Securities Law Commons^™

The Minority Report: When Should Publicly Traded Corporations Be Required To Disclose Material Information To Its Shareholders Under Item 303?, Alicia Mayo

St. John's Law Review

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Due to the social distancing mandate during the COVID-19 pandemic, the demand for cloud-based platforms conducting virtual meetings grew drastically. ON24, a cloud-based digital platform that provides interactive webinars, virtual events, and multimedia content experiences, was one of the companies that experienced “explosive growth.” ON24’s customers increased from 760 customers to 1,900 from December 31, 2015 to September 30, 2020, and its revenue increased by fifty-nine percent from the previous year. ON24’s annual recurring revenue is driven by the company’s ability to acquire new customers while maintaining and expanding its existing client relationships. On February 3, 2021, ON24 commenced …

Cross-Talk, The Honorable Raymond J. Lohier, John Q. Barrett, Noa Ben-Asher, Margaret E. Mcguinness, Mark L. Movsesian, Michael A. Perino

St. John's Law Review

(Excerpt)

You know what is interesting? This has been on my mind for a long time as my law clerk, Colin, knows. What you have all described in different ways, maybe with the exception of the religious rights case, but I will get to that, is a Supreme Court that either is, or perceives itself to be, unchecked by Congress and at times unchecked by the President, largely for reasons that we can discuss.

Private Securities Enforcement And The Roberts Court, Michael A. Perino

St. John's Law Review

(Excerpt)

Thank you, Judge Lohier, thank you Professor Subotnik, and thank you to everyone who put this scholarship symposium together. I am acutely aware that I am the last panelist, on the last panel, on Friday afternoon, and so, I am going to try my best to keep my comments to the allotted ten minutes.

It is important to keep two key points in mind if we are going to talk about the Roberts Court’s approach to private securities enforcement. First, the Roberts Court contains no securities experts. In fact, except for Lewis F. Powell Jr. and William O. Douglas, …

Policy Work In Securities Arbitration, Christine Lazaro

Journal of Civil Rights and Economic Development

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I have been a securities lawyer my entire professional career. I began my career representing financial services firms being sued by investors and investigated by the regulators. We handled their defense in a variety of forums, including Court, the Securities and Exchange Commission (SEC), and the Financial Industry Regulatory Authority (FINRA). FINRA is the primary self-regulatory organization tasked with regulating brokerage firms under the Securities Exchange Act of 1934.

From private practice, I joined St. John’s Law School, initially as a supervising attorney with the Securities Arbitration Clinic, and later as a Professor of Clinical Legal Education. Joining the …

The Collection Problem: How The Circuit Split On Pleading Standards In Securities Fraud Claims Undermines Federal Regulatory Goals, Lucas Immer

St. John's Law Review

(Excerpt)

The Great Depression is generally recognized as the greatest economic calamity in United States history. One of the Great Depression’s many causes was reckless financial speculation driven in part by financial fraud. In response to the crisis, Congress passed the 1934 Securities Exchange Act (“the Exchange Act”), which courts have long held creates a private right of action for plaintiffs who experience an economic loss due to reliance on a material misstatement surrounding the purchase or sale of a security. A prima facie claim for securities fraud under the Exchange Act requires a showing of scienter, defined as “a …

Regulatory Personhood: The Elixir For Redundancy Between The Sec And The Pcaob, Sarah J. Williams

St. John's Law Review

(Excerpt)

This Article analyzes enforcement activity against public company auditors during the agencies’ coexistence for the purpose of unmasking the alleged villainous duplication, budgetary waste, and agency in-fighting that was purportedly created by Congress when it endowed the PCAOB with enforcement powers already existing in the SEC’s arsenal. The Article examines enforcement cases brought by the SEC and the PCAOB against accounting firms and accountants associated with such firms that relate to poor performance in conducting public company audits during the period in which both agencies were in existence. Such research bears upon the effectiveness of the current system of …

Securities Arbitration Case Law Update 2024–2025 (July 2025), Elissa Germaine, Anthony Rivera

Faculty Publications

(Excerpt)

This article summarizes recent cases regarding the constitutionality of FINRA and leading arbitration cases that are of particular relevance to securities arbitration practitioners.

