Securities Law Commons^™

What's Good For The Goose Is Not Good For The Gander: Sarbanes-Oxley-Style Nonprofit Reforms, Lumen N. Mulligan

Faculty Works

In this article, I contend that these Sarbanes-Oxley-inspired, state, nonprofit reforms, particularly the costly disclosure requirements, will be of little value in the effort to improve ethical nonprofit board governance. The article proceeds as follows. Part II provides a primer on the oversight of nonprofit organizations. Part III reviews the recent Sarbanes-Oxley-like nonprofit reforms introduced in seven states. Part IV contends that the disclosure-focused reforms, which form the bulwark of these acts, will not foster ethical nonprofit board governance. Part V argues that this failure stems from the inappropriate application of a stockholder-based, normative perspective in the nonprofit sector. The …

The Corporate Monitor: The New Corporate Czar?, Vikramaditya Khanna, Timothy L. Dickinson

Michigan Law Review

Following the recent spate of corporate scandals, government enforcement authorities have increasingly relied upon corporate monitors to help ensure law compliance and reduce the number of future violations. These monitors also permit enforcement authorities, such as the Securities & Exchange Commission and others, to leverage their enforcement resources in overseeing corporate behavior. However there are few descriptive or normative analyses of the role and scope of corporate monitors. This paper provides such an analysis. After sketching out the historical development of corporate monitors, the paper examines the most common features of the current set of monitor appointments supplemented by interviews …

The Group Dynamics Theory Of Executive Compensation, Michael B. Dorff

Cardozo Law Review

No abstract provided.

A Complete Property Right Amendment, John H. Ryskamp

ExpressO

The trend of the eminent domain reform and "Kelo plus" initiatives is toward a comprehensive Constitutional property right incorporating the elements of level of review, nature of government action, and extent of compensation. This article contains a draft amendment which reflects these concerns.

Corporate Investigations, Attorney-Client Privilege, And Selective Waiver: Is A Half-Privilege Worth Having At All?, Colin P. Marks

Faculty Works

As the title suggests, this article is an analysis of the selective waiver doctrine, which allows a party to disclose materials protected by the attorney-client and work product privileges to the government during investigations without waiving the privilege as to third-party litigants. Specifically, the article analyzes the development of the selective waiver doctrine and why recent polices adopted by governmental agencies, specifically the Department of Justice and SEC, have made this doctrine a forefront of conversation amongst litigators, legislators and academics. But is a blanket adoption of the selective waiver doctrine wise?

Courts have taken a variety of approaches to …

The Use And Misuse Of Disclosure As A Regulatory System, Paula J. Dalley

ExpressO

Over the past several decades, legislators and regulators have increasingly turned to disclosure schemes, rather than substantive regulation, to accomplish regulatory goals. Most of these schemes are either expressly or impliedly based on the disclosure-based regulatory system established by the securities acts, which is primarily intended to provide information to traders in an established market and thereby to enhance the operation of the market. A secondary purpose of the securities acts is to alter the behavior of firms and individuals through the operation of the market. Other disclosure schemes usually have similar purposes, but they rarely operate in a market …

Bond Repudiation, Tax Codes, The Appropriations Process And Restitution Post-Eminent Domain Reform, John H. Ryskamp

ExpressO

This brief comment suggests where the anti-eminent domain movement might be heading next.

Responses By The Federal Communications Commission To Worldcom's Accounting Fraud, Warren G. Lavey

Federal Communications Law Journal

WorldCom's disclosure of billions of dollars of financial fraud on June 25, 2002 challenged the Federal Communications Commission ("FCC") in several major ways. The FCC proclaimed its commitment to enforce its rules to protect consumers against service discontinuance as well as the priority of rooting out corporate fraud. The FCC's rules required WorldCom to file accurate financial information and to show that it had financial and character qualifications necessary to hold FCC licenses. Despite numerous related proceedings and other actions in 2001 and early 2002, the FCC had not detected nor deterred WorldCom's fraud. After the disclosure, WorldCom continued its …

