Securities Law Commons^™

The Corporation’S Place In Society, Gabriel Rauterberg

Michigan Law Review

The vast majority of economic activity is now organized through corporations. The public corporation is usurping the state’s role as the most important institution of wealthy capitalist societies. Across the developed world, there is increasing convergence on the shareholder-owned corporation as the primary vehicle for creating wealth. Yet nothing like this degree of convergence has occurred in answering the fundamental questions of corporate capitalism: What role do corporations serve? What is the goal of corporate law? What should corporate managers do? Discussion of these questions is as old as the institutions involved.

The Challenge Of Fiduciary Regulation: The Investment Advisors Act After Seventy-Five Years, Roberta S. Karmel

Brooklyn Journal of Corporate, Financial & Commercial Law

Seventy-five years after its enactment the Investment Advisers Act of 1940 has advanced from a relatively weak statute merely registering advisers with the Securities and Exchange Commission (SEC) to a more robust law imposing fiduciary responsibilities on advisers. Over the years, the number of investment advisers and the number of their clients have increased greatly. The SEC therefore has been pressured by Congress to develop a harmonized fiduciary standard for broker-dealers and advisers and also to develop and enforce a greater degree of oversight over the advisory industry. These developments have raised the questions of how to fund such efforts …

Open Sesame: The Myth Of Alibaba's Extreme Corporate Governance And Control, Yu-Hsin Lin, Thomas Mehaffy

Brooklyn Journal of Corporate, Financial & Commercial Law

In September 2014, Alibaba Group Holding Limited (Alibaba) successfully launched a $25 billion initial public offering (IPO), the largest IPO ever, on New York Stock Exchange. Alibaba’s IPO success witnessed a wave among Chinese Internet companies to raise capital in U.S capital markets. A significant number of these companies have employed a novel, but poorly understood corporate ownership and control mechanism—the variable interest entity (VIE) structure and/or the disproportional control structure. The VIE structure was created in response to the Chinese restriction on foreign investments; however, it carries the risk of being declared illegal under Chinese law. The disproportional control …

A Cautionary Look At A Cautionary Doctrine, Andrew W. Fine

Brooklyn Journal of Corporate, Financial & Commercial Law

Optimism is an indispensable element of effective salesmanship. It is therefore quite natural for the directors of public companies to want to optimistically tout the potential long-term benefits of investing in their companies. After all, directors of public companies must be empowered to attract the attention and money of American investors. But what happens if these long-term projections fail to come true? Who is to blame for long-term projections that are simply unrealistic? A doctrine called the “bespeaks caution” doctrine has emerged in order to govern these inquiries, and holds that these optimistic forward-looking statements are legally immunized provided that …

Corporate Darwinism: Disciplining Managers In A World With Weak Shareholder Litigation, Randall S. Thomas, James D. Cox

Vanderbilt Law School Faculty Publications

Because representative shareholder litigation has been constrained by numerous legal developments, the corporate governance system has developed new mechanisms as alternative means to address managerial agency costs. We posit that recent significant governance developments in the corporate world are the natural consequence of the ineffectiveness and inefficiency of shareholder suits to address certain genre of managerial agency costs. We thus argue that corporate governance responses evolve to fill voids caused by the inability of shareholder suits to monitor and discipline corporate managers.

We further claim that these new governance responses are themselves becoming stronger due in part to the rising …

Manufactured Consent: The Problem Of Arbitration Clauses In Corporate Charters And Bylaws, Ann Lipton

Publications

No abstract provided.

Quieting The Sharholders' Voice: Empirical Evidence Of Pervasive Bundling In Proxy Solicitations, James D. Cox, Fabrizio Ferri, Colleen Honigsberg, Randall S. Thomas

Faculty Scholarship

The integrity of shareholder voting is critical to the legitimacy of corporate law. One threat to this process is proxy “bundling,” or the joinder of more than one separate item into a single proxy proposal. Bundling deprives shareholders of the right to convey their views on each separate matter being put to a vote and forces them to either reject the entire proposal or approve items they might not otherwise want implemented.

