Law Commons^™

Heart Of Darkness: The Problem At The Core Of The Us Proxy System And Its Solution, David C. Donald

David C. Donald

Voting rights are a shareholder’s main legal channel to exercise control internally over the company in which she invests her savings. Under the corporate law of the US states, a shareholder is someone registered on the stockholders’ list, not a person who has title to shares. When in the 1970s transferring paper certificates became impossible on high-volume markets, Congress ordered that the market’s securities be put into the vaults of a central depository and that claims against the depository’s accounts be transferred rather than the shares themselves. Once this was done, however, issuers no longer knew who owned their shares; …

The Unjustified Judicial Creation Of Class Certification Merits Trials In Securities, Michael J. Kaufman, John M. Wunderlich

University of Michigan Journal of Law Reform

The class action device is vital to deterring securities fraud and remedying its victims, who almost never suffer losses sufficient to justify an individual suit. Nonetheless, the federal courts have begun to convert the class certification process into a premature trial on the merits, thereby precluding victims of securities fraud from pursuing otherwise valid claims of financial wrongdoing. In particular, in a series of important decisions, the federal courts have required plaintiffs to prove the essential elements of their securities fraud claims at the preliminary class certification stage.

This Article demonstrates why this trend should end. The judicial creation of …

Is The Public Utility Holding Company Act A Model For Breaking Up The Banks That Are Too-Big-To-Fail?, Roberta S. Karmel

Roberta S. Karmel

ABSTRACT FOR “IS THE PUBLIC UTILITY HOLDING COMPANY ACT A MODEL FOR BREAKING UP THE BANKS THAT ARE TO-BIG-TO-FAIL?”

BY ROBERTA S. KARMEL

During the financial crisis of 2007-08 and the debates on regulatory reform that followed, there was general agreement that the “too-big-to-fail” principle creates unacceptable moral hazard. Policy makers divided, however, on the solutions to this problem. Some argued that the banking behemoths in the United States should be broken up. Others argued that dismantling the big banks would be bad policy because these banks would not be able to compete with universal banks in the global capital …

The Checks And Balances Of Good Corporate Governance, John Lessing

John Lessing

Good corporate governance requires a range of regulatory checks and balances - or mechanisms - to be effective. If one mechanism fails, the system will fail like a chain with a weak link. This article provides an overview and brief explanation of the main checks and balances a country needs to have a good corporate governance system. It is of particular relevance to countries with transition economies. However, it is also important in developed countries as recent corporate collapses and failures in the financial system have illustrated.

Effectuating Disclosure Under The Williams Act, Ronald J. Colombo

Ronald J Colombo

The importance of adequate, timely disclosure of critical information to investors and the capital markets has never been more greatly appreciated. In furtherance of such disclosure, within the specific context of rapid stock accumulations that implicate potential changes in corporate control, Congress passed the Williams Act in 1968. Unfortunately, thanks largely to an early Supreme Court decision interpreting the Act, the remedies available to private litigants foster noncompliance and gamesmanship. Fortunately, this decision is open to reinterpretation – and arguably ripe for relegation as bad law. Such a turn of events would give rise to a remedial regime that furthers, …

The Future Of Agency Independence, Lisa S. Bressman, Robert B. Thompson

Vanderbilt Law Review

Independent agencies have long been viewed as different from executive-branch agencies because the President lacks authority to fire their leaders for political reasons, such as failure to follow administration policy. In this Article, we identify mechanisms that make independent agencies increasingly responsive to presidential preferences. We find these mechanisms in a context where independent agencies traditionally have dominated: financial policy. In legislative proposals for securing market stability, we point to statutorily mandated collaboration on policy between the Federal Reserve Board and the Secretary of the Treasury. In administration practices for improving securities regulation, we focus on White House coordination of, …

Quagmire: Is The Sec Stuck In A Misguided War Against Pipe Financing?, Douglas Hoffer

Douglas Hoffer

A popular non-traditional capital formation option is the “PIPE” deal: Private Investment in Public Equity. Over the last ten years, companies raised more than $100 billion using PIPE transactions. The Securities and Exchange Commission (“SEC”) has increased its regulatory oversight of PIPE transactions as they have become more popular. The SEC believes that some PIPE investors who take a short position in a PIPE issuer’s publicly traded shares violate Section 5 of the Securities Act by selling unregistered securities, and that PIPE investors who trade on knowledge of an impending PIPE transaction are guilty of insider trading. The purpose of …

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 …

Risks And Hedges Of Providing Liquidity In Complex Securities: The Impact Of Insider Trading On Options Market Makers, Stanislav Dolgopolov

Fordham Journal of Corporate & Financial Law

No abstract provided.

Can The Law Track Scientific Risk And Technological Innovation?: The Problem Of Regulatory Definitions And Nanotechnology, David A. Dana

Faculty Working Papers

The functioning of a regulatory regime often turns on what is defined to be included in the scope of regulation and what is defined to be outside. In constructing the definitions of what is regulated, two key challenges are to align the defintions with the risks that motivated the establishment of the regulatory regime and to build in dynamism into the defintions so that they adapt to changes in scientific understanding and technology. This Chapter of a forthcoming book from Cambridge University Press (David Dana, ed., The Nanotechnology Challenge), explores these challnegs in the context of nanotechnology.