Spacs, Forward-Looking Statements, And Rule 419: Is Sec Rulemaking Needed?, Nicholas Vota

St. John's Law Review

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On October 8, 2020, FirstMark Horizon Acquisition Corp. (“FirstMark” or “Company”) closed an initial public offering (“IPO”) of 41,400,000 units. Each unit was priced at $10.00 and “consist[ed] of one share of Class A common stock of the Company . . . and one-third of one redeemable warrant of the Company.” Each whole warrant provided its holder with the right to purchase “one share of Class A [c]ommon [s]tock for $11.50 per share.” FirstMark generated $414,000,000 in connection with the IPO. These funds were then placed in a trust account and maintained by a trustee.

In a filing submitted …

The Exit Theory Of Judicial Appraisal, William J. Carney, Keith Sharfman

Faculty Publications

For many years, we and other commentators have observed the problem with allowing judges wide discretion to fashion appraisal awards to dissenting shareholders based on widely divergent, expert valuation evidence submitted by the litigating parties. The results of this discretionary approach to valuation have been to make appraisal litigation less predictable and therefore more costly and likely. While this has been beneficial to professionals who profit from corporate valuation litigation, it has been harmful to shareholders, making deals costlier and less likely to be completed.

In this Article, we propose to end the problem of discretionary judicial valuation by tracing …

Ethical Considerations For Advocates And Neutrals Regarding The Use Of Al In The Finra Arbitration Forum (July 2023), Brent A. Burns, Elissa Germaine, Lisa Roth, Peter J. Tepley

Faculty Publications

(Excerpt)

News abounds about the impacts of AI on our personal lives and work-places. The legal profession and the securities industry are no exception. This article begins to explore the use of open source generative AI in legal advocacy and the securities industry, and the related ethical implications for advocates and neutrals in the FINRA Dispute Resolution Services forum.

The Ethics Of Artificial Intelligence In Legal Advocacy, Elissa Germaine

Faculty Publications

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The use of AI in our personal and professional lives has entered the public consciousness over the past several months. The legal profession and the securities industry are no exception. This article begins to explore the use of open source generative AI in legal advocacy, and the related ethical implications for securities arbitration practitioners.

Studies have corroborated the impact of AI on the legal profession that many of us have been seeing in practice or hearing and reading about. A Goldman Sachs study predicted that the legal profession will be one of the most likely areas to be impacted …

Theorizing Responsibility In The Investor State Dispute Resolution System, Kristen Boon

St. John's Law Review

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The Investor-State Dispute System (“ISDS”) permits investors to sue states when their investments are injured. The system was designed to protect investors and impose responsibilities on states; it is uncontroversial to say that the ISDS system is one-sided. But a chorus of voices is now asking: should investors have responsibilities too? The narrative is one of injustice, driven by the perception that states have signed on to a system that has left them with large financial exposure to investors. This viewpoint has been reinforced, in the eyes of some, by the influence of big business, and by state losses …

Arbitration Case Law Updates 2021–2022 (June 2022), Sandra D. Grannum, Elissa Germaine

Faculty Publications

(Excerpt)

This article summarizes leading arbitration cases and related issues that are of particular relevance to the securities arbitration practitioner. There appears to be a move away from compelling arbitration and federal jurisdiction of motions to confirm or vacate. The courts have decided several cases specifically involving FINRA arbitrations, discussing who can bring them and what courts have jurisdiction over them.

In addition, the Federal Arbitration Act was amended by the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021, the title of which speaks for itself.

The Obligations And Regulatory Challenges Of Online Broker-Dealers And Trading Platforms, Christine Lazaro, Teresa J. Verges

Faculty Publications

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Investing has been evolving for decades. On “Mayday” in 1975, the SEC abolished fixed commissions, changing the face of the brokerage industry. A few months later, Charles Schwab opened its first offices, and discount brokerages were born. By the mid-1980s, there were over 600 discount brokers operating. By 1990, discount brokerage firms captured just under than 10% of the market, although Charles Schwab captured 40% of the discount brokerage market. Throughout the 1990s, new firms entered the market, including E*Trade and AmeriTrade. Online trading became more prevalent; by 1999 25% of all trades occurred online. The term “day trader” …

Pleading And Advocating A Negligence Claim Through The Regulation Best Interest Lens, Christine Lazaro, Michael S. Edmiston

Faculty Publications

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On June 5, 2019, the SEC adopted the Regulation Best Interest Rule Package, consisting of (i) Regulation Best Interest: The Broker-Dealer Standard of Conduct (“Reg. BI”); (ii) Form CRS Relationship Summary and Amendments to Form ADV;(iii) the SEC Interpretation Regarding Standard of Conduct for Investment Advisers; and (iv) the SEC Interpretation Regarding the “Solely Incidental” Prong of the Broker-Dealer Exclusion from the Definition of Investment Adviser. Brokers were obligated to begin compliance with Reg. BI as of June 30, 2020.