In this Paper, we provide the first comprehensive evaluation of the anti-bundling rules adopted by the Securities and Exchange Commission (“SEC”) in 1992. While we find that the …

The Enduring Legacy Of Modern Efficient Market Theory After Halliburton V. John, Mark Klock

Georgia Law Review

In 1988 the U.S. Supreme Court approved the fraud on the market theory for securities trading in an efficient market thus enabling securities class action plaintiffs to establish their required reliance element of the case through a rebuttable presumption. Basic v. Levinson held that efficient markets incorporate publicly disseminated information and investors who purchased or sold securities in an efficient market therefore relied on any publicly disseminated misinformation. For more than a quarter century since Basic, the efficient market theory has sustained a barrage of assaults from commentators who object to the use of economic theory in legal decision making …

Political Uncertainty And The Market For Ipos, Jay B. Kesten, Murat C. Mungan

Faculty Scholarship

This Article presents a simple theory and model of the effects of political uncertainty on the market for IPOs. Our model generates four central predictions: (i) increased political uncertainty reduces the frequency of IPOs; (ii) firms that choose to conduct an IPO during periods of political uncertainty are, on average, of higher quality and generate greater return on investment in the secondary market; (iii) political uncertainty increases the cost of capital for IPO firms; but (iv) underpricing is less pronounced during periods of heightened political uncertainty. We demonstrate that each of these predictions is consistent with available empirical evidence.

Our …

Locked In: The Competitive Disadvantage Of Citizen Shareholders, Anne M. Tucker

Faculty Publications By Year

In this Essay, I challenge the conventional corporate law wisdom that unhappy mutual fund investors paying high fees don’t need litigation or regulation to protect their interests because they should simply exit a fund and reinvest elsewhere. The exit solution, advanced by Professors John Morley and Quinn Curtis in Taking Exit Rights Seriously provided an elegantly simply solution to the problem of unhappy indirect investors (e.g., mutual fund investors) given that they are often low-dollar, low-incentive, rationally-apathetic investors facing enormous information asymmetries and collective action problems. According to their view, competition produced by exit, or the threat of exit, is …

Trending @ Rwulaw: Susan Schwab Heyman's Post: Defining The Boundaries Of Insider Trading, Susan Schwab Heyman

Law School Blogs

No abstract provided.

Attorneys Beware: Increased Liability For Providing Advice To Corporate Clients Issuing Securites, Joseph Reece

Akron Law Review

Although the law in this area is rapidly evolving, a general overview of recent case law seems to indicate that attorneys may be liable even though their participation in the issuance of securities only involved rendering routine services to a corporate client. If an attorney were to have an active part in activities such as business planning or the promotion of securities, their exposure to potential liability would increase dramatically. As a result of this rapid change in the law, there is a degree of uncertainty concerning the potential liabilities attorneys may face when assisting their corporate clients in issuing …

Qualification Of Securities In California: Hostile Territory For Foreign Issuers, James K. Roosa

Akron Law Review

The purpose of this article is to outline these policies and to discuss the threat which compliance poses to the issuer's shareholders as well as the corporation law of the issuer's home state. Although much of the discussion is couched in terms of Ohio law and Ohio issuers, it applies equally to other jurisdictions whose corporation laws are similar to Ohio's.

The Ipo Crisis: Title I Of The Jobs Act And Why It Does Not Go Far Enough, Brian Howaniec

Pepperdine Law Review

This Comment explores the brewing controversy over Title I and assesses the actual impact that it is having (and will have) on investor protection and the IPO market. This Comment argues that Title I has the ability to affect both, but, due to factors outside of Congress's control, will likely have only a minimal effect on either. Part II discusses the objectives of investor protection legislation and how previous legislation regulated the financial markets. Part III explains how these regulations have been changed for emerging growth companies under Title I. Part IV examines what impact Title I will have on …

Is The Quest For Corporate Responsibility A Wild Goose Chase? The Story Of Lovenheim V. Iroquois Brands, Ltd., D.A. Jeremy Telman

Akron Law Review

This Article is a Law Story. Law Stories have many purposes, but their main goal is to supplement and demystify the case method of legal pedagogy. The case method has been criticized for presenting students with the law more or less as a fait accompli. The case method assumes a pre-existing body of law that students passively learn rather than learning to think of the law as something that they will have a hand in shaping...In Part II, this Article explores the law of shareholder proposals and the reasons why the SEC and the courts permit proposals relating to social …

