Law Commons^™

The Importance Of Being Earnest: An Environmental Whistleblower’S Guide To Protection Under Sox § 806 And Dodd-Frank, John J. Tollefsen

John J. Tollefsen

This paper argues that the reason so few whistleblowers have won in court is because counsel failed to focus on SEC rule violations. It lays out a strategy for reversing that trend by identifying 13 SEC rules that could be cited by environmental whistleblowers under SOx §806 and its Dodd-Frank cousin.

Beyond Incentives: Making Corporate Whistleblowing Moral In The New Era Of Dodd-Frank Act "Bounty Hunting", Matt A. Vega

Matt A Vega

In this article, I examine the SEC's new whistleblower bounty program authorized by the Dodd-Frank Act. Under the program, which went into effect last year, the SEC is required to pay a bounty to whistleblowers who voluntarily provide the agency with "original information" about a potential securities law violation that leads to a successful SEC or "related" enforcement action and that results in monetary sanctions of sufficient size. When the average SEC settlement is over $18.3 million, whistleblowers can expect the average bounty to be well in the range of $2-5 million.

My contention is that this new program is …

Beneficial Ownership And The Remic Classification Rules, Bradley T.` Borden, David J. Reiss

David J Reiss

REMICs are securitized pools of mortgages that qualify for special flow-through taxation. To qualify for flow-through tax treatment, the pool must satisfy several requirements. An intended REMIC that fails to satisfy those requirements will likely be taxed as a corporation and payments made to holders of interests in a failed REMIC will likely be nondeductible dividend payments, subjecting the REMIC to significant tax and penalties. Such tax and penalties will cause beneficial interests in the pool to lose value and frustrate investors who relied upon REMIC classification as an incentive to purchase interests. Thus, tax classification is critical to REMICs …

Dear Sec: Please Don't Abdicate Your Jobs Act Responsibility To Make Forthcoming "Regulation A+" Exemption From Registration Available To Small Businesses, Rutheford B. Campbell Jr.

Rutheford B Campbell Jr.

Title IV of the Jobs Act amends Section 3(b) of the Securities Act of 1933 by adding a new Section 3(b)(2). This new statute requires the Commission to adopt regulations (“Section 3(b)(2) Regulations”) that provide an exemption from registration for offerings of up to $50 million. The anticipated Section 3(b)(2) Regulations are often referred to as “Regulation A+”. The name used for Title IV of the Jobs Act – “Small Company Capital Formation” – indicates that the purpose of the legislation is to provide small businesses an efficient access external capital. The provisions of Title IV also suggest Regulation A …

A Call For Action: An Analysis Of The Impending Regulatory Crisis In The Municipal Securities Market, Philip Grommet

Philip Grommet

This Article warns of an impending regulatory crisis in the municipal securities market. The municipal securities market is an integral tool that allows state and local governments to implement important public interest projects by appealing to retail investors seeking tax-exempt income. Its regulation has garnered little attention – aside from the market’s characterization as “sleepy.” However, the market has grown exponentially and today’s market is increasingly populated with complex financial instruments. Quite simply, its regulation has not kept pace with developments in the market. Municipal securities issuers are not subject to the general registration requirements of the Securities Act of …

Janus Capital Group, Inc. V. First Derivative Traders: The Culmination Of The Supreme Court’S Reactionary Rule 10b-5 Jurisprudence Which Protects Fraud At The Expense Of Investors, Charles W. Murdock

Charles W. Murdock

Summary: Janus Capital Group, Inc. v. First Derivative Traders: The Culmination of the Supreme Court’s Reactionary Rule 10b-5 Jurisprudence Which Protects Fraud at the Expense of Investors

“Political” decisions such as Citizens United and National Federation of Independent Business (“Obamacare”) reflect the reactionary bent of several Supreme Court justices. But this reactionary trend is discernible in other areas as well. With regard to Rule 10b-5, the Court has handed down a series of decisions that could be grouped into four trilogies. The article examines the trend over the past 40 years which has become increasingly conservative and finally reactionary.

