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Full-Text Articles in Law
Are Investors’ Gains And Losses From Securities Fraud Equal Over Time?, Alicia J. Davis
Are Investors’ Gains And Losses From Securities Fraud Equal Over Time?, Alicia J. Davis
Alicia Davis
Leading securities regulation scholars argue that compensating securities fraud victims is inefficient because diversified investors that trade frequently (generally, institutional investors) are as likely to gain from trading in fraud-tainted stocks as they are to suffer harm from doing so. In other words, institutional investors have no expected net losses from fraud over the long term and are effectively hedged against fraud risk. Moreover, individual investors can protect themselves from fraud, as well, by investing through diversified institutional intermediaries. In this Article, I demonstrate, using both probability theory and observational and computer-simulated trading data, that the argument of the compensation …
Attorneys As Arbitrators, Adam C. Pritchard, Stephen J. Choi, Jill E. Fisch
Attorneys As Arbitrators, Adam C. Pritchard, Stephen J. Choi, Jill E. Fisch
Articles
We study the role of attorneys as arbitrators in securities arbitration. We find that arbitrators who also represent brokerage firms or brokers in other arbitrations award significantly less compensation to investor-claimants than do other arbitrators. We find no significant effect for attorney-arbitrators who represent investors or both investors and brokerage firms. The relation between representing brokerage firms and arbitration awards remains significant even when we control for political outlook. Arbitrators who donate money to Democratic political candidates award greater compensation than do arbitrators who donate to Republican can-didates. We also study the dynamics of panel interaction. We find that the …
Risky Business: The Credit Crisis And Failure, Olufunmilayo B. Arewa
Risky Business: The Credit Crisis And Failure, Olufunmilayo B. Arewa
Olufunmilayo B. Arewa
The credit crisis represents a watershed event for global financial markets and has been linked to significant declines in real economy performance on a level of magnitude not experienced since World War II. Recognition of the crisis in 2008 has been followed in 2009 and 2010 by a plethora of competing proposals in response to the credit crisis. The result has been a cacophony of visions, voices, and approaches. The sheer noise that has ensued threatens to drown out the fundamental core questions that should be asked about the credit crisis. Among the most important are questions about the relationships …
Shareholder Compensation As Dividend, James J. Park
Shareholder Compensation As Dividend, James J. Park
Michigan Law Review
This Article questions the prevailing view that securities-fraud actions suffer from a circularity problem. Because shareholder plaintiffs are owners of the defendant corporation, it is commonly argued that shareholder compensation is a payment from shareholders to themselves with substantial transaction costs in the form of attorney fees. But shareholder compensation is no more circular than a dividend, which is a cash payment to shareholders from the company they own with substantial transaction costs in the form of taxes. In fact, shareholder compensation is less circular than a dividend because it is a transfer to shareholders who purchased stock when the …
Reverse Monitoring: On The Hidden Role Of Employee Stock-Based Compensation, Sharon Hannes
Reverse Monitoring: On The Hidden Role Of Employee Stock-Based Compensation, Sharon Hannes
Michigan Law Review
This Article develops a new understanding of equity-based compensation schemes, such as employee stock option plans. Current literature views such schemes as a measure aimed at motivating the recipient employees to work harder for the firm. Under that view, this method of remuneration either complements or substitutes for other measures used to monitor the performance of the recipient employees. In contrast, this Article proposes that recipient employees be viewed as potential monitors of other employees and that stock options (or similar types of compensation) motivate them to fulfill this task. This view has many applications and can shed light on …
The Investor Compensation Fund, Alicia J. Davis
The Investor Compensation Fund, Alicia J. Davis
Articles
The prevailing view among securities regulation scholars is that compensating victims of secondary market securities fraud is inefficient. As the theory goes, diversified investors are as likely to be on the gaining side of a transaction tainted by fraud as the losing side. Therefore, such investors should have no expected net losses from fraud because their expected losses will be matched by expected gains. This Article argues that this view is flawed; even diversified investors can suffer substantial losses from fraud, presenting a compelling case for compensation. The interest in compensation, however, should be advanced by better means than are …
Standing Up To Wall Street (And Congress), Richard W. Painter
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-Purchaser Of Outstanding Shares Of Same Class As Registered Issue Cannot Bring Suit Under Section 11 (A) Of Securities Act--Colonial Realty Corp. V. Brunswick Corp., Michigan Law Review
Securities-Purchaser Of Outstanding Shares Of Same Class As Registered Issue Cannot Bring Suit Under Section 11 (A) Of Securities Act--Colonial Realty Corp. V. Brunswick Corp., Michigan Law Review
Michigan Law Review
The court in the principal case conceded that, as a matter of economic reality, the prospectus (which contained the alleged misstatement) affects, because of its wide circulation, the value of the shares outstanding at the time it is distributed, as well as that of the new issue which is the subject of the registration statement. Indeed, financial institutions, market experts, brokers, and dealers digest and analyze the prospectus, and their opinions inevitably affect market values of all outstanding stock. However, in light of the act's legislative history, its general scheme of regulation, and the language contained in its other provisions, …
Corporations--Capital And Stock-Right Of Employee To Receive Stock Dividend Under Stock Purchase Agreement, John E. Riecker S.Ed.
Corporations--Capital And Stock-Right Of Employee To Receive Stock Dividend Under Stock Purchase Agreement, John E. Riecker S.Ed.
Michigan Law Review
Defendant's decedent, X, was executive vice-president and treasurer of plaintiff corporation. Intending to increase X's compensation, plaintiff drew up a plan calling for the sale of 100 shares of plaintiff's stock to X, plaintiff to have a lien on the stock certificate made out in X's name and the right to credit all dividends declared on the stock against its purchase price until fully paid. X was granted the right to vote the stock and to receive the dividends declared after full payment. The agreement specifically provided that X was not entitled to possession of the …
Corporations - Stock Options - Requirements Of Consideration For Employee Options, George D. Miller, Jr. S.Ed.
Corporations - Stock Options - Requirements Of Consideration For Employee Options, George D. Miller, Jr. S.Ed.
Michigan Law Review
The Delaware court, in two recent decisions, has indicated what may be an increasingly strict attitude toward employee stock options, particularly when granted to executive officers or directors. It will be the purpose of this comment to examine the significance of these decisions, and to attempt to determine the extent of the change wrought by them.
Corporations-Officers And Directors-Stock Option Incentive Employment Contracts For Corporation Executives, A. B. Perlin, Jr. S.Ed.
Corporations-Officers And Directors-Stock Option Incentive Employment Contracts For Corporation Executives, A. B. Perlin, Jr. S.Ed.
Michigan Law Review
In the past few decades considerable attention has been directed toward "piecework payment" for corporate executives; that is, compensation based largely upon results rather than upon past or expected performance. The stock option incentive employment contract' is one of the means utilized to achieve that desired objective.
Trusts - Validity - Subject Matter - Profits To Be Acquired In The Future, Paul R. Trigg
Trusts - Validity - Subject Matter - Profits To Be Acquired In The Future, Paul R. Trigg
Michigan Law Review
The plaintiff contemplated trading in the stock market and in 1927 declared a trust of the proceeds of his stock trading for the year 1928 in favor of various members of his immediate family, agreeing to assume all losses personally and to distribute all profits equally among the beneficiaries after deducting a reasonable compensation for his services. At the expiration of the year 1928, plaintiff deducted $10,000 as compensation, which he reported in his tax return for that year, and credited the named beneficiaries with the remainder on his books, these amount being reported in their respective tax returns for …