Securities Law Commons^™

Taking Stock: Insider And Outsider Trading By Congress, Jeanne L. Schroeder

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Spring 2012 saw the enactment of the "Stop Trading on Congressional Knowledge Act of 2012" or "STOCK Act." It supposedly repealed an exemption from the federal securities laws that made insider trading by members of Congress "totally legal." As every securities lawyer knows, however, there never was such an exemption. Representatives and Senators have always been subject to the same rules as the rest of us. It is just that insider-trading law is so incoherent that legal scholars sharply disagreed as to when, or even if trading by government officials on the basis of material nonpublic information gleaned from their …

The Collision Between The First Amendment And Securities Fraud, Wendy Gerwick Couture

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This Article seeks to correct the imbalance that occurs when the First Amendment and securities fraud collide. Under current precedent, securities analysts, credit rating agencies, and financial journalists are subject to differing liability standards depending on whether they are sued for defamation or for securities fraud. Under New York Times Co. v. Sullivan, First Amendment protections apply in the defamation context in order to prevent the chilling of valuable speech, yet courts have declined to extend these protections to the securities fraud context. This imbalance threatens to chill valuable speech about public companies. To prevent the dangerous chilling effect of …

Around The World Of Securities Fraud In Eighty Motions To Dismiss, Wendy Gerwick Couture

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The Pslra Discovery Stay Meets Complex Litigation: Five Questions Answered, Wendy Gerwick Couture

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Securities Regulation Of Alternative Litigation Finance, Wendy Gerwick Couture

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Downstream Securities Regulation, Anita K. Krug

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Securities regulation wears two hats. Its “upstream” side governs firms in connection with their obtaining financing in the securities markets. That is, it *1590 regulates firms' and issuers' offers and sales of securities, whether in public offerings to retail investors or in private offerings to institutional investors. Its “downstream” side, by contrast, governs financial services providers, who assist with investors' activities in those markets. Their services include providing advice regarding securities investments, as investment advisers do; aggregating investors' assets for purposes of enabling those investors to invest their assets collectively, as mutual funds do; and acting as “middlemen” between buyers …

Crowdfunding's Impact On Start-Up Ip Strategy, Sean M. O'Connor

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This Paper proceeds in Part I by reviewing the crowdfunding landscape and its potential benefits for start-ups, especially with regard to IP strategies. Part II examines the provisions of the JOBS Act and argues that the disclosure requirements of the CROWDFUND Act title will make the latter less attractive than other start-up financing options and may negatively affect start-ups’ IP strategies, in part by risking the disclosure of enabling aspects of patentable inventions.

Part III explores issues arising from the widespread involvement of many potentially unsophisticated investors who have no connection to the start-up. This contrasts with current unsophisticated investors …

'Quack Corporate Governance' As Traditional Chinese Medicine – The Securities Regulation Cannibalization Of China's Corporate Law And A State Regulator's Battle Against Party State Political Economic Power, Nicholas C. Howson

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From the start of the People’s Republic of China’s (PRC) “corporatization ” project in the late 1980s, a Chinese corporate governance regime subject to increasingly enabling legal norms has been determined by mandatory regulations imposed by the PRC securities regulator, the China Securities Regulatory Commission (CSRC). Indeed, the Chinese corporate law system has been cannibalized by all - encompassing securities regulation directed at corporate governance, at least for companies with listed stock. This Article traces the path of that sustained intervention and makes a case — wholly contrary to the “quack corporate governance” critique much aired in the United States …

Shareholder Vs. Investor Primacy In Federal Corporate Governance, George S. Georgiev

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Opening The Floodgates Of Small Customer Claims In Finra Arbitration: Finra V. Charles Schwab & Co., Inc., Teresa J. Verges

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Criminal Securities Fraud And The Lower Materiality Standard, Wendy Gerwick Couture

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Opinions Actionable As Securities Fraud, Wendy Gerwick Couture

