Securities Law Commons^™

The Great Etf Tax Swindle: The Taxation Of In-Kind Redemptions, Jeffrey M. Colon

Faculty Scholarship

Since the repeal of the General Utilities doctrine over 30 years ago, corporations must recognize gain when distributing appreciated property to their shareholders. Regulated investment companies (RICs), which generally must be organized as domestic corporations, are exempt from this rule when distributing property in kind to a redeeming shareholder.

In-kind redemptions, while rare for mutual funds, are a fundamental feature of exchange-traded funds (ETFs). Because fund managers decide which securities to distribute, they distribute assets with unrealized gains and thereby significantly reduce the future tax burdens of their current and future shareholders. Many ETFs have morphed into investment vehicles that …

Fair Or Foul?: Sec Administrative Proceedings And Prospects For Reform Through Removal Legislation, Joseph A. Grundfest

Fordham Law Review

This Article catalogues the long list of criticisms of the Commission’s administrative proceedings. It also evaluates data describing the outcome of litigated matters and finds that, with the exception of insider trading cases, the Commission has an exceptionally high and statistically indistinguishable record of success in administrative and federal court proceedings alike. The data thus seem not to support the view that the Commission has a generalized home-court advantage in administrative proceedings. Nonetheless, the Commission’s virtually unfettered discretion in forum selection decisions, when it can assign cases to a forum that it controls, raises a plethora of institutional design concerns.

Consistently Inconsistent: What Is A Qualifying Investment Under Article 25 Of The Icsid Convention And Why The Debate Must End, Jeremy Marc Exelbert

Fordham Law Review

International investment has helped to pave the way for an increasingly globalized world community. Consequently, the International Centre for Settlement of Investor Disputes (ICSID)—existing under the mandate of the World Bank and with the stated purpose of increasing economic development abroad—has become the leading international arbitration mechanism currently available for settling disputes arising out of such investments. It is unsettling, therefore, that the interpretation of “investment” within article 25 of the ICSID Convention (the provision that determines whether an ICSID tribunal may exercise jurisdiction over a dispute) has given rise to a unique interpretive controversy because the ICSID Convention fails …

In Defense Of The Dealers: Why The Sec Should Allow Substituted Compliance With The European Union For Security-Based Swap Dealers, John Welling

Fordham Law Review

Following the 2008–2009 financial crisis, legislators around the world enacted laws that regulated the over-the-counter (OTC) derivatives markets for the first time. These laws, though necessary, have duplicative requirements that dampen market efficiency. In the United States, the Securities and Exchange Commission is contemplating a “substituted compliance” regime with other jurisdictions. This regime would allow market participants to comply with one jurisdiction’s requirements for certain transactions, rather than the requirements of multiple jurisdictions. This Note argues that the SEC should allow substituted compliance for OTC derivatives, but only for dealers located in the United States and European Union. Some advocate …

White Collar Crime, Robert J. Anello, Miriam L. Glaser

Fordham Law Review

This Article will address six different areas of white collar law and procedure: (1) fraud, (2) the Racketeer Influenced & Corrupt Organizations Act (RICO), (3) conspiracy, (4) public corruption, (5) white collar practice, and (6) sentencing. Many of the cases profiled in this Article have driven legal and cultural developments far beyond the federal courts, including the cases of Leona Helmsley, one of New York’s most prominent real estate moguls; the “Mafia Commission,” a take-down of the bosses of the Five Families of La Cosa Nostra; and Abscam, a massive sting operation created by the federal government to expose corrupt …

Securities And Financial Regulation In The Second Circuit, Karen Patton Seymour

Fordham Law Review

The Second Circuit has long been the country’s preeminent court in the field of securities and financial regulation. The reputation of the Second Circuit in the realm of securities has been so great that other courts, including the Supreme Court, often mention by name the particular judges that decided a given Second Circuit precedent to justify their reliance on that decision. Many courts have long looked to its jurisprudence for guidance in deciding novel or complex securities law issues. This article tracks the Second Circuit’s significant role in developing civil enforcement mechanisms for federal securities laws and making criminal prosecution …

Shining The Light A Little Brighter: Should Item 303 Serve As A Basis For Liability Under Rule 10b-5?, Lauren M. Mastronardi

Fordham Law Review

This Note discusses a securities disclosure issue stemming from a split between the Second Circuit and the Ninth Circuit. The question presented is whether failure to comply with a disclosure requirement created by Item 303 of Regulation S-K can provide a basis for liability under section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The Ninth Circuit held that such violation does not provide a basis for liability. Conversely, in Stratte-McClure v. Morgan Stanley, the Second Circuit explicitly disagreed with the Ninth Circuit and concluded that this violation may serve as a basis for liability. This …

