Securities Law Commons^™

Recent Cases, Journal Staff

Vanderbilt Law Review

Antitrust Law--Robinson-Patman Act--To Satisfy the "In Commerce" Requirement of Section 2(a) at Least One of the Allegedly Discriminatory Sales in a Secondary-Line Case Must Cross a State Line

===============

Constitutional Law--Equal Protection--Exclusion of Pregnancy-Related Disabilities from State Salary Compensation Insurance Program Denies Equal Protection to Pregnant Employees

===============

Criminal Procedure--Grand Juries--Exclusionary Rule in Search and Seizure Cases Does Not Apply to Grand Jury Proceedings

==================

Securities Regulation-Rule 10b-5--Plaintiffs Who Are Neither Purchasers nor Sellers of Securities May Recover Under Rule 10b-5 if Injured in Their Capacity as Investors as a Direct Consequence of Fraud in Connection with a Securities Transaction …

Stock Options And The Tax Reform Act Of 1969: The Question Of Continued Utility, John W. Bonds, Jr.

Vanderbilt Law Review

This Note attempts its own exploration of the compensatory utility of stock options, beginning with brief sketches of the early tax law relating to options; the developing legislative, regulatory,and judicial refinements; and, the state of the law immediately prior to the Tax Reform Act. The basic operating provisions of the new Act and the proposed regulations are then examined as they relate to both statutory and nonstatutory stock options. After out-lining the goals that employers and employees seek by using stock options, the Note's conclusion attempts to analyze the degree to which those goals may still be attained in light …

Recent Cases, Law Review Staff

Vanderbilt Law Review

Remedies--Fair Labor Standards Act--Private Damage Suit Unavailable to Redress Violations of Child Labor Provisions of the Fair Labor Standards Act

=====================

Securities Regulation--Commercial Paper-Promissory Notes with Maturity Not Exceeding Nine Months but Offered to Public as Investment Are "Securities" Within Section 3(a)(10) of the 1934 Act

=====================

Securities Regulation-Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5-- A Reorganization in the Form of a Tripartite Merger in Which There Is No Change in the Total Assets Represented by a Share of Stock Does Not Involve a"Purchase or Sale" Within the Meaning of Section 10(b)of The Securities Exchange …

Characterization Of Shareholder-Creditor Bad Debt: United States V. Generes Sounds The Knell For Deductions From Ordinary Income, Bland W. Cannon, Jr.

Vanderbilt Law Review

The primary focus of this Note is on the development of the judicial doctrines interpreting the provisions of section 166 as applied to share-holder losses on loans to related corporations. Whether, in any given case, advances by shareholders will be considered loans or capital investments is beyond the scope of this work. For purposes of this study, the existence of a valid debtor-creditor or debtor-guarantor relationship between the corporation and its shareholder will be assumed. A brief description of the statutory scheme of the bad debt and loss provisions will be followed by a discussion of the origins and development …

Recent Cases, Law Review Staff

Vanderbilt Law Review

Constitutional Law--Due Process--Replevin Statutes Allowing Seizure of Property Without Notice and Opportunity for Hearing Violate Due Process Clause of Fourteenth Amendment

Constitutional Law--Right to Counsel--Absent Waiver,No Defendant May Be Imprisoned Unless Represented By Counsel At Trial

Federal Rules of Civil Procedure-Class Actions-Class Action Alleging Similar Injury by Separate Defendants Who Acted Similarly but Independently Allowed Under Rule 23(b)(3)

Securities Regulation--Securities Act of 1933-Access Of All Offerees To Additional Desired Information Required For Section 4(2) Private Offering Exemption

Torts-Joint Tort-feasors--Apportionment of Damages Among Negligent Joint Tort-feasors Based upon Relative Responsibility of Parties

Rule 144: Sec Regulation Of Dispositions Of Securities By Controlling Persons And Private Places, Paul L. Sloan, Iii

Vanderbilt Law Review

In recent years, dissatisfaction with the law that governs the disposition of securities by controlling persons' and private places under the Securities Act of 1933 has been voiced in numerous commentaries.Although criticism has been directed at varying facets of the problem,the displeasure of critics has resulted from two fundamental objections: first, the unnecessary ambiguity that heretofore has enveloped public resale of privately placed securities and, to a lesser degree, resale of securities by controlling persons; and secondly, the failure of the present law adequately to effect the disclosure policy of the Securities Act of 1933 and of the Securities Exchange …