The …

How Statistical Sampling Can Solve The Conundrum Of Compensation Disclosures Under Dodd-Frank, Michael Ohlrogge

Michael Ohlrogge

One of the more controversial measures of the Dodd-Frank bill is its requirement that companies report the ratio of their CEO’s compensation to that of their median employee. Critics of this provision have claimed that for large companies with employees and subsidiaries throughout the world, compliance with this measure alone could cost millions of dollars a year, due to the difficulties in identifying the median employee. This paper demonstrates that the Securities and Exchange Commission, which is charged with implementing this provision, has the latitude to direct companies to calculate the figure using a statistical sampling procedure which would greatly …

Janus Capital Group, Inc. V. First Derivative Traders: The Culmination Of The Supreme Court’S Reactionary Rule 10b-5 Jurisprudence Which Protects Fraud At The Expense Of Investors, Charles W. Murdock

Charles W. Murdock

Summary: Janus Capital Group, Inc. v. First Derivative Traders: The Culmination of the Supreme Court’s Reactionary Rule 10b-5 Jurisprudence Which Protects Fraud at the Expense of Investors

“Political” decisions such as Citizens United and National Federation of Independent Business (“Obamacare”) reflect the reactionary bent of several Supreme Court justices. But this reactionary trend is discernible in other areas as well. With regard to Rule 10b-5, the Court has handed down a series of decisions that could be grouped into four trilogies. The article examines the trend over the past 40 years which has become increasingly conservative and finally reactionary.

The …

Janus Capital Group, Inc. V. First Derivative Traders: The Culmination Of The Supreme Court’S Reactionary Rule 10b-5 Jurisprudence Which Protects Fraud At The Expense Of Investors, Charles W. Murdock

Charles W. Murdock

Summary: Janus Capital Group, Inc. v. First Derivative Traders: The Culmination of the Supreme Court’s Reactionary Rule 10b-5 Jurisprudence Which Protects Fraud at the Expense of Investors

“Political” decisions such as Citizens United and National Federation of Independent Business (“Obamacare”) reflect the reactionary bent of several Supreme Court justices. But this reactionary trend is discernible in other areas as well. With regard to Rule 10b-5, the Court has handed down a series of decisions that could be grouped into four trilogies. The article examines the trend over the past 40 years which has become increasingly conservative and finally reactionary.

The …

Eminently Reasonable, David J. Reiss

David J Reiss

Local governments across the country are considering an innovative use of eminent domain. They propose to condemn underwater mortgages (those that exceed the fair-market value of the home) in their communities and restructure them so that home­owners can afford their payments and so that the new mortgage is for less than the fair market value of the property. If this proposal is implemented, the local government will pay the owner of mortgages of "underwater" homes the fair market value for the mortgages. The local government will then restructure each mortgage by reducing the principal amount owed to be in line …

Wall Street Rules Applied To Remic Classification, David J. Reiss, Bradley T. Borden

David J Reiss

Investors in mortgage-backed securities, built on the shoulders of the tax-advantaged Real Estate Mortgage Investment Conduit (“REMIC”), may be facing extraordinary tax losses because of how bankers and lawyers structured these securities. This calamity is compounded by the fact that those professional advisors should have known that the REMICs they created were flawed from the start. If these losses are realized, those professionals will face suits for damages so large that they could put them out of business.

The Ralston-Landreth-Gustafson Harmony: A Security!, Nicholas L. Georgakopoulos

Nicholas L Georgakopoulos

The legal definition of a security is incomplete but consistent with the economic function of securities transactions and the financial theory of securities valuation (the Capital Asset Pricing Model). The switch of the regulatory environment from buyer beware to seller disclose is justified because buyers lack access to information and control. Despite that this analysis makes Landreth and Ruefenacht appear questionable, the regulation of private sales of securities that arises from Rawlston Purina, Landreth, and Gustafson is superior to what the drafters of the ’33 Act could have anticipated.

Blatant Bribery Or Locally Lawful?: Is The Foreign Corrupt Practices Act’S “Local Laws” Defense Extinct?, Erik J. King

Erik J King

Under the Foreign Corrupt Practices Act (FCPA), it is an affirmative defense if the payments in question were lawful under the written laws of a foreign country. This defense has been largely overlooked by commentators and used sparingly in the court system. This Note examines the utility of this defense, and finds that although the concept underlying the defense remains somewhat alive in certain types of foreign laws that could conceivably excuse a foreign investor, the defense has lost all practical value. U.S. judicial interpretations, multilateral efforts against similar exceptions in other anti-bribery laws, and the subsuming effect of other …

The Cost Of Securities Fraud, Urska Velikonja

Urska Velikonja

Under the dominant account, securities fraud by public firms harms the firms’ shareholders and, more generally, capital markets. Recent financial legislation—the JOBS Act and the Dodd-Frank Act—as well as the influential 2011 D.C. Circuit decision in Business Roundtable v. SEC reinforce that same worldview. This Article contends that the account is wrong. Misreporting distorts economic decision-making by all firms, both those committing fraud and not. False information, coupled with efforts to hide fraud and avoid detection, impairs risk assessment by providers of human and financial capital, suppliers and customers, and thus misdirects capital and labor to lower-value projects. If fraud …

