Securities Law Commons^™

Shareholder Inspection Rights: From Credible Basis To Rational Belief, Lynn Bai

Emory Business Law Review

Jurisdictions are split on the standard of proof for shareholder inspection lawsuits when inspections are for the purpose of investigating managerial misconduct. Delaware and its followers apply a credible basis standard that calls for extrinsic evidence, beyond mere suspicion, curiosity, or disagreement with management, to permit an inference of misconduct. A minority of jurisdictions require shareholders to show merely a rational belief that mismanagement likely happened. Rational belief can be satisfied by sound logic without referencing extrinsic evidence. The Delaware Supreme Court rejected rational belief for fear that a permissive standard would lead to a cascade of frivolous inspections, although …

United We Stand, Divided We Fall: A Survey Of Current Public And Private Initiatives Addressing Board Diversity & A Proposed Sec Diversity Disclosure To Help Increase Board Diversity, Gabrielle Hunter

Emory Business Law Review

No abstract provided.

From Director Liability To Officer Liability To Esg Caremark Claims: A Natural Evolution?, Gareth Mchugh

Emory Business Law Review

With the McDonald’s decision, officers and directors could face Caremark liability for the first time, and this decision could also lead to an influx of ESG-based Caremark claims in Delaware Courts. This Comment explains that, while ESG Caremark claims would force corporations to adopt ESG oversight systems to avoid liability, the very political, social, and legal environment that created a growing call for ESG Caremark claims presents a beneficial opportunity for corporations to appeal to consumers and investors by proactively adopting ESG oversight systems. Corporations are at a nexus where they can either willingly adopt ESG oversight systems and reap …

40 Acres And A Mule: Accountability For Corporations To Provide Reparations To Historically Black Colleges And Universities For Profits From Slave Labor, Meghan K. Marks

Emory Business Law Review

No abstract provided.

Inherently Incompatible: The Irreconcilable Tension Between Corporate Negligence Claims And The Federal Tort Claims Act, Veronica J. Finkelstein

Emory Business Law Review

No abstract provided.

The S.E.C.'S Unconstitutionally Compelled Speech, Steven J. Cleveland

Faculty Articles

Congress delegated to the Securities & Exchange Commission (S.E.C.) the regulation of the sale and trading of securities as well as the solicitation of proxies. The S.E.C. compels disclosure by involved parties to ensure that investors can make informed decisions regarding their trades and the exercise of voting rights with respect to their securities. Such important governmental interests routinely leave one without basis to challenge the compelled speech imposed by the S.E.C. Because it generally can compel speech by parties involved in securities transactions and the solicitation of proxies, the S.E.C. is insensitive to situations when legitimate First Amendment issues …

Inside Out (Or, One State To Rule Them All): New Challenges To The Internal Affairs Doctrine, Ann Lipton

Publications

The internal affairs doctrine provides that the law of the organizing state will apply to matters pertaining to a business entity's internal governance, regardless of whether the entity has substantive ties to that jurisdiction. The internal affairs doctrine stands apart from other choice of law rules, which usually favor the jurisdiction with the greatest relationship to the dispute and limit parties' ability to select another jurisdiction's law. The doctrine is purportedly justified by business entities' unique need for a single set of rules to apply to governance matters, and by the efficiency gains that flow from allowing investors and managers …

The Failure Of Market Efficiency, William Magnuson

Faculty Scholarship

Recent years have witnessed the near total triumph of market efficiency as a regulatory goal. Policymakers regularly proclaim their devotion to ensuring efficient capital markets. Courts use market efficiency as a guiding light for crafting legal doctrine. And scholars have explored in great depth the mechanisms of market efficiency and the role of law in promoting it. There is strong evidence that, at least on some metrics, our capital markets are indeed more efficient than they have ever been. But the pursuit of efficiency has come at a cost. By focusing our attention narrowly on economic efficiency concerns—such as competition, …

Nontraditional Investors, Jennifer S. Fan

BYU Law Review

In recent years, nontraditional investors have become a major player in the startup ecosystem. Under the regulatory regime of U.S. securities law, those in the public realm are heavily regulated, while those in the private realm are largely left alone. This public-private divide, which is a fundamental organizing principle of securities law, has eroded with the rise of nontraditional investors. While legal scholars have addressed the impact of some of these nontraditional investors individually, their collective impact on deal terms, deal timelines, due diligence, and board configuration has not been discussed in a holistic manner; neither has their impact on …

Spac Attack, Justin Kuehn

University of Arkansas at Little Rock Law Review

No abstract provided.

