Securities Law Commons^™

Corporate Governance Speech, Sarah C. Haan

Seattle University Law Review

The State has always regulated the intra-firm communications that make corporate governance possible, most commonly by mandating disclosures of information by a corporation to its shareholders. Some such laws are labeled “securities regulation,” but securities regulation is a broad category that extends to speech by actors who are outside the corporate enterprise as well. Also, the conventional securities regulation category does not capture all such laws; other examples, including informationforcing mandates, can be found in state corporate law. This Article uses the term “corporate governance speech” to describe the communications among shareholders, directors, and officers through which corporate governance is …

Dark Accounting Matter, Colleen Honigsberg

Seattle University Law Review

Physicists calculate that approximately 85% of the matter in the universe is composed of “dark matter” that “does not absorb, reflect, or emit electromagnetic radiation and is therefore difficult to detect.” The S&P 500 currently trades at a price-to-book value of 4.2, suggesting that book value accounts for less than 20% of the S&P 500’s market value. The remaining 80% appears nowhere in these firms’ balance sheets—it is invisible to contemporary accounting techniques and constitutes “dark accounting matter.”

Some “dark accounting matter” is composed of factors commonly described as components of “ESG.” Human capital, for example, is an intangible asset …

The Employees’ Dilemma: Balancing Internal Reporting, Whistleblowing, And Insider Trading Risks, Geeyoung Min

Seattle University Law Review

The Essay examines how recent developments in insider trading regulations and whistleblower reward programs can lead to unintended and counterproductive results of discouraging employees from using internal reporting channels within corporate compliance programs. While the presence of a robust and well-functioning corporate compliance program is a critical factor both in mitigating the level of public enforcement actions against companies and in protecting corporate managers from liability in private litigation, these programs often provide little incentive for employees to report potential misconduct internally.

Corporate compliance programs are designed to promote the upward information flow within the company, which is essential for …

How The Antidiscrimination Law Of Commercial Transactions Really Works, Helen Norton

Seattle University Law Review

A variety of businesses now cite 303 Creative when seeking First Amendment protection for their refusal to serve certain customers based on those customers’ protected class status. How this litigation will play out remains to be seen. But future courts need not, and should not, repeat the 303 Creative Court’s misunderstanding of how the antidiscrimination law of commercial transactions actually works.

Part I of this Essay explains the Court’s longstanding understanding of the antidiscrimination law of commercial transactions, and then describes the Court’s failure to engage with this precedent in 303 Creative. Part II then identifies the 303 Creative decision’s …

Volume 48 Masthead, Seattle University Law Review

Seattle University Law Review

Volume 48 Masthead

Voting Matters: Materiality Considerations And The Shareholder Vote, Renee M. Jones

Seattle University Law Review

For the shareholder franchise to have meaning, shareholders must have access to relevant information to inform their voting decisions. The securities laws’ disclosure requirements play an essential role in informing the shareholder vote.

This Essay focuses on the question of the materiality of information in the context of shareholder voting. It addresses the question of whether ESG-related information is material, positioning the materiality inquiry within the context of shareholders’ voting decisions. It explores the definition of materiality with a focus on the “reasonable investor” concept embedded within the definition. The Essay argues that the implicit expectations of many commentators that …

Volume 48 Masthead, Seattle University Law Review

Seattle University Law Review

Volume 48 Masthead

Understanding The Big Three’S Wavering Support Of Environmental And Social Shareholder Proposals, Jeff Schwartz, Jefferson Jensen

Seattle University Law Review

Because of their substantial equity portfolios, BlackRock, Vanguard, and State Street (the Big 3) are central players in corporate governance. It is, therefore, critical to understand how they vote. One puzzle is that their support for shareholder proposals on environmental and social matters appears to waiver. In 2020, for instance, BlackRock supported 11.1% of environmental proposals at S&P 500 firms. In 2021, it seemingly reversed course, supporting 55.2%. It then flipped again, supporting 32.1% in 2022. Such statistics suggest that the Big 3 are constantly changing their views on these topics. This Article seeks to better understand whether this is …

Volume 48 Masthead, Seattle University Law Review

Seattle University Law Review

Volume 48 Masthead

Green Dividends: A Case Study In Green Dividends And The Conditions For Private Ordering Solutions, Anne M. Tucker

Seattle University Law Review

This Essay introduces a novel private ordering solution to facilitate corporate investments in pro-social and environmental initiatives: Green dividends. Green dividends are an optional increase in shareholder dividends that are returned to the company to be reinvested in environmental initiatives or kept by a shareholder.

