Securities Law Commons^™

The Economics Of Corporation Law And Securities Regulation, Larry E. Ribstein, C. Paul Rogers

Vanderbilt Law Review

To evaluate this book as a teaching tool one must consider several questions. First, of what value is an economic analysis of law? Second, should one consider economics in a corporations or securities law course? Third, does this book offer a worthwhile approach to bringing economics into the corporate law curriculum? Last, how well has this approach been executed in the book? It may be a bit late to ponder the value of an economic analysis of the law. Economic legal theorists are both extending and deepening the thinking about economics' role in facilitating an understanding of law. This new …

Internal Revenue Service Summonses For "Sensitive"Accountants' Papers, Robert G. Nath

Vanderbilt Law Review

Every modern public corporation has obligations of accountability and disclosure to the public and to its shareholders. These accepted duties of disclosure, however, become the source of conflicts when government agencies make unanticipated inquiries of accountants about otherwise private or background data concerning the corporations they audit. This is particularly true when a public corporation's duties of financial accountability, which stem chiefly from securities law requirements and fiduciary duties,evoke the Internal Revenue Service's interest in information that may reveal or be probative of the corporation's tax liability. Most corporate taxpayers and their accountants understand and accept--if only reluctantly--their obligations to …

Fraud In Commodity Futures Trading--An Examination Of The Investor's Remedies, Lisa G. Demartini

Vanderbilt Law Review

This Note examines the various avenues of redress available to the defrauded commodity futures investor. Initially, an examination of two remedies expressly provided in the Commodity Exchange Act (CEA)--reparations and arbitration--demonstrates their current inefficiencies and inadequacies. Next, the Note considers the possibility of recovery under the antifraud provision of the Securities Exchange Act and argues that such a cause of action should still be available when the investor can show that the particular discretionary trading account is a security." Finally, a discussion of an implied private right of action for violations of the antifraud provision of the CEA reveals much …

Damages For Insider Trading In The Open Market: A New Limitation On Recovery Under Rule 10b-5, John B. Grenier

Vanderbilt Law Review

The Elkind court's adoption of a "disgorgement measure" of damages for insider trading on undisclosed misrepresented material information in the open market is basically sound. In allowing compensation to the extent practicable, the Second Circuit chose the best solution among the available alternatives. The decision's paramount problems arise in its shifted emphasis to deterrence; the court has neither provided plaintiffs with a sufficient incentive to sue nor created the level of deterrence that some cases might require. Future courts, however, can remedy this situation if they follow Elkind and also award punitive damages in cases in which plaintiffs' losses exceed …

Corporate Borrowing For Investment In Equity Securities: Tax Advantages Via The Interest Deduction And Dividends Received Deduction, Thomas D. Moore, Jr.

Vanderbilt Law Review

By borrowing money and purchasing preferred stocks with an average yield greater than 58% of the interest rate on the debt, a corporation at the maximum marginal tax rate can reduce its federal income tax liability. In evaluating the potential benefit of this practice, the corporation must consider transactions costs and its ability either to tie the debt to the equities or to have a sufficiently distant maturity on the debt to weather interest rate cycles that depress preferred stock prices. A small to medium-sized corporation probably is in a better position to obtain appropriate debt and to purchase enough …

Implied Private Remedies Under Federal Statutes: Neither A Death Knell Nor A Moratorium--Civil Rights, Securities Regulation, And Beyond, Thomas L. Hazen

Vanderbilt Law Review

The part of this Article that follows contains an examination of the implication process as it has developed in the federal courts.As will be seen, the Supreme Court has gone through a cyclical pattern of expansion and contraction in implying remedies with respect to a wide range of substantive areas. Accordingly, it is not possible to glean a single unified theory from the sixty-five years of Supreme Court activity. There are, however, a number of recurring themes, and it is possible to view all of the diverse approaches as part of a loosely defined pattern that was formulated into a …

Income And Gift Tax Treatment Of A Waiver Of Rights To Future, Undeclared Dividends By A Corporate Shareholder, Cornelia H. Boozman

Vanderbilt Law Review

This Note will attempt to set forth and analyze the present state of the law concerning dividend waivers.After determining that this law gives taxpayers few standards for determining the proper tax characterization of a dividend waiver, the Note concludes that analogous areas of tax law must be examined for guidance. Finally, the Note identifies and discusses several analogies that might be helpful to a taxpayer faced with a dividend waiver problem.