Top Ten Issues In De-Spac Securities Litigation, Wendy Gerwick Couture

University of Arkansas at Little Rock Law Review

I am delighted to contribute to this symposium on special purpose acquisition companies (SPACs). The securities litigation associated with the de-SPAC transaction is at an early stage, but courts are already wrestling with a number of unsettled issues that cast a mirror on SPACs and the securities laws more broadly. As these issues are resolved, they will affect the future of de-SPAC transactions as well as the regulatory environment in which they operate. In this essay, I identify ten such issues, drawing from the pleadings, briefings, and hearings in pending de-SPAC securities cases, with the goal of highlighting the key …

Spac Regulation—Past, Present And Future, E. Ramey Layne, K. Stancell Haigwood

University of Arkansas at Little Rock Law Review

No abstract provided.

Financial Innovation And Unforeseen Consequences: Spacs, Sec Lending, And Shorts, Christian A. Johnson

University of Arkansas at Little Rock Law Review

Although publicly traded “special purpose acquisition companies” (SPAC) have been trading for decades, the effect of the unique shareholder rights found in SPAC shares should be fully studied and compared with the rights of publicly traded non-SPAC shares. Because of their differences, PAC shares will not necessarily behave in the same way as non-SPAC shares in certain situations. The short selling of SPAC shares offers a useful case study as well as lessons for regulators, investors, and short sellers about the unforeseen and unintended consequences of financial innovation in the other-wise understood corner of securities lending and short selling of …

Corporate Response To The War In Ukraine: Stakeholder Governance Or Stakeholder Pressure?, Anete Pajuste, Anna Toniolo

Emory Business Law Review

This Article empirically investigates the corporate response to the Russian invasion of Ukraine in the framework of the stakeholder capitalism debate. Some describe corporate leaders’ decision to withdraw from Russia as an example of stakeholder governance, maintaining that they placed social responsibility over profits. Others question the authenticity of corporate support for Ukraine and argue that companies left Russia mainly driven by operational and reputational concerns.

Against this backdrop, we conduct an empirical study of reactions to the outbreak of the war from companies in the S&P500 and STOXX600 indices. We explore whether managers effectively decided mostly on ethical and …

Heyman Center Book Talk: Going Public, Heyman Center On Corporate Governance

2022 Event Invitations

Join us for a lively discussion with Dakin Campbell, author of Going Public: How Silicon Valley Rebels Loosened Wall Street’s Grip on the IPO and Sparked a Revolution and Megan Baier, partner at Wilson Sonsini Goodrich & Rosati, moderated by Rachel Landy, Visiting Assistant Professor and Director of the Heyman Center at Cardozo Law School.

Heyman Center Book Talk: Going Public, Heyman Center On Corporate Governance, Rachel Landy, Dakin Campbell, Megan Baier

2022–2023 Flyers

No abstract provided.

Taming Unicorns, Matthew Wansley

Indiana Law Journal

Until recently, most startups that grew to become valuable businesses chose to become public companies. In the last decade, the number of unicorns—private, venture-backed startups valued over one billion dollars—has increased more than tenfold. Some of these unicorns committed misconduct that they successfully concealed for years. The difficulty of trading private company securities facilitates the concealment of misconduct. The opportunity to profit from trading a company’s securities gives short sellers, analysts, and financial journalists incentives to uncover and reveal information about misconduct the company commits. Securities regulation and standard contract provisions restrict the trading of private company securities, which undermines …

The Corporate Forum, Sergio Alberto Gramitto Ricci, Christina M. Sautter

Faculty Works

In this response to Professor Jill Fisch’s article "GameStop and the Reemergence of the Retail Investor," we focus on one of the risks associated with the growth of retail investing that Fisch surveys, uncontrolled information sourcing. Drawing on our work on retail investors, we revisit an instrument dear to the U.S. Securities and Exchange Commission, whose potential has not been unleashed so far, the corporate forum. Our response succinctly discusses the main mechanics of the corporate forum, the benefits the corporate forum could provide, and the feasibility hurdles that might undermine the success of corporate forums.

A Proposed Sec Cyber Data Disclosure Advisory Commission, Lawrence J. Trautman, Neal Newman

Faculty Scholarship

Constant cyber threats result in: intellectual property loss; data disruption; ransomware attacks; theft of valuable company intellectual property and sensitive customer information. During March 2022, The Securities and Exchange Commission (SEC) issued a proposed rule addressing Cybersecurity Risk Management, Strategy, Governance, and Incident Disclosure, which requires: 1. Current reporting about material cybersecurity incidents; 2. Periodic disclosures about a registrant’s policies and procedures to identify and manage cybersecurity risks; 3. Management’s role in implementing cybersecurity policies and procedures; 4. Board of directors’ cybersecurity expertise, if any, and its oversight of cybersecurity risk; 5. Registrants to provide updates about previously reported cybersecurity …

Special Purpose Acquisition Companies (Spacs) And The Sec, Neal Newman, Lawrence J. Trautman

Faculty Scholarship

Special Purpose Acquisition Companies (SPACs) are simply enterprises that raise money from the public with the intention of purchasing an existing business and becoming publicly traded in the securities markets. If the SPAC is successful in raising money and the acquisition takes place, the target company takes the SPAC’s place on a stock exchange in a transaction that resembles a public offering. Also known as “blank-check” or “reverse merger” companies, this process avoids many of the pitfalls of a traditional initial public offering.