Legislation And Legitimation: Congress And Insider Trading In The 1980s, Thomas W. Joo

ExpressO

Legislation and Legitimation:

Congress and Insider Trading in the 1980s

Abstract

Orthodox corporate law-and-economics holds that American corporate and securities regulation has evolved inexorably toward economic efficiency. That position is difficult to square with the fact that regulation is the product of government actors and institutions. Indeed, the rational behavior assumptions of law-and-economics suggest that those actors and institutions would tend to place their own self-interest ahead of economic efficiency. This article provides anecdotal evidence of such self-interest at work. Based on an analysis of legislative history—primarily Congressional hearings—this article argues that Congress had little interest in the economic policy …

Federalism In Corporate/Securities Law: Reflections On Delaware, California, And State Regulation Of Insider Trading, Donald C. Langevoort

Georgetown Law Faculty Publications and Other Works

In this brief Essay, I offer some thoughts on both the theory and the politics underlying the federalism question. My comments will touch on some of the controversies and also look at a somewhat quieter question, the state regulation of insider trading. Over the course of the last few years, judges in California and Delaware have traveled markedly different routes on questions involving the states' role in regulating insider trading. A California court of appeal has recently expanded the reach of the state insider trading statute to cover a claim alleging misconduct in California by an executive of a Delaware …

The Irrational Auditor And Irrational Liability, Adam C. Pritchard

Articles

This Article argues that less liability for auditors in certain areas might encourage more accurate and useful financial statements, or at least equally accurate statements at a lower cost. Audit quality is promoted by three incentives: reputation, regulation, and litigation. When we take reputation and regulation into account, exposing auditors to potentially massive liability may undermine the effectiveness of reputation and regulation, thereby diminishing integrity of audited financial statements. The relation of litigation to the other incentives that promote audit quality has become more important in light of the sea change that occurred in the regulation of the auditing profession …

Taking The Stand: The Lessons Of The Three Men Who Took The Japanese American Internment To Court, Lorraine K. Bannai

Seattle Journal for Social Justice

No abstract provided.

Breaking The Bank: Revisiting Central Bank Of Denver After Enron And Sarbanes-Oxley, Celia Taylor

ExpressO

No abstract provided.

The Sec At 70: Time For Retirement?, Adam C. Pritchard

Articles

The Article proceeds as follows. Part I explains the pathologies of the SEC and explores the relation between those pathologies and the SEC's status as an independent agency. Part II then outlines an alternative regulatory structure primarily situated within the executive branch. I also argue that such a relocation of authority would enhance regulatory effectiveness while simultaneously reducing the cost of excessive regulation. The Article concludes with some thoughts about the viability of my proposal.

The Sec At 70: Time For Retirement?, Adam C. Pritchard

Articles

As one grows older, birthdays gradually shift from being celebratory events to more reflective occasions. One's 40th birthday is commemorated rather differently from one's 2lst, which is, in turn, celebrated quite differently from one's first. After a certain point, the individual birthdays become less important and it is the milestone years to whch we pay particular attention. Sadly for entities like the Securities and Exchange Commission, it is only the milestone years (the ones ending in five or zero, for some reason), that draw any attention at all. No one held a conference to celebrate the SEC's 67th anniversary. Clearly …

Expensing Isn't The Only Option: Alternatives To The Fasb's Stock Option Expensing Proposal, Benjamin A. Templin

ExpressO

This paper reviews the arguments for and against the Financial Accounting Standard Board's (FASB) proposal to require that corporations expense options. It identifies two major goals of the proposed rule -- 1) clarity in financial statements and 2) a reduction of corporate fraud by removing the incentive of options. To address these two goals, I adopt a framework of Information Reforms v. Rules of the Game Reforms. The article starts with a history of FASB Statement No. 123 Accounting for Stock-based Compensation and also analyzes the Congressional legislation that attempts to block the measure, the Stock Option Accounting Reform Act. …