Estate Tax Deductibility Of Underwriters' Expenses After An Executor's Sale Of Stock: A Loophole In Section 2053, Mark D. Maloney

Vanderbilt Law Review

This Recent Development will examine the relationship between two Code provisions that are essential to the calculation of the taxable estate. Section 2031 establishes the value of the "gross estate," and section 2053 provides that certain administrative expenses are deductible from the gross estate. Recently, in Estate of Joslyn v. Commissioner and Estate of Jenner v. Commissioner,' two United States Courts of Appeals applied sections 2031 and 2053 in a manner that substantially benefits estates that possess large holdings of a particular stock. Because large blocks of stock are difficult to liquidate, the per-share price of the stock will actually …

Some Practical Questions Concerning The Effect Of The Proposed Federal Securities Code On Civil Litigation, J. Vernon Patrick, Jr.

Vanderbilt Law Review

A major impetus for the launching of the Federal Securities Code project in 1969 was the view, widely held by businessmen and their lawyers, that it was far too easy for investors to bring class action suits under the federal securities laws, seeking multi-million dollar judgments against business corporations, directors, accountants, and lawyers.' The business community's concern about possible exposure to large judgments in securities litigation was heightened by the news that plaintiffs had obtained a judgment in a class action brought against the issuer and several "outside director"defendants in Escott v. Bar Chris Construction Corp., and by several United …

The American Law Institute's Proposed Federal Securities Code, Editor In Chief

Vanderbilt Law Review

This issue of the Law Review represents Part Two of the symposium on the Proposed Federal Securities Code. This issue contains articles on federal-state relations under the Code; the impact of the Code on the Trust Indenture Act of 1939; the extraterritorial reach of the Code; and the effect of the Code on civil litigation. It is hoped that these articles will continue the fine work begun by Part One of the symposium, providing our readers with a thorough analysis of these additional sections of the Code and presenting recommendations for constructive changes to be considered in the final process …

Federal-State Relations Under The Federal Securities Code, Jeffrey B. Bartell

Vanderbilt Law Review

There is little in the recorded history of the American Law Institute's Federal Securities Code to indicate that a major rearrangement of regulatory responsibilities between the federal government and the states was a primary object. Milton Cohen's thoughtful article "Truth in Securities" Revisited,I probably the principal catalyst of the codification project, described a new world of securities regulation involving coordinated disclosure and continuous reporting, without any mention of federal-state relations or the blue sky laws. Indeed, when the American Bar Association's Committee on Federal Regulation of Securities first discussed the project in 1966, a suggestion that concurrent consideration be given …

The Extraterritorial Reach Of The Federal Securities Code: An Analysis Of Section 1905, John M. Liftin

Vanderbilt Law Review

Section 1905 of the proposed Federal Securities Code' sets forth the applicability of the Code to transnational securities transactions. The drafters could have stated in each provision of the Code whether and to what extent it was to apply extraterritorially. Instead, they placed in one section a set of general principles that cuts across all other sections of the Code and indicates which sections are to have extraterritorial application. The result is a descriptive guide that relies on a classification of transactions rather than a section-by-section enumeration...

This Article will not analyze the existing cases, except to the extent they …

Corporate Directors' Liability For Resisting A Tender Offer: Proposed Substantive And Procedural Modifications Of Existing State Fiduciary Standards, Oby T. Brewer, Iii

Vanderbilt Law Review

This Note will review recent decisions applying state law fiduciary standards and will propose procedural and substantive modifications to existing standards. The proposed modifications will compel target directors to recognize and fulfill fiduciary obligations when faced with a decision whether or not to resist a tender offer.

The Trust Indenture Act Of 1939 In The Proposed Federal Securities Code, Richard A. Stark

Vanderbilt Law Review

This Article will summarize briefly the significant provisions of the TIA as they currently are applied and will describe and comment upon Code Part XIII, Trust Indentures, as it appears in the 1978 Draft. ... The Code requirement that statutory and optional trust indenture provisions are to be interpreted, applied, and enforced as a matter of federal law will be statutory confirmation of the Morris case. The overall scheme for dealing with trust indentures, trustees,and the related offering statement represents a desirable simplification and updating of the TIA provisions. Significantly, the SEC's enforcement authority regarding trust indentures is expanded to …

Recent Decisions, Thomas L. Raleigh, Iii, Jay W. Mccann

Vanderbilt Journal of Transnational Law

Jurisdiction--Application of Doctrine of Forum Non Conveniens Justified when Defendant Consents to Jurisdiction of a Non-United States Forum

Thomas L. Raleigh, III

Securities Regulation--Extraterritorial Application of Antifraud Provisions--Allegation of Deception of Foreign Fundholders by Foreign Directors Insufficient to Invoke Jurisdiction of the Securities Laws

Jay W. McCann

The Foreign Corrupt Practices Act Of 1977: A Private Right Of Action?, Mary F. Lyle

Vanderbilt Journal of Transnational Law

The Foreign Corrupt Practices Act of 1977 (the Act) was passed as a consequence of revelations of foreign and domestic bribes, kickbacks, political payoffs and other questionable financial practices by corporations throughout the past several years. The Act requires issuers of securities subject to the registration and reporting provisions of the Securities Exchange Act of 1934 to comply with specific accounting standards. In addition, the Act provides for civil and criminal liability when an issuer or any domestic concern not an issuer uses the mails or any instrumentality of interstate commerce in furtherance of certain payments to foreign officials...