Asadi: Renegade Or Precursor Of Who Is A Whistleblower Under The Dodd-Frank Act?, Mystica M. Alexander, John O. Hayward, David Missirian

Pace Law Review

Whistleblowers have a long and honorable history. From Ralph Nader blowing the whistle on the hazards of GM’s Corvair in Unsafe at Any Speed1 in the 1960’s to Jeffrey Wigand in 1996 exposing the duplicity of the tobacco industry, whistleblowers have put conscience ahead of career and personal success to expose corporate fraud and wrongdoing. Not surprisingly, they have had to endure ridicule and ostracism as well as financial hardship. Legislation has sought to protect them from retribution, often with mixed success. The most recent legislative effort is the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) that allows …

Delaware Corporate Law Recognizes The Fundamental Validity Of The Forum Selection Bylaw: A Survey Of The Boilermakers Litigation, Zachary R. Cormier

The Journal of Business, Entrepreneurship & the Law

Boilermakers Local 154 Retirement Fund v. Chevron Corp. represents a new and important chapter in the relationship between the forum selection clause and modern business relations. A forum selection clause is “[a] contractual provision in which the parties establish the place (such as the country, state, or type of court) for specified litigation between them.” Forum selection clauses have most often been analyzed by courts within contractual relationships between businesses, or a business and its customers. The Boilermakers case sets important precedent for forum selection in an equally fundamental business relationship--the corporation and its stockholders. This article will survey the …

Governing The Corporate Insiders: Improving Regulation Fair Disclosure With More Robust Guidance And Stronger Penalties For Individual Executives, Christopher Ippoliti

The Journal of Business, Entrepreneurship & the Law

This article discusses the history of Regulation Fair Disclosure (Regulation FD), the problems it was intended to remedy, the scope of the regulation, and acceptable methods of disclosing material information in compliance with the rule. Part III examines specific further guidance and two investigative reports issued by the United States Securities and Exchange Commission (SEC) impacting Regulation FD disclosures. In Part IV, this article sets forth a comprehensive analysis of all the specific enforcement actions pursued by the SEC and the penalties assessed against publicly traded companies and individuals for Regulation FD violations. Part V evaluates the effectiveness of the …

Private Equity And The Fcpa: Deal-Making As Reform Mechanism, Thomas J. Manning

Pepperdine Law Review

No abstract provided.

International Tax Free Exchanges: The Structure Of I.R.C. Section 367, Vikram A. Gosain

Georgia Journal of International & Comparative Law

No abstract provided.

Corporate Law And The Limits Of Private Ordering, James D. Cox

Faculty Scholarship

Solomon-like, the Delaware legislature in 2015 split the baby by amending the Delaware General Corporation Law to authorize forum-selection bylaws and to prohibit charter or bylaw provisions that would shift to the plaintiff defense costs incurred in connection with shareholder suits that were not successfully concluded. The legislature acted after the Boilermakers Local 154 Retirement Fund. v. Chevron Corp ATP Tour, Inc. v. Deutscher Tennis Bund, broadly empowered the board vis-à-vis the shareholders through the board’s power to amend the bylaws. Repeatedly the analysis used by each court referenced the contractual relationship the shareholders had through the articles of …

Piercing The Fiduciary Veil, Colin P. Marks

Faculty Works

Limited partnerships (LPs) and limited liability companies (LLCs) permit formation with a unique management structure in that these entities may be managed by another limited liability entity, such as a corporation. Thus, the true managers are those individuals who manage the manager. It is well settled that the managing entity, such as a corporate general partner, owes default fiduciary duties, but what of these second-tier managers? Technically, it is the managing entity that owes the duties, not the managing entity's owners, officers, and directors, yet courts have struggled with strict adherence to this separation when it would seem inequitable to …

Loser Pays: The Latest Installment In The Battle-Scarred, Cliff-Hanging Survival Of The Rule 10b-5 Class Action, John C. Coffee Jr.