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This Article proposes a new analytical framework to apply to statements of opinion in securities fraud cases. Although statements of opinion form the basis of some of the most cutting edge securities fraud claims-such as those asserted against securities analysts and credit rating agencies-statements of opinion do not fit squarely within the elements of securities fraud. In particular, three issues arise: (1) When is a statement of opinion false so as to qualify as a misrepresentation? (2) When is a statement of opinion material? (3) And, for that matter, what is the distinction between a statement of fact and a …

Securities Regulation As Gap-Filler: The Example Of Hydraulic Fracturing, Wendy Gerwick Couture

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Private Regulation Of Insider Trading In The Shadow Of Lax Public Enforcement: Evidence From Canadian Firms, Laura Nyantung Beny, Anita Anand

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Like firms in the United States, many Canadian firms voluntarily restrict trading by corporate insiders beyond the requirements of insider trading laws (i.e., super-compliance). Thus, we aim to understand the determinants of firms’ private insider trading policies (ITPs), which are quasi-contractual devices. Based on the assumption that firms that face greater costs from insider trading (or greater benefits from restricting insider trading) ought to be more inclined than other firms to adopt more stringent ITPs, we develop several testable hypotheses. We test our hypotheses using data from a sample of firms included in the Toronto Stock Exchange/Standard and Poor’s (TSX/S&P) …

Rethinking U.S. Investment Adviser Regulation, Anita K. Krug

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Although the U.S. Investment Advisers Act of 1940 (the “Advisers Act”) was not at the center of the post-financial crisis regulatory reform that culminated in the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank” or “Dodd-Frank Act”), it was certainly part of the reform effort. In particular, Dodd-Frank amended the Advisers Act--the federal statute that regulates investment advisers and their activities--in a manner intended to address the ways in which privately-offered funds, particularly hedge funds, may have exacerbated the financial crisis. The primary regulatory concern, whether valid or not, was that, given the magnitude of assets invested in hedge …

Escaping Entity-Centrism In Financial Services Regulation, Anita K. Krug

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In the ongoing discussions about financial services regulation, one critically important topic has not been recognized, let alone addressed. That topic is what this Article calls the “entity-centrism” of financial services regulation. Laws and rules are entity-centric when they assume that a financial services firm is a stand-alone entity, operating separately from and independently of any other entity. They are entity-centric, therefore, when the specific requirements and obligations they comprise are addressed only to an abstract and solitary “firm,” with little or no contemplation of affiliates, parent companies, subsidiaries, or multi-entity enterprises. Regulatory entity-centrism is not an isolated phenomenon, as …

Investment Company As Instrument: The Limitations Of The Corporate Governance Regulatory Paradigm, Anita K. Krug

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U.S. regulation of public investment companies (such as mutual funds) is based on a notion that, from a governance perspective, investment companies are simply another type of business enterprise, not substantially different from companies that produce goods or provide (noninvestment) services. In other words, investment company regulation is founded on what this Article calls a “corporate governance paradigm,” in that it provides a significant regulatory role for boards of directors, as the traditional governance mechanism in business enterprises, and is “entity centric,” focusing on intraentity relationships to the exclusion of super-entity ones.

This Article argues that corporate governance norms, which …

Revisiting 'Truth In Securities Revisited': Abolishing Ipos And Harnessing Private Markets In The Public Good, Adam C. Pritchard

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My thesis is that the transition between private- and public-company status could be less bumpy if we unify the public-private dividing line under the Securities Act and Exchange Act. The insight builds on Cohen's thought experiment where Congress first enacted the Exchange Act. My proposed public-private standard would take the company-registration model to its logical conclusion. The customary path to public-company status is through an IPO, typically with simultaneous listing of the shares on an exchange. There is nothing about public offerings, however, that makes them inherently antecedent to public-company status. What if companies became public, with required periodic disclosures …

Critique Of Money Judgment Part Three: Restraining Notices, David G. Carlson

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New York is virtually unique in permitting lawyers to issue court orders restraining debtors and third parties from conveying away any assets that could be used to satisfy a money judgment. In effect, these orders command the recipient to do nothing, whereas a turnover or garnishment orders the recipient to do something — pay the creditor or sheriff or surrender illiquid property to the sheriff. The weakness and strength of this debt collection tool is assessed at length. The Article also analyzes in detail New York’s Exempt Income Protection Act, enacted in 2008 to force banks to protect the exempt …