During late 2020 and 2021 an unprecedented surge in the popularity and issuance of Special Purpose Acquisition …

Taming Unicorns, Matthew Wansley

Articles

Until recently, most startups that grew to become valuable businesses chose to become public companies. In the last decade, the number of unicorns—private, venture-backed startups valued over one billion dollars—has increased more than tenfold. Some of these unicorns committed misconduct that they successfully concealed for years. The difficulty of trading private company securities facilitates the concealment of misconduct. The opportunity to profit from trading a company’s securities gives short sellers, analysts, and financial journalists incentives to uncover and reveal information about misconduct the company commits. Securities regulation and standard contract provisions restrict the trading of private company securities, which undermines …

Corporate Governance Guidelines: How To Improve Disclosure And Promote Better Corporate Governance In Public Companies, Jennifer O'Hare

Faculty Publications

If you are a shareholder of a public corporation, you may think it would be easy to find basic information about your shareholder rights, such as whether shareholders have the right to call special stockholder meetings. You would probably assume that the information would be disclosed in the company’s “Corporate Governance Guidelines,” (CGGs) which, according to a New York Stock Exchange (NYSE) rule, must be posted on the company’s website for shareholder review. But, as this article shows, companies are not required to disclose information about shareholder rights in their corporate governance guidelines, and most companies have chosen not to …

Don't Get Burned: Why The De-Spac Transaction Must Be Excluded From The Pslra's Safe Harbor Provision For Forward-Looking Statements, Jean-Claire Perini

Villanova Law Review (1956 - )

No abstract provided.

Don't Forget The "G" In Esg: The Sec And Corporate Governance Disclosure, Jennifer O'Hare

Faculty Publications

For years, many shareholders—both institutional and individual investors—have pressured the Securities and Exchange Commission (“SEC”) to require public companies to disclose more information about the environmental, social, and governance (“ESG”) risks facing the company. However, the SEC has generally refused calls to require public corporations to disclose, for example, how they are addressing climate change or workforce diversity challenges. With a new president in the White House and a new administration at the SEC, the SEC will soon propose new ESG disclosure rules, requiring more information about the “E” and the “S” in ESG. But the SEC has forgotten the …

Theranos: Case Study And Examination Of The Fraud Triangle, Abbey Jennings

Finance Undergraduate Honors Theses

Fraud is a serious issue which carries significant implications. Fraud committed by top level managers is particularly grievous, as it ripples through a firm, harming the company’s shareholders, employees, and credibility, while posing a threat to individuals and society (Zahra, et al.). A common framework in auditing, the fraud triangle, outlines three factors that if present, increase the risk or enable fraud to occur. The three factors are incentive, opportunity, and rationalization to commit fraud (Barlow).

In 2018, the Securities and Exchange Commission (SEC) charged Elizabeth Holmes, founder and CEO of a supposedly groundbreaking health tech company, Theranos, with what …

How Discretionary Decision-Making Impacts The Financial Performance And Legal Disclosures Of S&P 500 Funds, Bernard S. Sharfman, Vincent Deluard

Brooklyn Law Review

When investment funds track the S&P 500, the index becomes more than just a list of 500 companies. The focus then becomes the financial and regulatory issues that arise from the discretionary decision-making power of the Index Committee that governs the S&P 500. Based on our empirical research and analysis, this article recommends a new principal risk disclosure under SEC Form N-1A, which we refer to as “selection risk,” to be included in the statutory and summary prospectuses of investment funds that track the S&P 500. This type of risk results when the Index Committee uses its discretionary decision-making power …

The Sec's Ice-Cold Take On Climate Disclosure: Is The 2010 Interpretive Climate Guidance Working?, Patrick Dunbar

Villanova Environmental Law Journal (1991 - )

No abstract provided.

Federally Mandated Online Sales Tax: A Logistical Solution For The Future Of E-Commerce, Daniel O'Connor

DePaul Business & Commercial Law Journal

No abstract provided.

Economic Structural Transformation And Litigation: Evidence From Chinese Provinces, To Economic Change And Restructuring, Doug Bujakowski, Joan Schmit

DePaul Business & Commercial Law Journal

No abstract provided.

The "Business Interruption" Insurance Coverage Conundrum: Covid-19 Presents A Challenge, Paul E. Traynor

DePaul Business & Commercial Law Journal

No abstract provided.