Keeping Shareholder Activism Alive: A Comparative Approach To Outlawing Dead Hand Proxy Puts In Delaware, Danielle A. Rapaccioli

Fordham Law Review

Current trends in shareholder activism have brought to light the competing interests of management and stockholders. With a rise in shareholder activism, firms are continuing to include change in control provisions, known as proxy puts, in their debt agreements to counter activist success. Recent litigation regarding the use of these provisions has created a debate as to whether these provisions are valid under Delaware law. Moreover, companies and lending institutions have morphed these provisions into a more restrictive form, known as “dead hand proxy puts.” The controversy analyzed in this Note arises out of the use of dead hand proxy …

The Conscious Parallelism Of Wolf Packs: Applying The Antitrust Conspiracy Framework To Section 13(D) Activist Group Formation, William R. Tevlin

Fordham Law Review

Section 13(d) of the Williams Act requires all persons and groups that acquire 5 percent or more of an issuer’s outstanding stock to disclose their holdings to the Securities and Exchange Commission. Whether a group is formed under section 13(d) often is unclear. The legal precedent is ambiguous; courts give more weight to certain forms of circumstantial evidence than others without explaining why. With the substantial increase of hedge fund activism—in particular, the wolf pack tactic—further clarity or uniformity is necessary. A “wolf pack” is a loose association of hedge funds that employs parallel activist strategies toward a target corporation …

Helping Yourself While Serving Two Masters: Do Specialists Violate Rule 10b-5 When They Interposition?, Roman Asudulayev

Fordham Urban Law Journal

The decision of the Second Circuit in United States v. Finnerty (Finnerty III) was the culmination of a number of District Court decisions that found that specialists on the New York Stock Exchange (NYSE) could not be held liable for fraud under Rule 10b-5 for interpositioning, whereby they put themselves between buy and sell limit orders, in violation of NYSE rules, and profited on the spread. Finnerty III and its District Court sibling decisions were wrongly decided. Specialists presented a uniquely thorny issue of agency law to the Federal Courts in New York. This issue was under-analyzed by the Federal …

Victimization On Main Street: Occupy Wall Street And The Mortgage Fraud Crisis, Sandra D. Jordan

Fordham Urban Law Journal

No abstract provided.

Filling The Regulatory Void In The Fx Spot Market: How Traders Rigged The Biggest Market In The World, Colleen Powers

Fordham Urban Law Journal

No abstract provided.

The Fifteenth Annual Albert A. Destefano Lecture On Corporate, Securities, & Financial Law At The Fordham Corporate Law Center, Frederick H. Alexander, Chris Cernich, Mark Lebovitch, Norman M. Monhait, Andrew J. Pincus

Fordham Journal of Corporate & Financial Law

No abstract provided.

Disruptive Technology And Securities Regulation, Chris Brummer

Fordham Law Review

    Nowhere has disruptive technology had a more profound impact than in financial services—and yet nowhere do academics and policymakers lack a coherent theory of the phenomenon more, much less a coherent set of regulatory prescriptions. Part of the challenge lies in the varied channels through which innovation upends market practices. Problems also lurk in the popular assumption that securities regulation operates against the backdrop of stable market gatekeepers like exchanges, broker-dealers, and clearing systems—a fact scenario increasingly out of sync in twenty-first-century capital markets.

    This Article explains how technological innovation “disrupts” not only capital markets but also the exercise of …

Behind Enemy Phone Lines: Insider Trading, Parallel Enforcement, And Sharing The Fruits Of Wiretaps, Alexandra N. Mogul

Fordham Law Review

    Two key trends were present in the successful prosecution of Raj Rajaratnam and his coconspirators in one of the largest insider-trading conspiracies in history: the use of wiretaps to investigate and prosecute insider trading and a joint effort between the Department of Justice (DOJ) and the Securities & Exchange Commission (SEC) to conduct the investigation. Despite the close working relationship between the DOJ and the SEC, the DOJ never disclosed the fruits of the wiretaps to the SEC, presumably due to its belief that Title III of the Omnibus Crime Control and Safe Streets Act of 1968 (as amended, the …

The Sum Of Its Parts: The Lawyer-Client Relationship In Initial Public Offerings, Jeremy R. Mcclane

Fordham Law Review

    This Article examines the impact of the quality of a lawyer's working relationship with his or her client on one of the most important types of capital markets deal in a company's existence: its initial public offering (IPO). Drawing on data from interviews with equity capital markets lawyers at major law firms, and analyzing data from IPOs in the United States registered with the Securities and Exchange Commission between June 1996 and December 2010, this study finds a strong association between several measures of IPO performance and the familiarity between the lead underwriter and its counsel, as measured by the …

