Securities Law Commons^™

The Cost Of Securities Fraud, Urska Velikonja

William & Mary Law Review

Under the dominant account, fraudulent financial reporting by public firms harms the firms' shareholders and, more generally, capital markets. This Article contends that the account is incomplete. In addition to undermining investor confidence, misreporting distorts economic decision making by all firms, both those committing fraud and those not. False information impairs risk assessment by those who provide human or financial capital to fraudulent firms, the firms' suppliers and customers, and thus misdirects capital and labor to subpar projects. Efforts to hide fraud and avoid detection further distort fraudulent firms' business decisions, as well as decisions by their rivals, who mimic …

Scaling Chinese Walls: Insights From Aftra V. Jpmorgan Chase, Jeffrey Bingham

William & Mary Business Law Review

The material non-public information financial services firms receive from clients utilizing commercial banking services may often prove beneficial to the firm’s trust account clients if the information is used in making investment decisions for these trust accounts. Consequently, financial services firms confront two equally dubious options: to utilize the information to benefit the trust account client and break insider trading laws, or to disregard the information and seemingly violate the firm’s fiduciary duty to the trust account client. To successfully defend against either of the above claims, firms should establish and maintain effective Chinese Walls between private and public side …

Beyond Morrison: The Effect Of The "Presumption Against Extraterritoriality" And The Transactional Test On Foreign Tender Offers, Vladislava Soshkina

William & Mary Law Review

No abstract provided.

Allocating Loss In Securities Fraud: Time To Adopt A Uniform Rule For The Special Case Of Ponzi Schemes, Grant Christensen

William & Mary Business Law Review

The global financial crisis precipitated a condensing of capital and a fall in global equities markets that not only resulted in the necessity of government bailouts of the financial industry, but also exposed a number of Ponzi schemes that collectively will cost investors tens of billions of dollars. With a new wave of litigation by innocent investors against Ponzi scheme operators just beginning, and likely to take years to finish, it becomes important to clearly identify the methodologies used to value the loss and allocate existing assets among the remaining creditors. To that end, this Article argues that courts ought …

Insider Trading, Informed Trading, And Market Making: Liquidity Of Securities Markets In The Zero-Sum Game, Stanislav Dolgopolov

William & Mary Business Law Review

This Article reexamines the nexus of relationships among informed transactions, information asymmetry, and liquidity of securities markets in the context of public policy debates about insider trading and its regulation.The Article analyzes this nexus, with the emphasis on recent empirical studies and developments in the securities industry, from a variety of perspectives and considers the validity of the alleged link between insider trading—as opposed to other forms of informed trading—and market liquidity as a justification for the existence of regulation.

Arbitration As Contract: The Need For A Fully Developed And Comprehensive Set Of Statutory Default Legal Rules, Jack M. Graves

William & Mary Business Law Review

This Article analyzes the United States Federal Arbitration Act, as a statutory framework for effective arbitration of contract disputes. While arbitration under this Act has been subject to ever increasing criticism and calls for reform on a variety of fronts—most often from the perspective of consumer or employment arbitration—this Article focuses specifically on commercial, business-to-business arbitration and critically evaluates the Act as a set of default legal rules governing arbitration as a unique contractual business relationship.

The Article first looks at arbitration from a contractual default rules perspective and then employs this perspective to analyze: (1) the existing federal statutory …

Toward A Just Measure Of Repose: The Statute Of Limitations For Securities Fraud, Michael J. Kaufman, John M. Wunderlich

William & Mary Law Review

Statutes of limitations, a long-standing bulwark of civil litigation, mitigate the risk that evidence of meritorious claims will become stale and relieve defendants who might be exposed to claims from unending uncertainty about whether claims will be brought. But these twin rationales are balanced against allowing plaintiffs sufficient time to discover and file meritorious claims. This balance is manifest in the judicial and congressional effort to fashion a statute of limitations for securities fraud claims. The Supreme Court in Merck & Co. v. Reynolds recently attempted to strike that balance in its interpretation of the statute of limitations for securities …

Mismatch: The Misuse Of Market Efficiency In Market Manipulation Class Actions, Charles R. Korsmo

