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The Case For Federal Preemption Of State Blue Sky Laws, Rutheford B. Campbell Jr. May 2017

The Case For Federal Preemption Of State Blue Sky Laws, Rutheford B. Campbell Jr.

Law Faculty Popular Media

In our market economy, imposing rules on capital formation makes economic sense. Well-constructed rules regarding capital formation can promote the efficient flow of capital to its highest and best use and prevent or ameliorate fraud or unfairness to investors. These rules, however, generate additional offering costs that may retard or in some cases completely choke off the flow of capital from investors to businesses. The problem with state blue sky laws is their registration requirements, which significantly impede efficient capital formation and provide no material economic or societal benefits, such as protection of investors from fraud.


The Case For Federal Pre-Emption Of State Blue Sky Laws, Rutheford B. Campbell Jr. Mar 2017

The Case For Federal Pre-Emption Of State Blue Sky Laws, Rutheford B. Campbell Jr.

Law Faculty Scholarly Articles

State blue sky laws—state laws that regulate a company’s offer and sale of securities—are a substantial barrier to businesses’ efficient access to external capital. The registration provisions in state blue sky laws have been especially harmful to small businesses, a vital component of our economy that may account for 30% of the nation’s employment. The costs associated with complying with more than fifty separate and independent obligations to register securities often exceed what small businesses can pay and thus may foreclose small businesses from the capital market. At the same time, requiring small businesses to comply ...


The Sec's Regulation A+: Small Business Goes Under The Bus Again, Rutheford B. Campbell Jr. Jan 2016

The Sec's Regulation A+: Small Business Goes Under The Bus Again, Rutheford B. Campbell Jr.

Law Faculty Scholarly Articles

Title IV of the JOBS Act, which is entitled "Small Company Capital Formation," requires the Securities and Exchange Commission to adopt new rules regarding offerings under Regulation A. The Commission has now adopted its final regulations implementing Title IV and providing a new regulatory regime for exempt offerings under Section 3(b) of the Securities Act of 1933. The new regime is generally referred to as Regulation A+.

Unfortunately, history and empirical data regarding the use of Regulation A and Regulation D strongly suggest that the final Regulation A+ rules are unlikely to provide any material relief for small businesses ...


The New Regulation Of Small Business Capital Formation: The Impact—If Any—Of The Jobs Act, Rutheford B. Campbell Jr. Jan 2014

The New Regulation Of Small Business Capital Formation: The Impact—If Any—Of The Jobs Act, Rutheford B. Campbell Jr.

Law Faculty Scholarly Articles

The Jumpstart Our Business Startups Act (JOBS Act) was—at least apparently—driven by the desire to promote job creation by facilitating small business capital formation. The legislation was premised on the correct assumptions that small businesses create jobs and that an efficient access to capital is essential for small businesses to emerge, compete, and survive in our competitive, market economy. It is certain that the JOBS Act will have an effect on businesses’ access to external capital. With regard, however, to the capital formation efforts of small businesses—businesses that may account for more than 25% of our national ...


Regulation A And The Jobs Act: A Failure To Resuscitate, Rutheford B. Campbell Jr. Jan 2012

Regulation A And The Jobs Act: A Failure To Resuscitate, Rutheford B. Campbell Jr.

Law Faculty Scholarly Articles

Regulation A offers small businesses an exemption from the registration requirements of the Securities Act of 1933. The exemption is generally consistent with the obligation of the Securities and Exchange Commission to fashion exemptions that balance investor protection and capital formation. From the perspective of small businesses, the exemption may appear to provide an efficient access to external capital.

Regulation A, however, has fallen into nearly complete disuse. The millions of small businesses in this country, all of which at some point need external capital to survive and grow, simply do not use Regulation A.

Two reasons account for small ...


The Wreck Of Regulation D: The Unintended (And Bad) Outcomes For The Sec’S Crown Jewel Exemptions, Rutheford B. Campbell Jr. Aug 2011

The Wreck Of Regulation D: The Unintended (And Bad) Outcomes For The Sec’S Crown Jewel Exemptions, Rutheford B. Campbell Jr.

Law Faculty Scholarly Articles

Regulation D is—or at least should be—the crown jewel of the Securities and Exchange Commission's regulatory exemptions from the registration requirements of the Securities Act of 1933. It offers businesses—especially businesses with relatively small capital requirements—fair and efficient access to vital, external capital.

In this article, I present data derived from deep samples of recent Form Ds filed with the Commission. The data show that Regulation D is not working in the way the Commission intended or in a way that benefits society The data reveal that companies attempting to raise relatively small amounts of ...