Green dividends pose an alternative to the current gridlocked debate that corporations can’t, won’t, shouldn’t, and shouldn’t even try to act in pro-social or environmental ways. Turning the common refrains on their head converts each narrative into an element for a successful private ordering solution: authority, accountability, shareholder buy-in, and government- backed enforcement. With Green …

Does Climate Disclosure Work To Reduce Greenhouse Gas Emissions? Emerging Evidence Suggests Cautious Optimism, Cynthia A. Williams

Seattle University Law Review

Significant regulatory resources have been spent developing global, voluntary climate and sustainability disclosure standards, such as the TCFD, TNRD, and ISSB’s Sustainability and Climate Disclosure standards, or domestically required disclosures, such as in the EU and in the U.S. Thus, it is important to evaluate whether this disclosure, particularly voluntary, qualitative disclosure, will have the power to shift the allocation of capital, will have a significant effect on the management of climate risk within firms, and ultimately will reduce climate change risk and biodiversity loss.

In this Article, several interrelated questions will be discussed. First, what does the empirical evidence …

Unequal Ownership, Ofer Eldar, Rory Van Loo

Faculty Scholarship

Market concentration and weak competition do not just lead to lower efficiency but also result in corporate profits flowing primarily to wealthy households that own a disproportionate share of public corporations. We demonstrate that this is a growing distributional problem not only due to familiar reasons in the literature, most notably shifts in market power, but also due to changes in the socio-economic makeup of ownership. Over the past twenty years, households in the bottom 90 percent of wealth have seen their share of stock ownership decline by half. That is, the ownership of corporations has become increasingly concentrated among …

Can The Sec Mandate Disclosures That Contain Both Financial And Social Information? The Case Of The Human Capital Management Disclosures, Patrick M. Corrigan

Journal Articles

Human capital contributes directly to the top and bottom line of corporate financial performance. However, theory predicts, and empirical studies suggest, that firms underinvest in human capital because of a classic public goods problem: since employees can always leave to work for another employer, firms cannot expect to bear all the fruits of investments they make in human capital. As human capital becomes more important in the modern service and technology economy, the ills of this public good problem are growing and the deficiencies of underinvestment becoming more apparent. This Article studies the potential role of human capital management disclosures. …

Democratization Of The Private Markets?, Colleen Baker, Christina M. Sautter

Faculty Journal Articles and Book Chapters

U.S. initial public offerings are declining and the amount of private market assets under management are exploding. Simultaneously, the number of retail investors opening taxable brokerage accounts is increasing. Private market assets are hot. Everyone–both institutional and retail investors–wants in on the action. Yet considerations such as financial resources and U.S. securities laws make such investment less accessible for many retail investors. In this short article, we explore this changing investment landscape and, specifically, one development within this craze: retail investments in private company shares via closed-end funds (or CEFs).