William & Mary Law Review

Plaintiffs commonly bring two distinct types of claims under section 10(b) of the Securities Exchange Act of 1934: (1) claims of material misrepresentations or omissions, and (2) claims of tradebased market manipulation. Despite the distinctive features of the two types of claims, courts have tended to treat them identically when applying the “fraud on the market” doctrine. In particular, courts have required both types of plaintiffs to make identical showings that the relevant security was traded in an “efficient market” in order to gain a presumption of reliance. The reasons for requiring such a showing by plaintiffs in a misrepresentation …

Investors And Employees As Relief Defendants In Investment Fraud Receiverships: Promoting Efficiency By Following The Plain Meaning Of "Legitimate Claim Or Ownership Interest", Jared A. Wilkerson

W&M Law Student Publications

Relief defendants are nominal, innocent parties who hold funds traceable to the receivership but have no legitimate claim or ownership interest in them. These nominal parties, as opposed to full or primary defendants, have no cause of action asserted against them, and if they show no legitimate claim to the funds traced to the receivership, the funds are disgorged — generally at summary judgment. This seemingly simple relief defendant tool is used by receivers and regulatory agencies to quickly recover receivership funds for ultimate distribution to creditors. Recently, however, conflict has arisen in federal courts concerning the meaning of “legitimate …

The Howey Test Turns 64: Are The Courts Grading This Test On A Curve?, Miriam R. Albert

William & Mary Business Law Review

Sixty-four years ago, the Supreme Court decided SEC v. W.J. Howey, crafting a definition for one form of security, known as an investment contract. The Supreme Court’s definition of investment contract in Howey is flexible, consistent with the Congressional approach to defining the broader concept of what constitutes a security. This choice of adopting a flexible definition for investment contract is not without cost, and raises the specter of inconsistent interpretation and/or application by the lower courts that threatens to undermine the utility of the Howey test itself as a trigger for investor protection. The intentional breadth and adaptability of …

The Securities And Exchange Commission's 2010 Proxy Access Proposals: A Poison Pill For Corporate Health, Stephen W. Kiefer

William & Mary Business Law Review

The SEC has proposed proxy access rules in the wake of the recent financial crisis. With the stated purpose of removing impediments to the exercise of shareholder voice and increasing director accountability, the proposed rule changes are not without problems. The proposed rules enter a mix in which the corporate governance landscape, shaped by powerful role players, already presents troubling possibilities for activist shareholder abuse. This Article argues that adoption of the proposed rules could be the final piece to a puzzle in which shareholder power is achieved at the expense of long-term corporate health and shareholder value.

Does Sarbanes-Oxley Protect Whistleblowers? The Recent Experience Of Companies And Whistleblowing Workers Under Sox, Megan E. Mowrey, L. Stephen Cash, Thomas L. Dickens

William & Mary Business Law Review

The Sarbanes Oxley Act of 2002 (SOX) attempts to prevent fraud in the business activities of public companies. SOX includes regulations designed to protect whistleblowing employees that may be triggered if workers allege fraudulent activity by their employers, and, in response, their employers retaliate. This Essay discusses the strength of the whistleblowing protection provided by SOX, the conduct covered by the SOX whistleblower provisions, and specifically the application of the law by the courts

Betting The Farm: The Tic Turf War And Why Tics Constitute Investment Contracts Under Federal Securities Laws, David Rich

William & Mary Business Law Review

No abstract provided.

Evolutionary Enforcement At The Securities And Exchange Commission, Jayne W. Barnard

Faculty Publications

Hundreds of critics in the past eighteen months have heaped abuse on the SEC Enforcement Division. How could the Division have missed so much misbehavior on Wall Street? How could the Division's young lawyers have been charmed by Bernie Madoff and thwarted from discovering his terrible crimes? Most critics seem to agree that the Division's most urgent needs include developing substantially more financial sophistication among Division lawyers and investigators; better communications within the Commission and with other federal agencies; and a meaningful system for handling tips and processing information. The SEC's response to its critics has been remarkable. The Commission …

Corporate Governance In The Courtroom: An Empirical Analysis, Jessica Erickson

William & Mary Law Review

Conventional wisdom is that shareholder derivative suits are dead. Yet this death knell is decidedly premature. The current conception of shareholder derivative suits is based on an empirical record limited to suits filed in Delaware or on behalf of Delaware corporations, leaving suits outside this sphere in the shadows of corporate law scholarship. This Article aims to fill this gap by presenting the first empirical examination of shareholder derivative suits in the federal courts. Using an original, hand-collected data set, my study reveals that shareholder derivative suits are far from dead. Shareholders file more shareholder derivative suits than securities class …

Removal Of Covered Class Actions Under Slusa: The Failure Of Plain Meaning And Legislative Intent As Interpretative Devices, And The Supreme Court's Decisive Solution, J. Tyler Butts

William & Mary Business Law Review

No abstract provided.