Faculty Scholarship

When I was an upper-year student at Yale Law School in the late 1960s, I was sometimes as undermotivated as contemporary upper-year law students regularly appear to be. But there was then an appropriate role model for us: a graduate student, brimming with efficiency and self-discipline, who occupied a carrel in the law library, seemingly working day and night on a special research project. He had piled law review articles and cases a foot or more about his carrel, and anyone walking by could see that he seemed obsessed with something called Rule 10b-5. I had dimly heard of this …

Ceo Stock Ownership Policies: Rhetoric And Reality, Nitzan Shilon

Indiana Law Journal

This Article is the first academic endeavor to analyze the efficacy and transparency of stock ownership policies (SOPs) in U.S. public firms. SOPs generally require managers to hold some of their firms’ stock for the long term. Following the 2008 financial crisis, firms universally adopted these policies and cited them more than any other policy as a key element in their mitigation of risk. However, my analysis of the recent SOPs of S&P 500 CEOs disputes what firms claim about these policies. First, I find that SOPs are extremely ineffectual in making CEOs hold on to their firm’s stock; this …

Stock-Market Law And The Accuracy Of Public Companies’ Stock Prices, Kevin S. Haeberle

Faculty Publications

The social benefits of more accurate stock prices—that is, stock-market prices that more accurately reflect the future cash flows that companies are likely to produce—are well established. But it is also thought that market forces alone will lead to only a sub-optimal level of stock-price accuracy—a level that fails to obtain the maximum net social benefits, or wealth, that would result from a higher level. One of the principal aims of federal securities law has therefore been to increase the extent to which the stock prices of the most important companies in our economy (public companies) contain information about firms’ …

The Macroprudential Turn: From Institutional 'Safety And Soundness' To Systematic 'Financial Stability' In Financial Supervision, Robert C. Hockett

Cornell Law Faculty Publications

Since the global financial dramas of 2008-09, authorities on financial regulation have come increasingly to counsel the inclusion of macroprudential policy instruments in the standard ‘toolkit’ of finance-regulatory measures employed by financial supervisors. The hallmark of this perspective is its focus not simply on the safety and soundness of individual financial institutions, as is characteristic of the traditional ‘microprudential’ perspective, but also on certain structural features of financial systems that can imperil such systems as wholes. Systemic ‘financial stability’ thus comes to supplement, though not to supplant, institutional ‘safety and soundness’ as a regulatory desideratum.

The move from primarily micro- …

Political Uncertainty And The Market For Ipos, Jay B. Kesten, Murat C. Mungan

Scholarly Publications

No abstract provided.

Banker Loyalty In Mergers And Acquisitions, Andrew F. Tuch

Scholarship@WashULaw

When investment banks advise on merger and acquisition (M&A) transactions, are they fiduciaries of their clients, gatekeepers for investors, or simply arm’s-length counterparties with no other-regarding duties? Scholars have generally treated M&A advisors as arm’s-length counterparties, putting faith in the power of contract law and market constraints to discipline errant bank behavior. This Article counters that view, arguing that investment banks are rightly characterized as fiduciaries of their M&A clients and thus required to loyally serve client interests.

This Article also develops an analytical framework for assessing the liability rules that will most effectively deter disloyalty on the part of …

The New Financial Order: An Essay For Alan Bromberg - Tributes To Professor Alan R. Bromberg, Joel Seligman

Scholarship@WashULaw

In the aftermath of the 2008-2009 financial crisis, I characterized its causes broadly:

First, there was an ongoing economic emergency, initially rooted in the housing and credit markets, which has been succeeded by the collapse of several leading investment and commercial banks and insurance companies, dramatic deterioration of stock market indices, and a rapidly deepening recession.

Second, there were serious breakdowns in the enforcement and fraud deterrence missions of federal financial regulation, notably as illustrated by matters involving Bear Stearns and the other four then independent investment banks subject to the SEC's former Consolidated Supervised Entities program, the government creation …

Liquidity, Systemic Risk, And The Bankruptcy Treatment Of Financial Contracts, Rizwaan J. Mokal

Brooklyn Journal of Corporate, Financial & Commercial Law

No abstract provided.