Taking A More Sophisticated Approach To Market Efficiency: How Securities Analyst Reports Can Be Used To Establish Loss Causation In A Federal Securities Fraud Action, Bernard S. Sharfman

Bernard S Sharfman

In the newly evolving case law of what constitutes a corrective disclosure, a recent U.S. District Court for the District of Arizona decision in In re Apollo Group, Inc. Securities Litigation has brought to the fore the issue of whether or not corrective disclosures must come only in the form of “hard facts,” such as the public disclosure of prospective accounting restatements or the failure of the FDA to approve a drug for public use, or if they can also come in the form of “soft facts,” i.e., a public disclosure of how a securities analyst has changed her opinion …

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 …

New Governance In The Teeth Of Human Frailty: Lessons From Financial Regulation, Cristie L. Ford

Cristie L. Ford

New Governance scholarship has made important theoretical and practical contributions to a broad range of regulatory arenas, including securities and financial markets regulation. In the wake of the global financial crisis, question about the scope of possibilities for this scholarship are more pressing than ever. Is new governance a full-blown alternative to existing legal structures, or is it a useful complement? Are there essential preconditions to making it work, or can a new governance strategy improve any decision making structure? If there are essential preconditions, what are they? Is new governance “modular” – that is, does it still confer benefits …

Principles-Based Securities Regulation In The Wake Of The Global Financial Crisis, Cristie L. Ford

Cristie L. Ford

This paper seeks to re-examine, and ultimately to restate the case for, principles-based securities regulation in light of the global financial crisis and related developments. Prior to the onset of the crisis, the concept of more principles-based financial regulation was gaining traction in regulatory practice and policy circles, particularly in the United Kingdom and Canada. The crisis of course cast financial regulatory systems internationally, including more principles-based approaches, into severe doubt. This paper argues that principles-based securities regulation as properly understood remains a viable and even necessary policy option, which offers solutions to the real-life and theoretical challenge that the …

Fcc Regulation And Increased Ownership Concentration In The Radio Industry, Peter Dicola

Faculty Working Papers

In 1996, Congress increased the limits on how many radio stations one firm can own within a single "radio market." To enforce these limits, the FCC used an idiosyncratic method of defining radio markets, based on the complex geometry of the signal contour patterns of radio stations' broadcasts. Using a unique geographic data set, this paper provides the first calculations of the pre- and post-1996 limits on local radio ownership as actually implemented by the FCC. The limits are surprisingly permissive and vary considerably from city to city. While the limits were seldom binding on radio firms, I find a …

The Case For Semi-Strong-Form Corporate Scienter In Securities Fraud Actions, Paul B. Maslo

Michigan Law Review First Impressions

The mental state of scienter - intent to defraud - is a required element of a securities fraud claim. The scienter inquiry is fairly straightforward when the defendant is an individual. It is more complex when a corporate entity is involved because a corporation can only act through its agents; it has no mind of its own. This article compares the three approaches courts have used to impute scienter to corporate defendants in the securities fraud context and concludes by recommending the approach which strikes an appropriate balance between several dueling public policy concerns.

Power Without Property, Still: Unger, Berle, And The Derivatives Revolution, Cristie Ford, Carol Liao

Seattle University Law Review

We are in a time when the notion of property is in flux. The derivatives revolution has shattered the “atom of property” well beyond what was originally imagined in 1932 by Adolf Berle and Gardiner Means. This disaggregation has had fascinating, and often adverse, effects on corporate law and securities regulation. Moreover, the phenomenon has had the unexpected effect of permitting some parties that already possess considerable social, economic, and political power to accumulate even more.

Neo-Brandeisianism And The New Deal: Adolf A. Berle, Jr., William O. Douglas, And The Problem Of Corporate Finance In The 1930s, Jessica Wang

Seattle University Law Review

This essay revisits Adolf A. Berle, Jr. and The Modern Corporation and Private Property by focusing on the triangle of Berle, Louis D. Brandeis, and William O. Douglas in order to examine some of the underlying assumptions about law, economics, and the nature of modern society behind securities regulation and corporate finance in the 1930s. I explore Douglas and Berle’s academic and political relationship, the conceptual underpinnings of Brandeis, Berle, and Douglas’s critiques of modern finance, and the ways in which the two younger men—Berle and Douglas—ultimately departed from their role model, Brandeis.

The Power Of Proxy Advisors: Myth Or Reality?, Stephen Choi, Jill E. Fisch, Marcel Kahan

All Faculty Scholarship

Recent regulatory changes increasing shareholder voting authority have focused attention on the role of proxy advisors. In particular, greater shareholder empowerment raises the question of how much proxy advisors influence voting outcomes.

This Article analyzes the significance of voting recommendations issued by four proxy advisory firms in connection with uncontested director elections. We find, consistent with press reports, that Institutional Shareholder Services (ISS) is the most powerful proxy advisor and that, of the others, only Glass, Lewis & Co. seems to have a meaningful impact on shareholder voting. This Article also attempts to measure the impact of voting recommendations on …

Securities Class Actions Move North: A Doctrinal And Empirical Analysis Of Securities Class Actions In Canada, Adam C. Pritchard, Janis P. Sarra

Articles

The article explores securities class actions involving Canadian issuers since the provinces added secondary market class action provisions to their securities legislation. It examines the development of civil liability provisions, and class proceedings legislation and their effect on one another. Through analyses of the substance and framework of the statutory provisions, the article presents an empirical and comparative examination of cases involving Canadian issuers in both Canada and the United States. In addition, it explores how both the availability and pricing of director and officer insurance have been affected by the potential for secondary market class action liability. The article …

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 …