Female Investors And Securities Fraud: Is The Reasonable Investor A Woman?, Joan Macleod Heminway

William & Mary Journal of Race, Gender, and Social Justice

Let's face it. Women and men are different in more than just the biological sense. These differences play themselves out in a variety of contexts. Some of them are meaningful in theory or in reality; others are not.

Given an increase in women's involvement in business and finance, it is unsurprising that a multidisciplinary literature is emerging at the intersection of sex or gender differences and corporate governance. Much of the work in this area has centered on women and boards of directors and women in the executive ranks. However, it is important to focus on women not only as …

Deception, Decisions, And Investor Education, Jayne W. Barnard

Faculty Publications

Tens of millions of dollars each year are spent on investor education. Because older adults (those aged sixty and older) are disproportionately victims of investment fraud schemes, many educational programs are targeted at them. In this Article, Professor Barnard questions the effectiveness of these programs. Drawing on recent studies from marketing scholars, neurobiologists, social psychologists, and behavioral economists examining the ways in which older adults process information and make decisions, she offers a model of fraud victimization (the "deception/decision cycle") that explains why older adults are often vulnerable to investment fraud schemes. She then suggests that many of the factors …

Securities Fraud, Recidivism, And Deterrence, Jayne W. Barnard

Faculty Publications

Legal scholars have expended considerable energy on the study of high-level securities fraud violators-Ken Lay, Bernie Ebbers, Dennis Kozlowski, etc. There has been little attention, however, to the perpetrators of "retail" securities fraud-the con artists who sell bogus stock over the Internet, orchestrate elaborate pump-and-dump schemes, and create a never-ending array of purportedly "risk free" investment opportunities. Collectively, and in a cruel mockery of capitalism, these offenders extract hundreds of millions dollars from investors each year. In this article, Professor Barnard examines this group of offenders, focusing particularly on those who recidivate-often moving from state to state and scheme to …

Corporate Therapeutics At The Securities And Exchange Commission, Jayne W. Barnard

Faculty Publications

No abstract provided.

Securitizing Audit Failure Risk: An Alternative To Caps On Damages, Lawrence A. Cunningham

William & Mary Law Review

No abstract provided.

Creative Sanctions For Online Investment Fraud, Jayne W. Barnard

Faculty Publications

No abstract provided.

Fraud On The Market: Short Sellers' Reliance On Market Price Integrity, Douglas A. Smith

William & Mary Law Review

No abstract provided.

Rule 10b-5 And The "Unfitness" Question, Jayne W. Barnard

Faculty Publications

No abstract provided.

No Good Deed Goes Unpunished? Establishing A Self-Evaluating Privilege For Corporate Internal Investigations, Theodore R. Lotchin

William & Mary Law Review

No abstract provided.

Technological Evolution And The Devolution Of Corporate Financial Reporting, Donald C. Langevoort

William & Mary Law Review

No abstract provided.

Sec Debarment Of Officers And Directors After Sarbanes-Oxley, Jayne W. Barnard

Faculty Publications

No abstract provided.

An Economic Analysis Of The Private Securities Litigation Reform Act: Auctions As An Efficient Alternative To Judicial Intervention, Charles H. Gray

William & Mary Law Review

No abstract provided.

The Sec's Suspension And Bar Powers In Perspective, Jayne W. Barnard

Faculty Publications

Enron has brought about demands from many quarters to grant the Securities and Exchange Commission (SEC) new powers. Among the powers the SEC now seeks is the power to bar or suspend securities law violators from serving as an oflicer or director of any public company. Currently, the law assigns this power only to federal district courts. In this Essay, Professor Barnard traces the history of the current law; examining why Congress has expressly withheld suspension and bar powers from the SEC. She then argues that the courts have exercised their suspension and bar powers wisely, and that recent developments …

Sec Rule 14e-3 In The Wake Of United States V. O'Hagan: Proper Prophylactic Scope And The Future Of Warehousing, Jeff Lobb

William & Mary Law Review

No abstract provided.