Law Commons^™

Is "Public Company" Still A Viable Regulatory Category?, George S. Georgiev

Faculty Articles

This Article suggests that the ubiquitous “public company” regulatory category, as currently constructed, has outlived its effectiveness in fulfilling core goals of the modern administrative state. An ever-expanding array of federal economic regulation hinges on public company status, but “public company” differs from most other regulatory categories in that it requires an affirmative opt-in by the subject entity. In practice, firms today become subject to public company regulation only if they need access to the public capital markets, which is much less of a business imperative than it once was due to the proliferation of private financing options. Paradoxically, then, …

Shareholder Engagement In The United States, Vikramaditya S. Khanna

Book Chapters

Shareholder voting and engagement in the US have undergone substantial changes over the last 50 years. They have moved from being relatively sleepy issues to those that trigger insomnia in even the most hardened executives. The changes in the ownership structure of US publicly traded firms are probably the most important reason for the shift, but so too are rule changes that have facilitated greater shareholder activism. This chapter explores these developments while describing the rules of the road for shareholder voting in the US by focusing on Delaware jurisprudence and changes in US federal securities regulations. It also examines …

The Problem Of Sunsets, Jill E. Fisch, Steven Davidoff Solomon

All Faculty Scholarship

An increasing percentage of corporations are going public with dual class stock in which the shares owned by the founders or other corporate insiders have greater voting rights than the shares sold to public investors. Some commentators have criticized the dual class structure as unfair to public investors by reducing the accountability of insiders; others have defended the value of dual class in encouraging innovation by providing founders with insulation from market pressure that enables them to pursue their idiosyncratic vision.

The debate over whether dual class structures increase or decrease corporate value is, to date, unresolved. Empirical studies have …

The New Titans Of Wall Street: A Theoretical Framework For Passive Investors, Jill E. Fisch, Asaf Hamdani, Steven Davidoff Solomon

All Faculty Scholarship

Passive investors — ETFs and index funds — are the most important development in modern day capital markets, dictating trillions of dollars in capital flows and increasingly owning much of corporate America. Neither the business model of passive funds, nor the way that they engage with their portfolio companies, however, is well understood, and misperceptions of both have led some commentators to call for passive investors to be subject to increased regulation and even disenfranchisement. Specifically, this literature takes a narrow view both of the market in which passive investors compete to manage customer funds and of passive investors’ participation …

Mootness Fees, Matthew D. Cain, Jill E. Fisch, Steven Davidoff Solomon, Randall Thomas

All Faculty Scholarship

In response to a sharp increase in litigation challenging mergers, the Delaware Chancery Court issued the 2016 Trulia decision, which substantively reduced the attractiveness of Delaware as a forum for these suits. In this Article, we empirically assess the response of plaintiffs’ attorneys to these developments. Specifically, we document a troubling trend—the flight of merger litigation to federal court where these cases are overwhelmingly resolved through voluntary dismissals that provide no benefit to the plaintiff class but generate a payment to plaintiffs’ counsel in the form of a mootness fee. In 2018, for example, 77% of deals with litigation were …

Family Ties: Salman And The Scope Of Insider Trading, Jill E. Fisch

All Faculty Scholarship

On October 5, 2016, the Supreme Court heard oral argument in Salman v. United States. Salman raises questions about the scope of insider trading liability for tippees under the personal benefit test previously articulated in Dirks v. SEC. Some critics have argued the Second Circuit’s decision last year in United States v. Newman demonstrates that the personal benefit test is unduly restrictive and should be reconsidered. Salman offers an opportunity for the Supreme Court to do so.

This essay argues that Salman does not require the Court to reexamine the parameters of insider trading liability. Instead, the Court can …

In Search Of Safe Harbor: Suggestions For The New Rule 506(C), Usha Rodrigues

Scholarly Works

I devote most of this essay to exploring how, exactly, the Securities and Exchange Commission (“SEC”) should go about providing guidelines to implement the statutory requirement that issuers have a reasonable belief that a purchaser is accredited. The SEC has proposed rules, but these rules merely restate what Congress has already required, thus sidestepping Congress’s direction that the agency itself articulate some verification methods. Taking the SEC’s decidedly amorphous proposal to task, I recommend that the SEC offer two nonexclusive safe harbors for issuers to guide them in determining whether a natural person is an accredited investor. The paragraphs below …

Striking The Right Balance: Investor And Consumer Protection In The New Financial Marketplace: Introduction, Lisa Fairfax, Arthur E. Wilmarth Jr

All Faculty Scholarship

On March 2, 2012, The George Washington University Law School's Center for Law, Economics & Finance and The George Washington Law Review jointly hosted a symposium entitled "Striking the Right Balance: Investor and Consumer Protection in the New Financial Marketplace."' The symposium focused on two principal topics. First, participants analyzed the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank") on investors and consumers in three areas of federal regulation-securities markets, derivatives markets, and consumer financial products. Second, the symposium evaluated the Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley") on its tenth anniversary and considered whether Sarbanes-Oxley's legacy might …

A Theory Of Preferred Stock, William W. Bratton, Michael L. Wachter

All Faculty Scholarship

No abstract provided.

Confronting The Circularity Problem In Private Securities Litigation, Jill E. Fisch

All Faculty Scholarship

Many critics argue that private securities litigation fails effectively either to deter corporate misconduct or to compensate defrauded investors. In particular, commentators reason that damages reflect socially inefficient transfer payments—the so-called circularity problem. Fox and Mitchell address the circularity problem by identifying new reasons why private litigation is an effective deterrent, focusing on the role of disclosure in improving corporate governance. The corporate governance rationale for securities regulation is more powerful than the authors recognize. By collecting and using corporate information in their trading decisions, informed investors play a critical role in enhancing market efficiency. This efficiency, in turn, allows …

Bankruptcy Boundary Games, David A. Skeel Jr.

All Faculty Scholarship

For the past several decades, Congress has steadily expanded the exclusion of securities market operations from core bankruptcy protections. This Article focuses on three of the most important of these issues: the exclusion of brokerage firms from Chapter 11; the protection of settlement payments from avoidance as preferences or fraudulent conveyances; and the exemption of derivatives from the automatic stay and other basic bankruptcy provisions. In Parts I, II and III of the Article, I consider each of the issues in turn, showing that each has had serious unintended consequences. Both Drexel Burnham and Lehman Brothers evaded the brokerage exclusion, …

Director Elections And The Role Of Proxy Advisors, Stephen Choi, Jill E. Fisch, Marcel Kahan

All Faculty Scholarship

Using a dataset of proxy recommendations and voting results for uncontested director elections from 2005 and 2006 at S&P 1500 companies, we examine how advisors make their recommendations. Of the four firms we study, Institutional Shareholder Services (ISS), Proxy Governance (PGI), Glass Lewis (GL), and Egan Jones (EJ), ISS has the largest market share and is widely regarded as the most influential. We find that the four proxy advisory firms differ substantially from each other both in their willingness to issue a withhold recommendation and in the factors that affect their recommendation. It is not clear that these differences, or …