Securities Law Commons^™

Securities Law Fifth Circuit Symposium, Steve Thel

Faculty Scholarship

The Fifth Circuit decided some important securities cases during the survey period and issued some interesting opinions. Although the court consistently claimed a conservative reliance on precedent and seldom acknowledged making new law, it interpreted some well-established doctrine in surprising ways. The past year's opinions in fraud cases provide guidance in the related areas of reliance, damages, and plaintiff's due diligence. The year also witnessed important developments in the law governing the relationship between brokerage firms and their clients. The most spectacular development in this area during the survey year was the October collapse in security prices. In light of …

Regulation Of Manipulation Under Section 10(B): Security Prices And The Text Of The Securities Exchange Act Of 1934, Steve Thel

Faculty Scholarship

No abstract provided.

Ties That Bond: Duel Class Common Stock And The Problem Of Shareholder Choice, Jeffrey N. Gordon

Faculty Scholarship

Professor Gordon argues that the Securities and Exchange Commission (SEC) should adopt a rule enabling the New York Stock Exchange (NYSE) to maintain its traditional rule forbidding NYSE firms from recapitalizing with dual class common stock After critically evaluating the purported justifications for dual class recapitalizations, Professor Gordon presents empirical data to demonstrate that such recapitalizations may have a negative impact on shareholder wealth. He then describes the collective action and strategic choice problems in shareholder voting that allow managers to win approval for such wealth-reducing recapitalizations. The traditional NYSE rule is a means by which shareholders and managers have …

Hush: The Criminal Status Of Confidential Information After Mcnally And Carpenter And The Enduring Problem Of Overcriminalization, John C. Coffee Jr.

Faculty Scholarship

Each of the last three decades has witnessed an intense public reaction to a distinctive type of "white collar" crime. In the early 1960's, public attention was riveted by the Electrical Equipment conspiracy and the image of senior corporate executives of major firms meeting clandestinely to fix prices. In the mid-1970's, the focus shifted to corporate bribery, as the media ran daily stories regarding questionable payments abroad and illegal political contributions at home. The representative white collar crime of the 1980's is undoubtedly "insider trading." The archetype of this new kind of criminal in the public's mind is Ivan Boesky …

The Role Of The Market Model In Corporate Law Analysis: A Comment On Weiss And White, Merritt B. Fox

Faculty Scholarship

In a recent article, Elliott Weiss and Lawrence J. White sought to establish that seven decisions of the Delaware courts concerning corporation law had little value in predicting the future conduct of courts and corporations under the Delaware Corporations Law. Weiss and White relied, in part, on a statistical analysis of changes in the prices of publicly traded shares in Delaware corporations to show that the seven studied decisions had no statistically significant market impact.

In this Comment, Professor Fox takes issue with the explanation Weiss and White give for their data. Although the absence of an observed market impact …

Corporate Takeovers: Who Wins; Who Loses; Who Should Regulate, John C. Coffee Jr., Joseph A. Grundfest, Roberta Romano, Murray L. Weidenbaum

Faculty Scholarship

On December 3, 1987, during its 11th Annual Policy Conference in Washington, DC, the American Enterprise Institute convened a panel discussion on "Corporate Takeovers and Insider Trading: Who Should Regulate?" The panelists were John C. Coffee, Jr., professor of law at Columbia University; Joseph A. Grundfest, commissioner at the Securities and Exchange Commission; Roberta Romano, professor of law at Yale Law School; and Murray L. Weidenbaum, Mallinckrodt Distinguished University Professor and director of the Center for the Study of American Business at Washington University. The panel was moderated by Christopher C. DeMuth, president of AEI. The following discussion is drawn …

Accountable Accountants: Is Third-Party Liability Necessary?, Victor P. Goldberg

Faculty Scholarship

Should accountants be liable to third parties if they conduct an audit in negligent manner? A half century ago, in Ultramares Corporation v. Touche, Niven & Co., Cardozo argued that they should not, unless their performance could be characterized as fraud. In recent years, courts in a minority of jurisdictions have concluded that Cardozo's argument is no longer compelling and they have found that "foreseeable" third parties could bring a tort action for ordinary negligence against the accountants. In addition to being subject to tort actions, accountants may also be liable under federal and state securities laws.