Comment On The Use Of Eminent Domain To Restructure Performing Loans, David J. Reiss

David J Reiss

There has been a lot of fear-mongering by financial industry trade groups over the widespread use of eminent domain to residential mortgages. While there may be legitimate business reasons to oppose its use, its inconsistency with Takings jurisprudence should not be one of them. To date, the federal government’s responses to the current crisis in the housing markets have been at cross purposes, half-hearted and self-defeating. So it is not surprising that local governments are attempting to fashion solutions to the problem with the tools at their disposal. Courts should, and likely will, give these democratically-implemented and constitutionally-sound solutions a …

Employers United: An Empirical Analysis Of Corporate Political Speech In The Wake Of The Affordable Care Act, Elizabeth Weeks Leonard, Susan Scholz, Raquel Meyer Alexander

Elizabeth A. Weeks

Is the Patient Protection and Affordable Care Act (ACA) bad for business? Did the countries' most prominent companies game the Securities and Exchange Commission (SEC) disclosure process to make negative political statements about ObamaCare? Immediately following the ACA's enactment on March 23, 2010, a number of companies drew scrutiny for issuing SEC filings writing off millions – and in AT&T's case, one billion dollars – against expected earnings for 2010 alone, based on a single, discrete tax-law change in the ACA. Congressional and Administration officials accused the firms of being “irresponsible” and using “big numbers to exaggerate the health reform's …

Out Of The Shadows: Requiring Strategic Management Disclosure, Nadelle Grossman

Nadelle Grossman

Under federal securities laws and related regulations, public companies must disclose a host of information about their risk management processes to protect firm value. By contrast, these companies need not disclose virtually anything about their strategic management processes to generate firm value. As a result, investors are given a lopsided picture of firm processes to create value, undermining one of the federal securities laws’ central purposes of ensuring that investors receive complete information about public firms.

To address this concern, I propose that the Securities and Exchange Commission require public firms to disclose those qualities of their strategic management processes …

Out Of The Shadows: Requiring Strategic Management Disclosure, Nadelle Grossman

Nadelle Grossman

Under federal securities laws and related regulations, public companies must disclose a host of information about their risk management processes to protect firm value. By contrast, these companies need not disclose virtually anything about their strategic management processes to generate firm value. As a result, investors are given a lopsided picture of firm processes to create value, undermining one of the federal securities laws’ central purposes of ensuring that investors receive complete information about public firms.

To address this concern, I propose that the Securities and Exchange Commission require public firms to disclose those qualities of their strategic management processes …

Out Of The Shadows: Requiring Strategic Management Disclosure, Nadelle Grossman

Nadelle Grossman

Under federal securities laws and related regulations, public companies must disclose a host of information about their risk management processes to protect firm value. By contrast, these companies need not disclose virtually anything about their strategic management processes to generate firm value. As a result, investors are given a lopsided picture of firm processes to create value, undermining one of the federal securities laws’ central purposes of ensuring that investors receive complete information about public firms.

To address this concern, I propose that the Securities and Exchange Commission require public firms to disclose those qualities of their strategic management processes …

Out Of The Shadows: Requiring Strategic Management Disclosure, Nadelle Grossman

Nadelle Grossman

Under federal securities laws and related regulations, public companies must disclose a host of information about their risk management processes to protect firm value. By contrast, these companies need not disclose virtually anything about their strategic management processes to generate firm value. As a result, investors are given a lopsided picture of firm processes to create value, undermining one of the federal securities laws’ central purposes of ensuring that investors receive complete information about public firms.

To address this concern, I propose that the Securities and Exchange Commission require public firms to disclose those qualities of their strategic management processes …

Out Of The Shadows: Requiring Strategic Management Disclosure, Nadelle Grossman

Nadelle Grossman

Under federal securities laws and related regulations, public companies must disclose a host of information about their risk management processes to protect firm value. By contrast, these companies need not disclose virtually anything about their strategic management processes to generate firm value. As a result, investors are given a lopsided picture of firm processes to create value, undermining one of the federal securities laws’ central purposes of ensuring that investors receive complete information about public firms.

To address this concern, I propose that the Securities and Exchange Commission require public firms to disclose those qualities of their strategic management processes …

Out Of The Shadows: Requiring Strategic Management Disclosure, Nadelle Grossman

Nadelle Grossman

Under federal securities laws and related regulations, public companies must disclose a host of information about their risk management processes to protect firm value. By contrast, these companies need not disclose virtually anything about their strategic management processes to generate firm value. As a result, investors are given a lopsided picture of firm processes to create value, undermining one of the federal securities laws’ central purposes of ensuring that investors receive complete information about public firms.