Reconsidering The Prohibition Against General Solicitation During Section 3(C)(7) Offerings, Daniel P. Taub

ExpressO

This paper examines the seventy year history of the general solicitation prohibition during private offerings and then analyzes its continuing relevance as applied to Section 3(c)(7) offerings. The S.E.C. Staff recently issued a report questioning the continuing value of prohibiting general solicitation during private offerings made pursuant to Section 3(c)(7) of the Investment Company Act. If the S.E.C. were to follow the recommendation in the S.E.C. Staff Report, this would have tremendous implications for a growing number of hedge funds, and other investment companies utilizing the Section 3(c)(7) exemption. By allowing general solicitation, the S.E.C. would be reversing a policy …

Securing Truth For Power: Informational Strategy And Regulatory Policy Making, Cary Coglianese

ExpressO

No abstract provided.

Securities Supervision And Judicial Review [In China], Zhongle Zhan, Fengying Li, Inseon Paik

Washington International Law Journal

Since its founding in 1992, the China Securities Regulatory Commission ("CSRC") has, by the design of the central government of China, become the primary regulator of the Chinese securities market. The CSRC has, however, made some controversial decisions in enforcing its securities regulations. In particular, this article addresses the legal implications of the CSRC's failure to comply with controlling securities regulations in rejecting the Hainan Kaili Central Construction Company's listing application and the ramifications of such selective regulatory enforcement. The article provides an analysis of the current relationship between Chinese administrative and securities law.

Sec Enforcement Of Attorney Up-The-Ladder Reporting Rules: An Analysis Of Institutional Contraints, Norms, And Biases, Michael A. Perino

Faculty Publications

In their paper and in their earlier comments to the SEC on the proposed attorney reporting rules, Professors Cramton, Cohen and Koniak do an excellent job recounting the genesis of the attorney reporting requirements in the Sarbanes-Oxley Act, describing the SEC's proposed and final rules and critiquing the rule's triggering mechanism and now apparently shelved noisy withdrawal requirement. Their case study of the recent Spiegel, Inc. independent examiner's report is a particularly useful vehicle for examining the practical implications of the SEC's policy and drafting choices. Although I was a member of a committee that submitted comments opposed to noisy …

Can Lawyers Be Cured?: Eternal Recurrence And The Lacanian Death Drive, Jeanne L. Schroeder

Cardozo Law Review

No abstract provided.

Behavioral Economics And The Sec, Stephen J. Choi, Adam C. Pritchard

Articles

Not all investors are rational. Quite apart from the obvious examples of credulity in the face of the latest Ponzi scheme, there is no shortage of evidence that many investors' decisions are influenced by systematic biases that impair their abilities to maximize their investment returns. For example, investors will often hold onto poorly performing stocks longer than warranted, hoping to recoup their losses. Other investors will engage in speculative trading, dissipating their returns by paying larger commissions than more passive investors. And we are not just talking about widows and orphans here. There is evidence that supposedly sophisticated institutional investors-mutual …

Self-Regulation And Securities Markets, Adam C. Pritchard

Articles

Enron, Arthur Andersen, Tyco, ImClone, WorldCom, Adelphia - as American investors reel from accounting scandals and self-dealing by corporate insiders, the question of trust in the securities markets has taken on a new urgency. Securities markets cannot operate without trust. Markets known for fraud, insider trading, and manipulation risk a downward spiral as investors depart in search of safer investments. Today, many investors are rethinking the wisdom of entrusting their financial futures to the stock market. Absent trust in the integrity of the securities markets, individuals will hoard their money under the proverbial mattress.

The Changing Nature Of Federal Regulation - Dedications, Joel Seligman

Scholarship@WashULaw

In 1911 the failure of state corporation statutes to prevent securities fraud gave rise to the first significant legislative response when Kansas enacted the first well known state securities law. The law was popularly known as a “blue sky” law, because its intention was to check stock swindlers so barefaced that they “would sell building lots in the blue sky.”

