Annual Symposium: Civil Rights and Shareholder Activism at Washington and Lee University School of Law, February 15, 2019.

In 1952, the SEC altered the shareholder proposal rule to exclude proposals made “primarily for the purpose of promoting general economic, political, racial, religious, social or similar causes.” The SEC did not reference civil rights activist James Peck or otherwise acknowledge that its actions were prompted by Peck’s 1951 shareholder proposal to Greyhound for desegregating seating. Instead, the SEC indicated that its change simply reflected a codification …

Chancery’S Greatest Decision: Historical Insights On Civil Rights And The Future Of Shareholder Activism, Omari Scott Simmons

Washington and Lee Law Review

This article builds upon the author's remarks at the 2018-2019 Lara D. Gass Annual Symposium: Civil Rights and Shareholder Activism at Washington and Lee University School of Law, February 15, 2019.

Shareholder activism—using an equity stake in a corporation to influence management—has become a popular tool to effectuate social change in the twenty-first century. Increasingly, activists are looking beyond financial performance to demand better corporate performance in such areas as economic inequality, civil rights, human rights, discrimination, and diversity. These efforts take many forms: publicity campaigns, litigation, proxy battles, shareholder resolutions, and negotiations with corporate management. However, a consensus on …

From Public Policy To Materiality: Non-Financial Reporting, Shareholder Engagement, And Rule 14a-8’S Ordinary Business Exception, Virginia Harper Ho

Washington and Lee Law Review

This article builds upon the author's remarks at the 2018-2019 Lara D. Gass Annual Symposium: Civil Rights and Shareholder Activism at Washington and Lee University School of Law, February 15, 2019.

In 2017, shareholder proposals urging corporate boards to report on their climate-related risk made headlines when they earned majority support from investors at ExxonMobil, Occidental Petroleum, and PPL. The key to this historic vote was the support of Blackrock, State Street, and Vanguard, which broke with management and cast their votes behind the proposals. The 2018 proxy season saw several more climate-related proposals earn majority support, and in 2018 …

How Did We Get Here? Dissecting The Hedge Fund Conundrum Through An Institutional Theory Lens, Cary Martin Shelby

Scholarly Articles

This article dissects both the origins and resulting harms of what the author terms the "hedge fund conundrum," in which institutional investors, such as pension plans and endowments, have consistently increased hedge fund allocations over the past decade despite pervasive evidence of excessive fees and subpar returns. It then utilizes an historical institutionalist lens to examine how lawmakers may have enabled a conundrum of this magnitude. By and large, this phenomenon is a symptom of regulatory loopholes that have permitted the private hedge fund market to increase in "publicness" through its expanding access and subsequent harm to retail investors. Such …

Myth Of The Attorney Whistleblower, Carliss N. Chatman

Scholarly Articles

Notwithstanding the political grandstanding and legal regimes put in place to prevent the next Enron, this article explores whether attorney whistleblower provisions provided in the Standards of Professional Conduct for Attorneys Appearing and Practicing Before the Commission in the Representation of an Issuer and in the Model Rules of Professional Conduct are effective. When faced with attorney involvement in Enron, Congress passed § 307 of the Sarbanes Oxley Act (Sarbanes), which required the Securities and Exchange Commission (SEC) to amend its standards governing the conduct of attorneys practicing before the SEC. In response, the SEC and the American Bar Association …

The Leidos Mixup And The Misunderstood Duty To Disclose In Securities Law, Matthew C. Turk, Karen E. Woody

Washington and Lee Law Review

This Article concerns the recent Supreme Court case, Leidos,Inc. v. Indiana Public Retirement System (Leidos), and examines the broader issues that it raised for securities law. The consensus among scholars and practitioners is that Leidos presented a direct conflict among the circuit courts over a core question of securities law—when a failure to comply with the SEC’s disclosure requirements can constitute fraud under Rule 10b-5. This Article provides a much different interpretation of the case. It begins by demonstrating that the circuit split which is presumed to have brought Leidos to the Supreme Court does not in fact exist. …

The Gatekeepers Of Crowdfunding, Andrew A. Schwartz

Washington and Lee Law Review

Securities crowdfunding is premised on two core policy goals: inclusivity and efficiency. First, crowdfunding is conceived as an inclusive system where all entrepreneurs are given a chance to pitch their idea to the “crowd.” Second, crowdfunding is supposed to be an efficient way to channel funds from public investors to promising startup companies. There is a fundamental tension between these two policy goals, however. A totally inclusive system would ensure that platforms list any and every company that wants to participate. But platforms need to curate and select the companies they list in order to establish a reputation as a …

Cash For Your Conscience: Do Whistleblower Incentives Improve Enforcement Of The Foreign Corrupt Practices Act?, Amy Deen Westbrook

Washington and Lee Law Review

No abstract provided.