Correcting Corporate Benefit: How To Fix Shareholder Litigation By Shifting The Doctrine On Fees, Sean J. Griffith

Faculty Scholarship

The current controversy in corporate law concerns whether firms can discourage litigation by shifting its cost to shareholders. But corporate law courts have long engaged in fee-shifting—from shareholder plaintiffs to the corporation—under the “corporate benefit” doctrine. This Article examines fee-shifting in share-holder litigation, arguing that current practices are unsound from the perspective of both doctrine and public policy. Unfortunately, the fee-shifting bylaws recently enacted in response to the problem of excessive shareholder litigation fare no better. The Article therefore offers a different approach to fee-shifting, articulating three specific reforms of the corporate benefit doctrine to quell the current crisis in …

Lift Not The Painted Veil! To Whom Are Directors’ Duties Really Owed?, Martin Gelter, Geneviève Helleringer

Faculty Scholarship

In this article, we identify a fundamental contradiction in the law of fiduciary duty of corporate directors across jurisdictions, namely the tension between the uniformity of directors’ duties and the heterogeneity of directors themselves. American scholars tend to think of the board as a group of individuals elected by shareholders, even though it is widely acknowledged (and criticized) that the board is often a largely self-perpetuating body whose inside members dominate the selection of their future colleagues and eventual successors. However, this characterization is far from universally true internationally, and it tends to be increasingly less true even in the …

Confronting The Peppercorn Settlement In Merger Litigation: An Empirical Analysis And A Proposal For Reform, Jill E. Fisch, Sean J. Griffith, Steven D. Solomon

Faculty Scholarship

Shareholder litigation challenging corporate mergers is ubiquitous, with the likelihood of a shareholder suit exceeding 90%. The value of this litigation, however, is questionable. The vast majority of merger cases settle for nothing more than supplemental disclosures in the merger proxy statement. The attorneys that bring these lawsuits are compensated for their efforts with a court-awarded fee. This leads critics to charge that merger litigation benefits only the lawyers who bring the claims, not the shareholders they represent. In response, defenders of merger litigation argue that the lawsuits serve a useful oversight function and that the improved disclosures that result …

The Sec Adds A New Weapon: How Does The New Admission Requirement Change The Landscape?, Paul Radvany

Faculty Scholarship

Over the past several years, the Securities and Exchange Commission (the “SEC”) has settled the vast majority of the cases it has brought. Some people have suggested, however, that settlements by public agencies such as the SEC should be scrutinized more closely. For instance, in a series of recent opinions, Judge Jed S. Rakoff of the Southern District of New York has “question[ed] the wisdom” of the SEC’s well-established practice of permitting defendants to enter into consent judgments while neither admitting nor denying the allegations. During the past two years, the SEC has implemented new policies that have altered its …

Whose Trojan Horse? The Dynamics Of Resistance Against Ifrs, Martin Gelter, Zehra Kavame Eroglu

Faculty Scholarship

The introduction of International Financial Reporting Standards (“IFRS”) has been debated in the United States since at least the accounting scandals of the early 2000s. While publicly traded firms around the world are increasingly switching to IFRS, often because they are required to do so by law or by their stock exchange, the Securities Exchange Com-mission (“SEC”) seems to have become more reticent in recent years. Only foreign issuers have been permitted to use IFRS in the United States since 2007. By contrast, the EU has mandated the use of IFRS in the consolidated financial statements of publicly traded firms …

Substituted Compliance And Systemic Risk: How To Make A Global Market In Derivatives Regulation, Sean J. Griffith

Faculty Scholarship

The conventional wisdom is that the global financial crisis of 2007-2008 revealed faults in the ability of international financial regulation to contain the problem of systemic risk. Further conventional wisdom suggests that the failure to regulate comple

Taking Section 10(B) Seriously: Criminal Enforcement Of Sec Rules, Steve Thel

Faculty Scholarship

The Supreme Court has determined the scope of federal securities laws in a series of cases in which it has read section 10(b) of the Securities Exchange Act as either prohibiting certain misconduct or authorizing the SEC to regulate that conduct and only that conduct. Judging by the language, structure and history of the Exchange Act, the Court’s reading is wrong. Section 10(b) does not prohibit anything, and it neither grants the SEC rulemaking power nor limits the rulemaking power granted to the SEC elsewhere in the Exchange Act. Instead, section 10(b) simply triggers criminal sanctions for certain rule violations. …