Procedure In Eclipse: Group-Based Adjudication In A Post-Conception Era, Myriam E. Gilles

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The Falsity-Scienter Inference, Wendy Gerwick Couture

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Enforcement Without Foundation? Insider Trading And China's Administrative Law Crisis, Nicholas C. Howson

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China's securities regulator enforces insider trading prohibitions pursuant to non-legal and non-regulatory internal "guidance." Reported agency decisions indicate that enforcement against insider trading is often possible only pursuant to this guidance, as the behavior identified is far outside of the scope of insider trading liability provided for in statute or regulation. I argue that the agency guidance is itself unlawful and unenforceable, because: (i) the guidance is not the regulatory norm required by the statutory delegation of power; and (ii) the guidance is ultra vires because (a) it addresses something substantively different from what is authorized under the statutory delegation, …

Facebook, The Jobs Act, And Abolishing Ipos, Adam C. Pritchard

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Initial public offerings (IPOs)-the first sale of private firms' stock to the public-are a bellwether of investor sentiment. Investors must be bullish if they are putting their money into untested start-ups. IPOs are frequently cited in the business press as a key barometer of the health of financial markets. Politicians, too, see a steady flow of IPOs as an indicator that capital is fueling the entrepreneurial initiative that sustains the growth of new businesses. Growing businesses create jobs, so Republicans and Democrats can find common ground on the importance of promoting IPOs. That bipartisan consensus was on display this spring …

Warning: Your Lcc Interest Might Be A Security, Wendy Gerwick Couture

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Mixed Statements: The Safe Harbor's Rocky Shore, Wendy Gerwick Couture

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Price Fraud, Wendy Gerwick Couture

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The Price Of Pay To Play In Securities Class Actions, Adam C. Pritchard, Stephen J. Choi, Drew T. Johnson-Skinner

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We study the effect of campaign contributions to lead plaintiffs—“pay to play”—on the level of attorney fees in securities class actions. We find that state pension funds generally pay lower attorney fees when they serve as lead plaintiffs in securities class actions than do individual investors serving in that capacity, and larger funds negotiate for lower fees. This differential disappears, however, when we control for campaign contributions made to offcials with infuence over state pension funds. This effect is most pronounced when we focus on state pension funds that receive the largest campaign contributions and that associate repeatedly as lead …

Securities Law In The Roberts Court: Agenda Or Indifference?, Adam C. Pritchard

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To outsiders, securities law is not all that interesting. The body of the law consists of an interconnecting web of statutes and regulations that fit together in ways that are decidedly counter-intuitive. Securities law rivals tax law in its reputation for complexity and dreariness. Worse yet, the subject regulated-capital markets-can be mystifying to those uninitiated in modem finance. Moreover, those markets rapidly evolve, continually increasing their complexity. If you do not understand how the financial markets work, it is hard to understand how securities law affects those markets.

What Role For “Women,” “Men,” And Transpeople/Intersex People In Gender Equality: A Commentary, Edward D. Stein

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This has been a very rich opening panel to what promises to be a terrific conference. The panelists' comments go in such varied directions that it is a challenge to be both a commentator and summarizer, especially when I have just a few minutes to speak. What I plan to do is say a little bit to draw together some of the themes that the panelists have been talking about that are connected to a couple of topics I have been working on while at the same time trying to look forward to some of the things I hope we …

Institutionalization, Investment Adviser Regulation, And The Hedge Fund Problem, Anita K. Krug

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This Article contends that more effective regulation of investment advisers could be achieved by recognizing that the growth of hedge funds, private equity funds, and other private funds in recent decades is a manifestation of institutionalization in the investment advisory context. That is, investment advisers today commonly advise these “institutions,” which have supplanted other, smaller investors as advisory clients.

However, the federal securities statute governing investment advisers, the Investment Advisers Act of 1940, does not address the role of private funds as institutions that now intermediate those smaller investors' relationships to investment advisers. Consistent with that failure, investment adviser regulation …