After the U.S. Supreme court held that the blue sky law was constitutional in 1917, the blue sky movement swept the country. By 1933 every state except Nevada had a state securities law in effect.

Harmonizing Civil And Criminial Enforcement Of Federal Regulatory Statutes: The Case Of The Securities Exchange Act Of 1934, Margaret V. Sachs

Scholarly Works

Many federal regulatory statutes (including those governing antitrust, securities, and the environment) are hybrid statutes: their prohibitions are enforceable in criminal actions as well as in private or governmental civil actions (or both). Courts have long divided over whether prohibitions in hybrid statutes can be construed differently in different enforcement contexts. Resolution of this uncertainty has become urgent now that criminal enforcement of federal regulatory statutes is relatively frequent.

In this article, Professor Sachs argues that prohibitions in hybrid statutes should be limited to a single interpretation. How to apply this principle (referred to in this article as “the core …

Moving Toward A Clearer Definition Of Insider Trading: Why Adoption Of The Possession Standard Protects Investors, Lacey S. Calhoun

University of Michigan Journal of Law Reform

In recent years, insider trading has become a publicized focus of securities law enforcement. The definition of insider trading has emerged slowly through case law, and the term has been clarified by new theories of liability. The use and possession tests are two standards of liability used to judge the treatment of inside information. The use standard offers a defense to insider trading liability while the possession standard premises liability on mere possession of inside information. This Note argues that courts should adopt the possession standard because this standard better protects investors, a primary goal of the Securities Exchange Act …

A Public Choice Model Of International Economic Cooperation And The Decline Of The Nation State, Enrico Colombatto, Jonathan R. Macey

Cardozo Law Review

The idea of the state lies at the core of international relations and international law. The concept of sovereignty is also central to the notion of the state. Indeed, inherent in the existing system of states are the principles of political independence and sovereign equality that form the underpinnings of sovereignty.

Decreasing The Costs Of Jurisdictional Gridlock: Merger Of The Securities And Exchange Commission And The Commodity Futures Trading Commission, Mark Frederick Hoffman

University of Michigan Journal of Law Reform

Jurisdictional conflict exists between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), primarily due to the language of the 1974 CFTC Act. This Act grants the CFTC exclusive jurisdiction to regulate certain financial instruments which, given the increasing complexity and "hybrid" nature of such instruments, might simultaneously be subject to SEC regulation. This Note first explores the history of the two agencies and the statutory language giving rise to the jurisdictional conflict. This Note then examines several instances of jurisdictional conflict that resulted in extensive costs for the respective agencies and the United States' financial …

The Obsolescence Of Wall Street: A Contextual Approach To The Evolving Structure Of Federal Securities Regulation, Joel Seligman

Michigan Law Review

As a matter of analytical style, this article illustrates a contextualist approach. For a considerable period of time, the dominant analytical style in corporate and securities .law has been a variant of economic, or law and economics, analysis. The virtue of this type of analysis is that it focuses on what its authors deem to be crucial variables and reaches conclusions derived from the core of a specific legal problem. The defect of this type of analysis is that so much is assumed or often assumed away.

Not Just A Private Club: Self Regulatory Organizations As State Actors When Enforcing Federal Law, Richard L. Stone, Michael A. Perino

Faculty Publications

In the Securities Exchange Act of 1934, Congress enacted a comprehensive scheme for regulating the national securities markets. Pursuant to that scheme, the Securities and Exchange Commission was given ultimate authority to enforce the newly enacted securities laws against market participants. The Exchange Act also created a prominent enforcement role for national securities exchanges, like the New York Stock Exchange. Congress required these self-regulatory organizations as a condition for their continued operation to enforce, among other things, compliance by their members with the provisions of the Exchange Act and the rules and regulations promulgated thereunder. The SROs were also given …