Reg. BI contains four component sections mandating duties for brokers and firms: Disclosure, Care, Conflicts of Interest, and Compliance. …

Arbitrating Security Class Actions: The Limits Of Forum Selection Bylaws, Paul Schochet

St. John's Law Review

No abstract provided.

Staying True To Nsmia: A Roadmap For Successful State Fiduciary Rules After Reg Bi, Maria E. Vaz Ferreira

St. John's Law Review

(Excerpt)

As Americans, there is hardly anything we value more than freedom. Being “free to choose” is the core guarantee through which we pursue our livelihood and succeed at happiness. The more choices, the better. But what if we we are supposed to choose blindly? In our postindustrial society, we often feel overwhelmed by the myriad choices we must make simply to get through our daily lives. To inform our choices, we rely on assumptions. More importantly, we rely on each other.

Reliance is central in the world of financial investments. Financial products are increasingly complex, and investors need specialized …

An Overview Of Brokercheck And The Central Registration Depository, Christine Lazaro, Albert Copeland

Faculty Publications

(Excerpt)

Securities brokers are governed by a unique regulatory framework, subject to both extensive state and federal statutory and regulatory regimes. The vast bulk of federal regulation and oversight of brokers and brokerage firms has been delegated to the Financial Industry Regulatory Authority (“FINRA”), a self-regulatory organization with the power to govern its members’ conduct. FINRA operates under the oversight of the Securities and Exchange Commission (the “SEC”), a federal agency established by the federal securities laws.

FINRA was created on July 26, 2007 through the consolidation of the National Association of Securities Dealers (“NASD”) and the member regulation, enforcement …

Real Insider Trading, Michael A. Perino

Faculty Publications

In popular rhetoric, insider trading cases are about leveling the playing field between elite market participants and ordinary investors. Academic critiques vary. Some depict an untethered insider trading doctrine that enforcers use to expand their power and enhance their discretion. Others see enforcers beset with agency cost problems who bring predominantly simple, easily resolved cases to create the veneer of vigorous enforcement. The debate has, to this point, been based mostly on anecdote and conjecture rather than empirical evidence. This Article addresses that gap by collecting extensive data on 465 individual defendants in civil, criminal, and administrative actions to assess …

Arbitration Law Update: 2019–2020 (July 2020), Scott Eichorn, Elissa Germaine

Faculty Publications

(Excerpt)

This article summarizes leading arbitration cases during the last year that are of particular relevance to the securities arbitration practitioner, as well as cases on the horizon for the coming year. The decided cases focus on class arbitration, arbitrability, customer identification, discovery abuse, grounds to modify arbitration awards, enforceability of arbitration agreements, and challenges to Regulation Best Interest. The upcoming cases focus on class arbitration and arbitrability.

Sec V. Creditors: Why Sec Civil Enforcement Practice Demonstrates The Need For A Reprioritization Of Securities Fraud Claims In Bankruptcy, Sean Kelly

St. John's Law Review

(Excerpt)

This Note examines how this tension has motivated the SEC to use receiverships as a preferred vehicle to maximize recovery for defrauded security holders and, in the process, create what amounts to an SEC-run bankruptcy proceeding. The use of these receiverships has triggered a high-stakes race to the courthouse among the SEC and creditors, where mere hours can be the difference between millions in recovery and nothing at all. To end this costly race, this Note proposes a solution that seeks to harmonize securities fraud enforcement with bankruptcy law, which starts with revisiting Bankruptcy Code § 510(b) to reprioritize …

Crowdfunding Capital In The Age Of Blockchain-Based Tokens, Patricia H. Lee

St. John's Law Review

(Excerpt)

To illustrate the findings, this Article proceeds like so. Part I provides a brief history of the Reg. CF exemption law and the research findings about investment crowdfunding, generally, and digital tokens, more specifically. Next, Part II provides insights on the current state of offering blockchain-based digital tokens to unsophisticated investors and the silver linings in the data. Finally, Part III provides recommendations for a path forward in Reg. CF. First, the SEC should re-evaluate its regulatory policy in light of the proliferation of blockchain-based token offerings and gaps in funding portals, and provide additional warnings to unsophisticated investors …

Business Development Companies – The Basics, Christine Lazaro

Faculty Publications

(Excerpt)

Business Development Companies (“BDCs”) are a type of closed end fund. They were created by Congress in 1980, through amendments to the Investment Company Act of 1940 (the “1940 Act”).