A Legal Frankenstein’S Monster: The Complete Bar Order In Securities Fraud Class Action Lawsuits, Jonathan C. Stanley

Washington and Lee Law Review

No abstract provided.

The Risk Of Regulatory Arbitrage: A Response To Securities Regulation In Virtual Space, Wendy Gerwick Couture

Washington and Lee Law Review Online

In Securities Regulation in Virtual Space, Eric. C. Chaffee explores the potential applicability of the securities laws to virtual transactions based on virtual activity and argues that, although many of these transactions likely qualify as “investment contracts” under S.E.C. v. W.J. Howey Co., they should be excluded under the context clause because, among other reasons, application of the securities laws would stifle creativity within this innovative space. This Response proposes a reframing of the Howey test as a response to the risk of regulatory arbitrage, argues that the context clause should only exclude transactions that do not pose …

Canons Of Construction For Dysfunctional Statutes: A Comment On Bennett, Paul G. Mahoney

Washington and Lee Law Review

No abstract provided.

Whistling Loud And Clear: Applying Chevron To Subsection 21f Of Dodd–Frank, Shaun M. Bennett

Washington and Lee Law Review

This Note addresses a circuit court split arising from a portion of the anti-retaliation provisions in the Dodd–Frank Wall Street Reform and Consumer Protection Act. Subsection 21F’s retaliation prohibitions apply to those employers whose employees make required or protected disclosures under the Sarbanes–Oxley Act of 2002 (SOX) or any other rule or regulation under the SEC’s jurisdiction. SOX provides anti -retaliation protections — similar to those available under Dodd–Frank — for employees of publicly traded companies who report misconduct. However, SOX expressly affords protections to those who provide information to “a Federal regulatory or law enforcement agency; any Member of …

Comment On Whistling Loud And Clear: Applying Chevron To Subsection 21f Of Dodd–Frank, Sarah C. Haan

Washington and Lee Law Review

No abstract provided.

Securities Regulation In Virtual Space, Eric C. Chaffee

Washington and Lee Law Review

No abstract provided.

Getting Specific About The Policy And Tools Of Securities Regulation: A Limited Response To Diversifying To Mitigate Risk: Can Dodd–Frank Section 342 Help Stabilize The Financial Sector?, Joan Macleod Heminway

Washington and Lee Law Review Online

No abstract provided.

Is Transparency The Answer? Reconciling The Fiduciary Duties Of Public Pension Plans And Private Funds, In 2016 Private Fund Report: Public Pension Plans And Private Funds - Common Goals, Conlicting Interests (2016), Cary Martin Shelby

Books and Chapters

Public pension plans manage over $3 trillion in assets on behalf of millions of state and local government workers across the country. The trustees of such plans (“Trustees”) invest the bulk of these assets into a variety of equities and bonds, with the hopes of earning sufficient returns to finance the retirement of these countless public sector workers. In recent years however, Trustees have grown more creative in selecting their underlying investment allocations. Alternative investments, such as hedge funds and private equity funds for example provide unique opportunities for Trustees to maximize returns, protect against declining markets, and to diversify …

Justice Stevens And Securities Law, Lyman P.Q. Johnson, Jason A. Cantone

Scholarly Articles

In this Article, we tell the overlooked story of Justice Stevens's important role in Supreme Court securities law decisions. In Part I, where we briefly highlight Stevens's career before his 1975 appointment to the Supreme Court, we observe that we can identify no evident interest in or connection to federal securities law or the securities industry, making his contributions all the more remarkable. The only foreshadowing of his prolific opinion-writing on the subject of securities law was his voluminous writing of opinions, in general, while serving on the Seventh Circuit Court of Appeals. This commitment to authoring opinions stemmed, in …

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.

Feeling Insecure—A State View Of Whether Investors In Municipal General Obligation Bonds Have A Mere Promise To Pay Or A Binding Obligation, Randle B. Pollard

Scholarly Articles

The City of Detroit's filing for municipal bankruptcy in July, 2013, has added to a continuing controversy of whether general obligation bondholders have a secured lien. The City of Detroit claimed its general obligation bondholders did not have a fully secured lien because the law of the state of Michigan did not create a statutory lien. Without the creation of a lien by state law, during the insolvency or bankruptcy of municipalities, general obligation bondholders will potentially have a mere promise to pay versus a binding obligation to pay, and therefore, will not have a secured lien. Treating otherwise secured …

Brief Of Professors At Law And Business Schools As Amici Curiae In Support Of Respondents: Omnicare, Inc., Et Al. V. Laborers District Council Construction Industry Pension Fund, Et Al., Celia Taylor, Lyman P.Q. Johnson, J. Robert Brown, Joan Macleod Heminway

Scholarly Articles

None available.