Nationalization And Necessity: Takings And A Doctrine Of Economic Emergency, Nestor M. Davidson

Faculty Scholarship

Serious economic crises have recurred with regularity throughout our history. So too have government takeovers of failing private companies in response, and the downturn of the last decade was no exception. At the height of the crisis, the federal government nationalized several of the country’s largest private enterprises. Recently, shareholders in these firms have sued the federal government, arguing that the takeovers constituted a taking of their property without just compensation in violation of the Fifth Amendment. This Essay argues that for the owners of companies whose failure would raise acute economic spillovers, nationalization without the obligation to pay just …

An Altered Derivatives Marketplace: Clearing Swaps Under Dodd-Frank, Eduard H. Cadmus

Fordham Journal of Corporate & Financial Law

Though over a year has passed, the impact of the Dodd Frank Act remains unclear. This Note examines the provisions of the Act that relate to swap transactions within the context of pre-reform and postreform markets. In order to reduce the uncertainties inherent in unregulated swap transactions, the Act employs a comprehensive framework, which includes mandatory clearing through derivative clearing organizations, extensive reporting requirements, margin requirements, and position limits. This Note argues that, in doing so, the Dodd Frank Act addresses the fundamental failures of pre-reform derivative markets. However, the importance of the role for derivative clearing organizations under this …

Creatively Financed Legal Education In A Marketized Environment: How Faculty Leveraged Buyouts Can Maximize Law Schools’ Stakeholder Values, David Groshoff

Fordham Journal of Corporate & Financial Law

“This [financial aid] money is not necessarily going to educate more students or to improve education. It’s a scholarship ultimately going into profits.”1

The End Of The Internal Compliance World As We Know It, Or An Enhancement Of The Effectiveness Of Securities Law Enforcement? Bounty Hunting Under The Dodd-Frank Act's Whistleblower Provision, Justin Blount, Spencer Markel

Fordham Journal of Corporate & Financial Law

In the wake of Bernard Madoff’s $65 billion Ponzi scheme and the recent economic crisis stemming largely from loosely regulated subprime lending and mortgage-backed securities, President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act on July 21, 2010, signaling loudly and clearly that change is coming to Wall Street. But Wall Street is not the only one receiving a message. Buried deep within the 2,319 pages of the Dodd-Frank Act, companies can find Section 922, the whistleblower provision, which provides a bounty for whistleblowers who report securities violations to the Securities and Exchange Commission.These bounty provisions and …

The New Section 1202 Tax-Free Business Sale: Congress Rewards Small Businesses That Survived The Great Recession, Beckett G. Cantley

Fordham Journal of Corporate & Financial Law

On September 27, 2010, President Barack Obama signed the Creating Small Business Jobs Act of 2010 (“SBJA”) that contains a temporary amendment to Internal Revenue Code (“IRC”) § 1202. The amendment permits original shareholders of eligible corporation stock to sell the stock without being taxed on the sale. The temporary amendment initially only applied to certain stock acquired after the enactment of the SBJA and before January 1, 2011, but the amendment was extended on December 17, 2010 for another year ending January 1, 2012. With the impending sunset of the 15% capital gains rate at the end of 2012, …

Lessons From The Flash Crash For The Regulation Of High-Frequency Traders, Edgar Ortega Barrales

Fordham Journal of Corporate & Financial Law

Are equity markets vulnerable to a sudden collapse if the traders who account for about half of the volume have no regulatory obligations to stabilize prices? After the “Flash Crash” of May 6, 2010, policymakers have resoundingly answered this question in the affirmative. During the worst of the crash, some of the so-called high-frequency trading firms that dominate equity markets stopped trading and prices collapsed, momentarily wiping out almost $1 trillion in market value. In response, the U.S. Securities and Exchange Commission is considering whether high-frequency trading firms should be required to act as the traders of last resort. This …

Burning Down The House Or Simply Rolling The Dice: A Comment On Section 621 Of The Dodd-Frank Act And Recommendation For Its Implementation, Joshua R. Rosenthal

Fordham Journal of Corporate & Financial Law

Section 621 of the Dodd-Frank Wall Street Reform and Consumer Protection Act modifies the Securities Act of 1933 to prohibit the underwriter, placement agent, initial purchaser, or sponsor, or any affiliate or subsidiary of any such entity of an asset-backed financial product from betting against that very product for one year after the product’s initial sale. The rule prohibits anyone who structures or sells an asset-backed security or a product composed of asset-backed securities from going short, in the specified timeframe, on what they have sold, and labels such transactions as presenting material conflicts of interest. This Comment discusses traces …