Suits against …

Drafting An Effective Greenmail Prohibition, Ronald J. Gilson

Faculty Scholarship

Hostile tender offers have become a recurrent political issue. In recent years Congress has held seemingly endless hearings on the subject, and by now the testimony has settled into a familiar dialogue. Potential acquirers cast themselves as the embodiment of Adam Smith's invisible hand – their activities energize the market for corporate control with the desirable result of improving the efficiency of corporate management. Management of potential targets, in turn, claim the role of Albert Chandler's visible hand – efficient managers who internalize a function previously carried out by an inefficient market. Their argument is that because the market for …

The Ethics Of Insider Trading, Gary S. Lawson

Faculty Scholarship

The quickest way to become famous is often to become infamous, as arbitrageur Ivan Boesky has recently discovered. Prior to November 1986, Mr. Boesky was well-known within the financial community, but largely unknown outside it. That changed dramatically following revelations that he and Dennis Levine, a merger specialist with the investment banking firm of Drexel Burnham Lambert, Inc., had made tens of millions of dollars in the stock market by using Mr. Levine's advance knowledge of impending takeovers by Drexel clients. Today, after disgorging $50 million in profits, paying $50 million in penalties, and receiving a jail sentence, Mr. Boesky …

Taxation Without Premeditation: An Economic Analysis Of The Structure, Regulation And Strangulation Of The Private Activity Bond Market, Kevin Outterson

Faculty Scholarship

Private Activity Bonds (PABs) are private debt issued under the auspices of state governments. The states issued $119.4 billion dollars of long-term PABs in 1985. Utilizing the state government conduit transforms the bond interest into federally tax exempt income. As a result, PABs bear lower interest rates than comparable taxable bonds. PAB financing significantly reduces private capital costs at the expense of the Federal Treasury. The structure of the PAB subsidy is fundamentally flawed. State governments subsidize local businesses and investments with PABs, often in competition with sister states. The states receive significant local benefits, but bear no direct costs …

Qualitative Standards For Qualified Securities: Sec Regulation Of Voting Rights, Roberta S. Karmel

Faculty Scholarship

No abstract provided.

Qualitative Standards For 'Qualified Securities': Sec Regulation Of Voting Rights, Roberta S. Karmel

Faculty Scholarship

No abstract provided.

The Independent Corporate Board: A Means To What End?, Roberta S. Karmel

Faculty Scholarship

No abstract provided.

The "Contemporaneous" Traders Who Can Sue An Inside Trader, William K.S. Wang

Faculty Scholarship

No abstract provided.

Blue-Sky Merit Regulation: Benefit To Investors Or Burden On Commerce, Roberta S. Karmel

Faculty Scholarship

No abstract provided.

Evaluating Dual Class Common Stock: The Relevance Of Substitutes, Ronald J. Gilson

Faculty Scholarship

The proposal of the New York Stock Exchange to end its prohibition on listing the securities of companies with dual classes of common stock has focused public policy debate over this evolution in capital structure both too broadly and too narrowly.

The debate has been too broad because it has encompassed one situation – an initial public offering by a company with a capital structure containing dual class common stock – that should not be controversial at all. Whatever may have originally prompted the New York Stock Exchange's longstanding prohibition against listing non-voting common stock or common stock with voting …

Blue-Sky Merit Regulation: Benefit To Investors Or Burden On Commerce?, Roberta S. Karmel

Faculty Scholarship

No abstract provided.

Assessment Of Shelf Registration: How Much Diligence Is Due Investors?, Roberta S. Karmel

Faculty Scholarship

No abstract provided.

Can Regulators Of International Capital Markets Strike A Balance Between Competing Interests, Roberta S. Karmel

Faculty Scholarship

No abstract provided.

Some Arguments That The Stock Market Is Not Efficient, William K.S. Wang

Faculty Scholarship

No abstract provided.

Can Regulators Of International Capital Markets Strike A Balance Between Competing Interests?, Roberta S. Karmel

Faculty Scholarship

No abstract provided.

Symposium: The Internationalization Of The Securities Markets - Introduction, Tamar Frankel

Faculty Scholarship

This symposium on international trading in securities was the brain child of William Schwartz, Dean of the Boston University School of Law, and John J. Phelan, President of the New York Stock Exchange. The idea was implemented by Donald L. Calvin, Executive Vice President of the New York Stock Exchange, and myself, with the staff and students of Boston University School of Law. The event was held in New York City on October 18, 1985.

The symposium had three purposes: first, to present a picture of the current status of international trading in securities, which has been developing rapidly; second, …

The Unfaithful Champion: The Plaintiff As Monitor In Shareholder Litigation, John C. Coffee Jr.