"Prejudgment" Rejudgment: The True Story Of Antoniu V. Sec, Douglas C. Michael Jan 2009

"Prejudgment" Rejudgment: The True Story Of Antoniu V. Sec, Douglas C. Michael

Law Faculty Scholarly Articles

In Antoniu v. SEC, the Eighth Circuit found that Charles C. Cox, then a member of the Securities and Exchange Commission (SEC or Commission), had "impermissibly tainted" an SEC administrative proceeding against Antoniu by a speech Cox gave while the proceeding was pending. In this way, Commissioner Cox is now joined with former Federal Trade Commission (FTC) Chairman Paul Rand Dixon of Texaco, Inc. v. FTC and Cinderella Career & Finishing Schools, Inc. v. FTC fame as an administrative law casebook poster child for "prejudgment" by an administrative agency.

After a brief discussion of the factual background of the case, I ...


Regulation A: Small Businesses’ Search For “A Moderate Capital”, Rutheford B. Campbell Jr. Jan 2006

Regulation A: Small Businesses’ Search For “A Moderate Capital”, Rutheford B. Campbell Jr.

Law Faculty Scholarly Articles

Small businesses are an important part of our national economy, accounting for as much as 40% of our total economic activity and providing society with important services and products.

Small businesses face daunting economic, structural, and legal impediments when they attempt to acquire external capital. The absence of financial inter-mediation services means that they are almost always on their own to find investors. Their small capital needs mean that their relative offering costs are often sky high. Federal and state securities rules significantly exacerbate these economic and structural disadvantages by imposing onerous and unwarranted conditions on their search for external ...


The Overwhelming Case For Elimination Of The Integration Doctrine Under The Securities Act Of 1933, Rutheford B. Campbell Jr. Jan 2001

The Overwhelming Case For Elimination Of The Integration Doctrine Under The Securities Act Of 1933, Rutheford B. Campbell Jr.

Law Faculty Scholarly Articles

The thesis of this Article is that the Securities and Exchange Commission should entirely eliminate the integration doctrine from the Securities Act of1933. Under the integration doctrine, a single "offering" or "issue" of securities cannot be split. The doctrine is expensive for society and furthers no valid policy of the 1933 Act. More specifically, the doctrine does not promote investor protection but does retard capital formation, an outcome that is contrary to the presently articulated purposes of the 1933 Act.

Part II of this Article traces the history of the adoption of the integration doctrine both by the Commission and ...


The Insidious Remnants Of State Rules Respecting Capital Formation, Rutheford B. Campbell Jr. Jul 2000

The Insidious Remnants Of State Rules Respecting Capital Formation, Rutheford B. Campbell Jr.

Law Faculty Scholarly Articles

As we move into the Twenty-First Century, state blue sky laws and regulations continue to govern a significant portion of the capital formation activities of our domestic businesses. As a result, state administrators, influenced by their historically informed preferences and local traditions, continue to play important roles when businesses attempt to access external capital sources.

Today, however, the effects of state blue sky laws, regulations, and administrators on capital formation are felt almost exclusively by small businesses. The capital formation activities of larger businesses generally have been freed from state control, most recently by the preemption contained in the National ...


Blue Sky Laws And The Recent Congressional Preemption Failure, Rutheford B. Campbell Jr. Jan 1997

Blue Sky Laws And The Recent Congressional Preemption Failure, Rutheford B. Campbell Jr.

Law Faculty Scholarly Articles

Laws regarding the sale of securities may be understood as responses to perceived bargaining failures. The most extreme examples of these bargaining failures are seen in instances in which investors are intentionally misled or defrauded regarding the quality of the investments they receive for their money. Even without the presence of such culpability, however, bargaining failures are likely anytime the trading parties lack sufficient, accurate information necessary to effect value-enhancing trades. When that occurs in trades for capital, the parties to the transaction are misinformed respecting the trade, expectations are not protected, and that precious commodity, capital, may be turned ...


Resales Of Securities Under The Securities Act Of 1933, Rutheford B. Campbell Jr. Jan 1995

Resales Of Securities Under The Securities Act Of 1933, Rutheford B. Campbell Jr.

Law Faculty Scholarly Articles

This Article explains the failings of the Securities and Exchange Commission in dealing with resales of securities and suggests an appropriate statutory and policy framework for a principled approach to the matter. Part I of this article is an introduction to this issue. Part II of this Article describes the present situation regarding the law of resales. Part III of this Article offers a series of broad observations about resales under the 1933 Act, suggests an economic analysis for the registration provisions of the 1933 Act, and presents some more specific recommendations concerning resale rules.


Rule 145: Mergers, Acquisitions And Recapitalizations Under The Securities Act Of 1933, Rutheford B. Campbell Jr. Dec 1987

Rule 145: Mergers, Acquisitions And Recapitalizations Under The Securities Act Of 1933, Rutheford B. Campbell Jr.

Law Faculty Scholarly Articles

The most significant occurrence surrounding the adoption of Rule 145 was the repeal by the Securities and Exchange Commission of Rule 133, the conceptually deficient “no sale” rule that had perplexed commentators for years. In Rule 133, the Commission took the position that no offer or sale of a security was involved when, for example, a shareholder of a company to be acquired in a merger (an “acquired company”) voted whether to authorize the merger of the acquired company into an acquiring company (an “acquiring company”) in exchange for stock in the acquiring company. The purpose of this Article is ...