The …

Implied Private Right Of Action Under Section 17 Of The Securities Exchange Act Of 1934, Andrew Bor

Vanderbilt Law Review

The Securities Exchange Act of 1934 created the Securities and Exchange Commission (SEC) and vested it with broad regulatory and enforcement powers. While one of the purposes of the Act is to protect investors, the SEC has long recognized that it lacks the resources to fully accomplish that goal. Consequently, plaintiffs injured by actions in violation of the Act have sought remedies in the federal courts that have been willing to imply private rights of action under the securities laws. Recently, however, the Supreme Court has indicated that it will restrict the scope of remedies available to private litigants, thus …

Plaintiff's Standard Of Care After Hochfelder: Toward A Theory Of Causation, Robert P. Bryant

Vanderbilt Law Review

The extended debate by the Institute illustrates the logical and even emotional difficulty of dealing with the victim of an admittedly intentional deception who has acted foolishly in his own behalf and does not seem to deserve recovery. The crux of the controversy in the common law deceit cases mirrors that in the 10b-5 cases:should the victim have to investigate, and what might trigger an obligation to investigate? As this discussion demonstrates, tort principles provide some guidance. In deceit cases, the obligations placed on the plaintiff arise from the requirement that his reliance be justified. To the extent that his …

Recent Cases, Robert E. Banta, Oby T. Brewer, Iii, Cornelia A. Clark, I. Terry Currie, Douglas W. Ey, Jr.

Vanderbilt Law Review

Constitutional Law-First Amendment-School Authorities May Prohibit High School Student's Distribution of Sex Questionnaire to Prevent Possible Psychological Harm to Other Students Robert Edward Banta

Plaintiff, editor of a high school publication,' brought suit in federal court seeking an order compelling defendant school officials to allow the student publication to distribute a sex questionnaire,to students in the high school and to publish the results. Plaintiff claimed that defendants had not shown that the planned distribution would disrupt school activities and that, therefore, defendants'prohibition of the questionnaire violated 42 U.S.C. § 19831 and the first and fourteenth amendments. Pointing to potential psychological …

Recent Cases, James H. Lokey, Jr., Stephen D. Goodwin, Charles L. Jarik

Vanderbilt Law Review

Constitutional Law--Criminal Procedure-Circuits Split over Application of Stone v. Powell's "Opportunity for Full and Fair Litigation"

James H. Lokey, Jr.

In Stone v. Powell,' the third 1976 decision, the Supreme Court made a limited but distinct break with precedent. Stone held that a state prisoner may not be granted federal habeas relief on the ground that evidence obtained in an unconstitutional search and seizure was introduced at his trial as long as the state has provided an "opportunity for full and fair litigation" of his fourth amendment claim." The Court, as noted previously, did not define what kind of "opportunity" …

Exemptions Under The Proposed Federal Securities Code, James H. Cheek, Iii

Vanderbilt Law Review

The policy of full, accurate, and continuous disclosure to investors embodied in the Securities Act of 1933 (1933 Act)' and in the Securities Exchange Act of 1934 (1934 Act) continues unfettered* Lecturer in under the proposed Federal Securities Code (the Code), but the provisions effecting that policy are consolidated and simplified. Under the Code, a company must register itself (not its securities) with the Commission after the first year-end at which it has at least one million dollars in total assets and three hundred holders of its aggregate, nonexempted securities or when the Code first requires it to file an …

The Securities And Exchange Commission And The Code, Ray Garrett, Jr., William B. Weaver

Vanderbilt Law Review

Under the Federal Securities Code, the Commission's discretionary power will be restricted by the Code itself, by formal and informal congressional oversight, and by the Commission's traditionally judicious use of its powers. With these restraints, Congress should not be reluctant to grant to the Commission the new powers proposed in the Code. This article has concentrated on the balance between those new powers and the constraints on the Commission. It should be emphasized, as it certainly is elsewhere in this symposium, that the Code's changes of the Commission's responsibilities will enhance the Commission's ability to administer the securities laws fairly …

Public Utility Holding Company Act Of 1935 -- Fossil Or Foil?, Douglas W. Hawes

Vanderbilt Law Review

The 1935 Act, like the Investment Company Act of 1940, is concerned primarily with regulation and does not emphasize disclosure, as does the Securities Act of 1933. Under the 1935 Act, unless an exemption is available, all holding companies whose subsidiaries are engaged in the electric utility business or in the retail distribution of natural or manufactured gas must register. Once registered, a holding company becomes subject to two principal kinds of provisions under the Act. The geographical integration and corporate simplification process mandated by section 11 (and sections 6, 7, 9, and 10, which are designed to prevent new …

Preamble, Herbert Wechsler

Vanderbilt Law Review

As readers of the Review are undoubtedly aware, the American Law Institute was organized in 1923 as a permanent organization of lawyers, judges, and law teachers "to promote," as its charter recites, "the clarification and simplification of the law and its better adaptation to social needs." ...