BDCs were first created when a venture capital pool manager lobbied Congress to make it easier to invest in venture capital pools and private equity investments. While there was early interest in BDCs, their popularity waned through the 1990s. Since 2000, they have once again regained their popularity.

BDCs provide funding to small and mid-sized businesses. Following the financial crisis, BDCs were able to provide loans to businesses that …

An Overview Of The Regulation Best Interest Rule Package, Christine Lazaro

Faculty Publications

(Excerpt)

On June 5, 2019, the SEC adopted the Regulation Best Interest Rule Package. The package consists of Regulation Best Interest: The Broker-Dealer Standard of Conduct; Form CRS Relationship Summary and Amendments to Form ADV; Commission Interpretation Regarding Standard of Conduct for Investment Advisers; and Commission Interpretation Regarding the Solely Incidental Prong of the Broker-Dealer Exclusion from the Definition of Investment Adviser. This article will summarize each of the releases.

The Lost History Of Insider Trading, Michael A. Perino

Faculty Publications

Common conceptions about the history of insider trading norms in the United States are inaccurate and incomplete. In his landmark 1966 book Insider Trading and the Stock Market, Dean Henry Manne depicted a world in which insider trading was both widespread and universally accepted. It was SEC enforcement efforts in the early 1960s, he contended, that swayed public opinion to condemn what had previously been considered a natural and unobjectionable market feature. For five decades, the legal academy has largely accepted Manne’s historical description, and the vigorous debates over whether the federal government should prosecute insider trading have assumed, …

Arbitration Law Update: 2018-2019, Teresa J. Verges, Elissa Germaine

Faculty Publications

(Excerpt)

This article summarizes the leading federal and state arbitration cases during the last year that are of particular relevance to the securities arbitration practitioner. The Supreme Court decided three cases related to arbitration involving the “wholly groundless” exception, class arbitration, and arbitrability. Courts also addressed issues concerning arbitrability, vacating arbitration awards, a receiver action on behalf of defrauded investors, the limits of FINRA arbitration over member’s other business activities, and discovery in arbitration.

'Deriving' An Understanding Of The Extraterritorial Applicability Of The Commodity Exchange Act, Gabrielle Schwartz

St. John's Law Review

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This Note argues that courts should return to using a holistic approach, similar to the traditional “conducts” and “effects” test previously used by courts to analyze extraterritorial securities and commodities claims, to assess claims brought under the CEA. Furthermore, this Note argues that both the Commodity Futures Trading Commission and private individuals including foreign plaintiffs, should be permitted to bring these claims to uphold Congress’s intent in establishing a regulatory regime and maintaining the integrity of the international derivatives market. Part I discusses the history of derivative regulation and how both court decisions and statutory changes have created the …

Arbitration Law Update: 2017-2018, Teresa J. Verges, Elissa Germaine

Faculty Publications

(Excerpt)

This article summarizes the leading federal and state arbitration cases during the last year that are of particular relevance to the securities arbitration practitioner. In its sole arbitration decision during the 2017-18 term, the U.S. Supreme Court held in Epic Systems Corp. v. Lewis that employers could require their employees to waive their right to class actions and collective arbitration. Courts also addressed a host of novel issues, including whether investors can force a non-FINRA member and municipal bond indentured trustee to arbitrate before FINRA, the arbitrability of claims against a cryptocurrency exchange, and the applicability of a state's …

Financial Exploitation Of The Elderly: An Overview Of Regulatory Action, Christine Lazaro

Faculty Publications

(Excerpt)

Financial exploitation of the elderly is a significant problem, which is only getting worse over time. A study by MetLife estimated that seniors lost $2.9 billion as a result of financial abuse, recognizing that the number was likely low due to underreporting of abuse. Each year, the elder population increases as the baby boomer generation ages. By the year 2050, it is estimated that 83.7 million people will be aged 65 or older, double what it was in 2012.

The Regulation Of Digital Investment Advice, Christine Lazaro

Faculty Publications

Digital investment advice, or robo-advice, is a growing trend in the financial services industry. It is expected that by 2022, robo-advisers will manage over $4 trillion in assets. Robo-advice covers a wide range of services, however all involve advice derived from algorithms. This article will discuss what robo-advice is as well as how it is regulated by the SEC and FINRA.