An Open Attack On The Nonsense Of Blue Sky Regulation, Rutheford B. Campbell Jr. Apr 1985

An Open Attack On The Nonsense Of Blue Sky Regulation, Rutheford B. Campbell Jr.

Law Faculty Scholarly Articles

The evolution of state securities laws (hereinafter "blue sky laws") in this country is a classic example of regulation that was, perhaps, initially justified and that was apparently promulgated with the best of motives, but which now is actually harmful to society. Today, blue sky laws are ineffective, philosophically unsound, and unnecessarily expensive, and they should be substantially eliminated. Because of the vested interests that have developed, however, it is unlikely that states will respond to this problem, and it will probably take action by the United States Congress to preempt the area. Such an action is appropriate and, indeed ...


The Plight Of Small Issuers (And Others) Under Regulation D: Those Nagging Problems That Need Attention, Rutheford B. Campbell Jr. Jan 1985

The Plight Of Small Issuers (And Others) Under Regulation D: Those Nagging Problems That Need Attention, Rutheford B. Campbell Jr.

Law Faculty Scholarly Articles

Regulation D traces its roots to section 4(2) and section 3(b) of the Securities Act of 1933. Both of these sections are designed to relieve an issuer from the pains of registration under the 1933 Act in situations where Congress deemed such registration inappropriate. Therefore, under section 4(2), no registration is required for "transactions by an issuer not involving any public offering." Section 3(b) is not a self-executing exemption but instead permits the Securities and Exchange Commission to enact rules and regulations exempting issuers from registration requirements "if it finds that ... [registration] is not necessary in ...


The Draft Restatement: A Critique From A Securities Regulation Perspective, Douglas C. Michael, Daniel L. Goelzer, Jacob H. Stillman, Elisse B. Walter, Anne H. Sullivan Jan 1985

The Draft Restatement: A Critique From A Securities Regulation Perspective, Douglas C. Michael, Daniel L. Goelzer, Jacob H. Stillman, Elisse B. Walter, Anne H. Sullivan

Law Faculty Scholarly Articles

For the past several years, the American Law Institute has been preparing a proposed revision of the Restatement (Second) of the Foreign Relations Law of the United States (“Draft Restatement”). This article is a critique from a securities regulation perspective of the Draft Restatement's sections 402, 403, 416, 418, 419, 420 and 431.1 In short, the Draft Restatement departs substantially from existing law. It would add dangerous vagueness and uncertainty to the jurisdictional analysis used to determine whether the United States securities laws will be applied to transnational securities activities. In particular, the complicated balancing inquiry required under ...


The Plight Of Small Issuers Under The Securities Act Of 1933: Practical Foreclosure From The Capital Market, Rutheford B. Campbell Jr. Jan 1978

The Plight Of Small Issuers Under The Securities Act Of 1933: Practical Foreclosure From The Capital Market, Rutheford B. Campbell Jr.

Law Faculty Scholarly Articles

The thesis of this Article is simple: the Securities Act of 1933 does not work very well for small issuers, a premise which the Securities and Exchange Commission appeared to tacitly recognize in a series of announcements released early this year. Because of a combination of exorbitant costs, unmanageable levels of ambiguity, unworkable resale provisions and contamination caused by prior illegal sales of stock, a small issuer often is unable to comply with the 1933 Act. As a result it may be difficult or even impossible for a small issuer to raise capital by selling stock.

There are obvious pernicious ...


Voluntary Recapitalization, Fairness, And Rule 10b-5: Life Along The Trail Of Santa Fe, Rutheford B. Campbell Jr. Jan 1978

Voluntary Recapitalization, Fairness, And Rule 10b-5: Life Along The Trail Of Santa Fe, Rutheford B. Campbell Jr.

Law Faculty Scholarly Articles

In corporate recapitalizations, the board of directors will sometimes propose a recapitalization plan which substantially alters the “bundle of rights” represented by preferred shares. Although these plans cannot usually be completed without the approval of a majority of the preferred shareholders, the preferred shareholders are at a disadvantage to protect their interests for several reasons. Thus preferred shareholders who are dissatisfied with the change in their rights will sometimes call upon state courts to enjoin the recapitalization on the grounds that it is unfair or fraudulent; state courts, however, have provided only slight protection for preferred shareholders. In this article ...


Definition Of Control In Secondary Distributions, Rutheford B. Campbell Jr. Nov 1976

Definition Of Control In Secondary Distributions, Rutheford B. Campbell Jr.

Law Faculty Scholarly Articles

Section 2(11) of the Securities Act of 1933 (Act) generally subjects the sale of securities by a person "controlling an issuer" to the same rules that govern the sale of securities by an issuer. Accordingly, before a "control" person may sell the securities he holds in the controlled corporation he must either register them with the Securities and Exchange Commission (Commission) or qualify for an exemption from the registration requirement. While the Act clearly requires that a "control" person either register or qualify for an exemption, it fails to define "control." Thus, the task of defining has fallen to ...