To address this concern, I propose that the Securities and Exchange Commission require public firms to disclose those qualities of their strategic management processes …

Out Of The Shadows: Requiring Strategic Management Disclosure, Nadelle Grossman

Nadelle Grossman

Under federal securities laws and related regulations, public companies must disclose a host of information about their risk management processes to protect firm value. By contrast, these companies need not disclose virtually anything about their strategic management processes to generate firm value. As a result, investors are given a lopsided picture of firm processes to create value, undermining one of the federal securities laws’ central purposes of ensuring that investors receive complete information about public firms.

To address this concern, I propose that the Securities and Exchange Commission require public firms to disclose those qualities of their strategic management processes …

Out Of The Shadows: Requiring Strategic Management Disclosure, Nadelle Grossman

Nadelle Grossman

Under federal securities laws and related regulations, public companies must disclose a host of information about their risk management processes to protect firm value. By contrast, these companies need not disclose virtually anything about their strategic management processes to generate firm value. As a result, investors are given a lopsided picture of firm processes to create value, undermining one of the federal securities laws’ central purposes of ensuring that investors receive complete information about public firms.

To address this concern, I propose that the Securities and Exchange Commission require public firms to disclose those qualities of their strategic management processes …

Out Of The Shadows: Requiring Strategic Management Disclosure, Nadelle Grossman

Nadelle Grossman

Under federal securities laws and related regulations, public companies must disclose a host of information about their risk management processes to protect firm value. By contrast, these companies need not disclose virtually anything about their strategic management processes to generate firm value. As a result, investors are given a lopsided picture of firm processes to create value, undermining one of the federal securities laws’ central purposes of ensuring that investors receive complete information about public firms.

To address this concern, I propose that the Securities and Exchange Commission require public firms to disclose those qualities of their strategic management processes …

Beyond The Target Market: Product Advertising And Rule 10b-5'S "In Connection With" Requirement, Thomas J. Molony

Thomas J Molony

An investor purchases Apple common stock in reliance on representations in advertisements that the new iPad is capable of connecting to “ultrafast” 4G wireless networks. It turns out that the iPad is not compatible with the fastest wireless network in Australia or the 4G networks in Sweden and Germany. If the investor suffered a loss a result, can the investor recover from Apple for securities fraud under Rule 10b-5 of the Securities Exchange Act of 1934?

A number of possible impediments to recovery exist. One is Rule 10b-5’s limited scope. The Rule applies only to a fraud that is “in …

Credit Default Swaps And Insider Trading, Douglas B. Levene

Douglas B Levene

In the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, Congress clarified that the insider trading regime of Rule 10b-5 applies to trading in credit default swaps. In so doing, Congress implicitly assumed without analysis that the equities securities markets and the credit default swap market are the same and should be subject to the same rules.

This paper is the first to question that assumption and to consider whether as a normative matter credit default swaps should be subject to Rule 10b-5. Through a rigorous analysis of the differences between the two markets and the policies underlying …

Out Of The Shadows: Requiring Strategic Management Disclosure, Nadelle Grossman

Nadelle Grossman

Under federal securities laws and related regulations, public companies must disclose a host of information about their risk management processes to protect firm value. By contrast, these companies need not disclose virtually anything about their strategic management processes to generate firm value. As a result, investors are given a lopsided picture of firm processes to create value, undermining one of the federal securities laws’ central purposes of ensuring that investors receive complete information about public firms.

To address this concern, I propose that the Securities and Exchange Commission require public firms to disclose those qualities of their strategic management processes …

Out Of The Shadows: Requiring Strategic Management Disclosure, Nadelle Grossman

Nadelle Grossman

Under federal securities laws and related regulations, public companies must disclose a host of information about their risk management processes to protect firm value. By contrast, these companies need not disclose virtually anything about their strategic management processes to generate firm value. As a result, investors are given a lopsided picture of firm processes to create value, undermining one of the federal securities laws’ central purposes of ensuring that investors receive complete information about public firms.

To address this concern, I propose that the Securities and Exchange Commission require public firms to disclose those qualities of their strategic management processes …

Out Of The Shadows: Requiring Strategic Management Disclosure, Nadelle Grossman

Nadelle Grossman

Under federal securities laws and related regulations, public companies must disclose a host of information about their risk management processes to protect firm value. By contrast, these companies need not disclose virtually anything about their strategic management processes to generate firm value. As a result, investors are given a lopsided picture of firm processes to create value, undermining one of the federal securities laws’ central purposes of ensuring that investors receive complete information about public firms.

To address this concern, I propose that the Securities and Exchange Commission require public firms to disclose those qualities of their strategic management processes …