Recently, CEFs like ARK Venture Fund and Destiny Tech100, Inc. …

Unprincipled Investor Bifurcations, Anita K. Krug

American University Law Review

The investment world is full of bifurcations—that is, divisions among groups of investors that the securities laws establish for the purpose of furthering the regulatory goal of investor protection. The notion behind these bifurcations is that only more wealthy investors should be permitted to invest in riskier investment products. However, as this Article details, a more pernicious bifurcation has emerged in recent years, alongside the growing popularity of exchange-traded funds, or “ETFs.” Investing in ETFs is desirable for many investors because ETF shares, unlike shares of mutual funds, can be traded throughout the day. In addition, ETFs allow investors to …

Urgensi Optimalisasi Regulasi Ico Dan Regulatory Sandbox Di Indonesia: Studi Komparatif Malaysia, Singapura, Dan Uea, Arfan Yanayir Akbar Sabillilah

Jurnal Hukum & Pembangunan

Regulasi aset kripto di Indonesia sedang mengalami transisi mendasar menyusul diberlakukannya Undang-Undang Pengembangan dan Penguatan Sektor Keuangan (UU P2SK), yang mengalihkan pengawasan dari Bappebti ke Otoritas Jasa Keuangan (OJK) dan Bank Indonesia. Meskipun demikian, kerangka kerja saat ini masih menyisakan celah yang signifikan, khususnya terkait mekanisme penggalangan dana publik seperti Initial Coin Offering (ICO), Initial Exchange Offering (IEO), dan Security Token Offering (STO), serta tidak adanya Regulatory Sandbox khusus untuk inovasi berbasis kripto. Celah-celah ini menciptakan ketidakpastian hukum, meningkatkan risiko penipuan, dan melemahkan perlindungan investor. Studi ini menggunakan metode yuridis-normatif dengan pendekatan hukum komparatif, menganalisis model regulasi di Malaysia, Singapura, …

Anticipating The Effects Of The Brazilian New Business Environment Law's Corporate Governance Provisions On Minority Shareholder Protection, Dean Farmer

Michigan Business & Entrepreneurial Law Review

To encourage minority shareholder protections and public investment in Brazilian corporations, Brazil passed the New Business Environment Law. The New Business Environment Law’s Corporate Governance Provisions require that all corporations have at least one independent board member, have different individuals serving as their CEO and board chairperson, and grant increased power to the general shareholders’ meeting. This Note predicts that the New Business Environment Law’s Corporate Governance Provisions will have an inconsequential effect on Brazilian minority shareholder protections. Traditional American means of achieving minority shareholder protections may be ineffective in Brazil, due to legal, institutional, and cultural differences between the …

Unveiling Misconceptions Of Tunneling: Market Capitalization-Based Analysis, Sang Yop Kang

Michigan Business & Entrepreneurial Law Review

In internal transactions between affiliated companies, there are two opposite directions of wealth-transfer: (1) in the “forward transfer of wealth” (FTW), the wealth-transfer arises from an affiliated company where a controller’s “economic interest” (i.e., “cash-flow right”) is smaller relative to another affiliated company where the controller’s economic interest is larger; (2) in the “reverse transfer of wealth” (RTW), the wealth-transfer arises from an affiliated company where a controller’s economic interest is larger relative to another affiliated company, where the controller’s economic interest is smaller. This Article puts forward a new finding that the extent of internal-transaction tunneling is affected not …

Regulating Crypto Intermediaries, Eric D. Chason

Faculty Publications

Early 2024 produced a dramatic rebound in cryptocurrency markets as Bitcoin hit an all-time high price in March 2024. This surge was fueled in large part by judicial and regulatory action. After years of denials and a high-profile defeat in court, the U.S. Securities and Exchange Commission (SEC) finally approved the first exchange-traded funds (ETFs) for Bitcoin in January 2024. Many believe that these approvals will lead to a greater shift of investment funds into crypto. Crypto regulation is not, however, ready for this shift. While ETFs have clear treatment under current law, other institutions lack the same clarity or …

Dol Fiduciary Rule 3.0 Strikeout, Base Knock, Or Home Run?, Antolin Reiber

DePaul Business & Commercial Law Journal

No abstract provided.

Money Is Morphing - Cryptocurrency Can Morph To Be An Environmentally And Financially Sustainable Alternative To Traditional Banking, Clovia Hamilton

DePaul Business & Commercial Law Journal

No abstract provided.

Survey Evidence In Trademark Actions, Ioana Vasiu And Lucian Vasiu

DePaul Business & Commercial Law Journal

No abstract provided.