Faculty Scholarship

When the legal history of the 1970's is written, it will note a significant shift in the way courts perceived shareholder litigation. Only a generation ago, the Supreme Court described the derivative action as "the chief regulator of corporate management." Even into the 1960's, those issues involving shareholder litigation that percolated up to the Supreme Court were typically resolved so as to extend the availability of a litigation remedy by removing arbitrary or overbroad barriers to the plaintiff.

Efficient Markets, Costly Information, And Securities Research, Jeffrey N. Gordon, Lewis A. Kornhauser

Faculty Scholarship

Courts, administrative policy makers and legal scholars have widely embraced the theory that well-developed markets are efficient. In this Article, Professors Gordon and Kornhauser cast doubt on the wisdom of reliance on the efficient market hypothesis as applied to various areas of corporate law. Their charge is that legal decision makers and scholars have misunderstood the assumptions and limitations of the theory and have neglected recent critical economics scholarship. Professors Gordon and Kornhauser begin by detailing the assertions of the hypothesis in relation to the workings of securities markets, focusing on various asset pricing models used to test the hypothesis …

Market Failure And The Economic Case For A Mandatory Disclosure System, John C. Coffee Jr.

Faculty Scholarship

Recent academic commentary on the securities laws has much in common with the battles fought in historiography over the origins of the First World War. The same progression of phases is evident. First, there is an orthodox school, which tends to see historical events largely as a moral drama of good against evil. Next come the revisionists, debunking all and explaining that the good guys were actually the bad. Eventually, a new wave of more professional, craftsmanlike scholars arrives on the scene to correct the gross overstatements of the revisionists and produce a more balanced, if problematic, assessment.

Shelf Registration, Integrated Disclosure, And Underwriter Due Diligence: An Economic Analysis, Merritt B. Fox

Faculty Scholarship

In a recent article, Professor Barbara Banoff mounted a spirited defense of the Securities and Exchange Commission's decision to adopt permanently Rule 415 under the Securities Act of 1933 (Securities Act). Rule 415 permits the registration of securities that an issuer intends to "put on the shelf'' rather than sell immediately. By having a block of "shelf registered" securities available, an issuer avoids the delay of the registration process once the decision is made to proceed with a sale. Shelf registration also gives an issuer the flexibility to seek bids from a group of competing underwriters and bypasses the traditional …

The Mechanisms Of Market Efficiency, Ronald J. Gilson

Faculty Scholarship

Of all recent developments in financial economics, the efficient capital market hypothesis ("ECMH") has achieved the widest acceptance by the legal culture. It now commonly informs the academic literature on a variety of topics; it is addressed by major law school casebooks and textbooks on business law; it structures debate over the future of securities regulation both within and without the Securities and Exchange Commission; it has served as the intellectual premise for a major revision of the disclosure system administered by the Commission; and it has even begun to influence judicial decisions and the actual practice of law. In …

The Case Against Shark Repellent Amendments: Structural Limitations On The Enabling Concept, Ronald J. Gilson

Faculty Scholarship

The tactical history of the tender offer movement resembles an unrestrained arms race. Faced with offeror assaults in the form of Saturday night specials, various types of bear-hugs, godfather offers, and block purchases, target management responded with equally intriguing defensive tactics: the black book, reverse bear-hug, sandbag, show stopper, white knight, and, drawing directly on military jargon, the scorched earth. But however varied the labels given particular defensive strategies, they share the common characteristic of being responsive: They are available only after an offer is made and the battle for the target's independence joined. From the target's perspective, what was …

Seeking Competitive Bids Versus Pure Passivity In Tender Offer Defense, Ronald J. Gilson

Faculty Scholarship

Responding to my comments in the Stanford Law Review, and to those of Lucian Bebchuk in the Harvard Law Review, Professors Easterbrook and Fischel have reiterated their preference for a rule of pure passivity by target management in response to a tender offer. Unlike my more limited rule barring defensive tactics designed to prevent the offer but not barring the facilitation of competitive bids, Easterbrook and Fischel would prohibit both. Because their response to the points that Bebchuk and I raised goes beyond their initial treatment of the subject, it is appropriate that I respond here by extending …

A Delicate Assignment: The Regulation Of Accountants By The Sec, Roberta S. Karmel

Faculty Scholarship

No abstract provided.