Work on the Code began' in 1969 with Professor Loss as the Reporter, aided by consultants and advisers whose experience and expertise is equaled only by their high distinction in this field. Five tentative drafts have been printed in the years from 1972 to 1976 and a sixth, which now is off the …

Postregistration Provisions Of The Federal Securities Code, Alfred J. Law

Vanderbilt Law Review

The discussion of Part VI of the Federal Securities Code, dealing with postregistration provisions, falls naturally into three general areas: reporting requirements for registered companies, tender requests, and solicitation of proxies. This article will examine each category separately.

The Issuer Registration And Distribution Provisions Of The Proposed Federal Securities Code, Kenneth J. Bialkin

Vanderbilt Law Review

Section 403 of the Code provides that "[a] registration statement shall contain whatever information, financial statements, material contracts and other documents the Commission specifies by rule. This complete legislative delegation to the Commission, in Professor Loss's view, "seems perfectly safe in the year 1972. "One need not criticize the Commission's competence in the disclosure area, however, to suggest that after some 35 years of experience with the securities laws a statute prescribing the basic disclosure items (similar to the 1933 Act's Schedule A) should be possible, as well as appropriate and desirable. The wisdom of leaving the entire job to …

Introduction: The Federal Securities Code -- Its Purpose, Plan, And Progress, Louis Loss

Vanderbilt Law Review

The first generation of federal securities statutes, vintage 1933-40, has sprouted tentacles in so many areas of the American corpus juris that it is not easy to think of any field in which so much law-and lore-have been built on so flimsy a statutory base. The nineteen-page grandfather statute, the Securities Act of 1933, goes on, with a continually enhanced fertility that belies its years, to yield esoterica like the "140 series" of rules: professed "safe harbors" whose entrances are guarded by Cerberus atop Scylla and a bevy of Sirens cavorting in Charybdis. In the area of "fraud" that peripatetic …

Recent Cases, Sara P. Walsh, Don B. Cannada, Frances L. Adams, William T. Luedke, Iv

Vanderbilt Law Review

Civil Procedure - Appellate Jurisdiction - Orders Denying Disqualification of Counsel on Ethical Grounds Are Not Final Decisions Subject to Immediate Review Under 28 U.S.C. § 1291

Sara Porter Walsh

Petitioner,' an applicant for a Federal Communications Commission (FCC) broadcasting license, sought interlocutory review of a Commission order' denying a motion to disqualify the law firm that had represented competitor RKO for thirty years. Petitioner alleged that participation by the firm, which included an attorney who was chairman of the FCC while RKO's application was under consideration, constituted a violation of Canons Five and Nine' of the ABA Code of …

Recent Cases, Samuel E. Stumpf, Jr., M. Carolyn Barefield, Robert S. Reder, Stephen C. Morton, Randolph C. Coley

Vanderbilt Law Review

Noerr-Pennington Immunity for Joint Efforts to Influence Governmental Action - Intent to Cause Competitive Injury, Evidenced by Repeated, Baseless Opposition Before an Adjudicatory Body, Does Not Result in Loss of Noerr-Pennington Immunity Absent Specific Allegations of Conduct External to or Abusive of the Adjutory Processes

Samuel E. Stumpf, Jr.

Constitutional Law - First Amendment - Student's Right to Receive Information Precludes Board's Removal of Allegedly Offensive Books from High School Library

M. Carolyn Barefield

Constitutional Law-Search and Seizure - Federal Courts Are Bound by Federal Wiretapping Statutes and Will Not Exclude Evidence Seized by State Agents in Violation of More …

Fiduciaries And Fairness Under Rule 10b-5, Thomas J. Sherrard

Vanderbilt Law Review

In Marshel v. AFW Fabric Corp., decided on February 13,1976, the court unanimously sustained a challenge to long-form merger under New York law for the sole purpose of "going private,"concluding that despite full disclosure, the merger itself constituted a fraudulent scheme because it represented an attempt by the majority stockholders, in violation of their fiduciary obligations, to utilize corporate funds strictly for personal benefit and for no legitimate corporate purpose...

It is the purpose of this article to analyze the Green and Marshel decisions against the backdrop of previous cases in the area of fraudulent mismanagement, to gauge their impact …