Corporate Governance And Compelled Speech: Do State-Imposed Board Diversity Mandates Violate Free Speech?, Salar Ghahramani

DePaul Business & Commercial Law Journal

No abstract provided.

The Real Persons Are The Corporations We Made Along The Way, Leonard Brahin

DePaul Business & Commercial Law Journal

No abstract provided.

Front Matter

DePaul Business & Commercial Law Journal

No abstract provided.

The Business Judgment Rule In Stakeholder Capitalism, Thiago Spercel

Northwestern Journal of International Law & Business

The tension between shareholder primacy and stakeholder capitalism embodies a fundamental debate about the purpose of a corporation. These two perspectives offer contrasting views on whether a company should primarily serve the interests of its shareholders or consider the broader spectrum of stakeholders in its decision-making process, taking into account environmental, social and governance factors alongside financial performance. The Dodd-Berle debate from the 1930s and Milton Friedman’s teachings in the 1970s regarding the purpose of a corporation and the tension between shareholder primacy and stakeholderism have been reinvigorated. On the one hand, ESG considerations have become increasingly important in risk …

Emerging Technologies And Perfection Of Security Interests: A Financial University Of Uncertainty, Elizabeth M. Wagenbach

Brooklyn Law Review

Since the founding of Bitcoin in 2009, digital assets, such as cryptocurrency, have exploded in popularity. Cryptocurrency has been associated with stories of immense profit and immense loss. The lucky transactors have been able to capitalize on the price fluctuations of cryptocurrency, while the unlucky transactors became victims of the same volatility, losing tremendous amounts of money. The novelty and ingenuity of cryptocurrency has been coupled with mass confusion to transactors and regulators alike. These early days of cryptocurrency have been characterized by a sort of regulatory tug of war that is a direct result of confusion of what cryptocurrency …

Covid-19 Risk Factors And Boilerplate Disclosure, Stephen J. Choi, Mitu Gulati, Xuan Liu, Adam C. Pritchard

Law & Economics Working Papers

The SEC mandates that public companies assess new information that changes the risks that they face and disclose these if there has been a “material” change. Does that theory work in practice? Or are companies copying and repeating the same generic disclosures? Using the shock of the COVID-19 pandemic, we explore these questions. Overall, we find considerable rote copying of boilerplate disclosures. Further, the factors that correlate with deviations from the boilerplate seem related more to the resources that companies have (large companies change updated disclosures more) and litigation risks (companies vulnerable to shareholder litigation update more) rather than general …

Retail Investors And Corporate Governance: Evidence From Zero-Commission Trading, Dhruv Aggarwal, Albert H. Choi, Yoon-Ho Alex Lee

Law & Economics Working Papers

We examine the effects of the sudden abolition of trading commissions by major online brokerages in 2019, which lowered stock market entry costs for retail investors, on corporate governance. Firms already popular with retail investors experienced positive abnormal returns around the abolition of commissions. Firms with positive abnormal returns in response to commission-free trading subsequently saw a decrease in institutional ownership, a decrease in shareholder voting, and a deterioration in environmental, social, and corporate governance (ESG) metrics. Finally, these firms were more likely to adopt bylaw amendments to reduce the percentage of shares needed for a quorum at shareholder meetings. …

Henderson And The Objective Observer Standard: The Future Of Race-Conscious Standards Post-Students For Fair Admissions, Gabriela Dionisio

Seattle University Law Review

On June 29, 2023, the Supreme Court of the United States decided Students for Fair Admissions v. President & Fellows of Harvard College, which struck down race-conscious admissions policies. Within just a year after its ruling, Students for Fair Admissions has already had a sweeping impact, reaching beyond higher education. Although the Supreme Court did not indicate whether Students for Fair Admissions applies to sectors beyond higher education, law firms, and other employers have already modified their diversity policies and initiatives, erasing race and company diversity considerations. Given those dramatic changes, there is growing fear that Students for Fair Admissions …