Recent Cases, Law Review Staff

Vanderbilt Law Review

RECENT CASES

Antitrust--Sham Exception--Allegations of Purposeful and Concerted Use of Adjudicatory Processes to Harass and Deter Parties From Having Free Access to These Processes Constitute a Cause of Action Under Antitrust Laws

====================

Criminal Procedure--Confessions--Determination of Confession's Voluntariness by Preponderance of the Evidence Is Not Violative of Fifth Amendment Prohibition Against Self-Incrimination

====================

Landlord and Tenant--Forcible Entry and Detainer Statute--Provisions for Immediate Trial and Limitation of Triable Issues Not Violative of Due Process or Equal-Protection Clauses

=====================

Securities Regulation-Section 16(b) of Securities Exchange Act of 1934--Insider May Sell Enough Stock To Bring His Holdings Below Ten Percent and Within Six …

The Securities Investor Protection Act Of 1970: A New Federal Role In Investor Protection, Allan Gates

Vanderbilt Law Review

It has long been a matter of common knowledge that securities, investment involves an element of financial risk. In addition to the obvious hazards of injudicious investment, such as market decline and failure of the corporate venture, there is an appreciable risk of financial loss to the investor due to the potential insolvency of his broker-dealer. Until recently it had been the policy of the federal government to restrict its protection against this latter risk to measures designed to prevent broker-dealer insolvencies and, when an insolvency did occur, to an ordering of the priorities of customer claims in bankruptcy. In …

The Taxation Of Stock Dividends And The Tax Reform Act Of 1969--Foreboding Implications And Constitutional Uncertainties, John A. Pickens

Vanderbilt Law Review

Federal income taxation of stock dividends has followed a diverse course. Since the introduction of a federal income tax on all stock dividends in 1916, five major changes have occurred in this area. The most recent of these changes is embodied in section 421 of the Tax Reform Act of 1969, which amends section 305 of the Internal Revenue Code of 1954. When the 1969 Amendments are compared with the treatment of stock dividends under the Internal Revenue Code of 1954, they can be viewed, in conjunction with the regulations issued in 1969 under the 1954 Code, as initiating a …

The Williams Amendments: An Evaluation Of The Early Returns, M. Douglas Dunn

Vanderbilt Law Review

The purpose of this note is to examine the judicial interpretation of the Williams Amendments to the Securities Exchange Act. The background of the legislation is outlined to direct attention to its general purpose and to isolate its intended beneficiaries.' A discussion of the actual amendments will provide the informational base necessary for consideration of the recent cases. The critical discussion of the first few cases interpreting the amendments provides the foundation for a suggested approach in applying the available remedies to violators of the Williams Amendments.

A Rejoinder To Mr. Ferber, Henry G. Manne

Vanderbilt Law Review

No congressman would tell his constituents, "you may be losing money by SEC regulation, but that is irrelevant, since the men down there are serving a higher moral order." The truth of the matter is that there need be no conflict between good economics and good morality. The confusion arises when the attempt is made to substitute superficial ideas of morality for fundamental economic doctrine. Clearly every decision has an economic impact just as it has moral implications. But how can one judge the moral content or desirability of an act of economic regulation without knowing the effects of it?

Codification And Rule 10b-5, Lewis D. Lowenfels

Vanderbilt Law Review

One of the most interesting as well as controversial areas of the securities laws has been the growth of implied liabilities under section 10(b) of the Securities Exchange Act of 1934 and Rule l0(b)-5 promulgated there under. Any attempt to codify the securities laws would probably include an attempt to codify this entire l0b-5 area.' Once the codifiers move into this area, however, there is a strong likelihood that codification will result in reform and revision, and the present scope as well as the future growth and development of "federal corporation law" under Rule l0b-5 will be profoundly altered.' Thus …

Introduction To Symposium On Securities, Manuel F. Cohen

Vanderbilt Law Review

Students of the securities markets, and of relevant law and regulation, will wonder whether another symposium is worthwhile. Recent years have seen a proliferation of symposia, meetings, conferences, taped messages, books, pamphlets, and other materials designed to educate the uninitiated or to provide an opportunity for debate among the sophisticated concerning the important issues of the day. This, of course, assumes that there are important issues, and merit in the continued effort at education...This symposium does not reach all the issues. It does, however, deal with certain important ones and suggests quite emphatically the need for re-examination of all. To …

Insider Trading And The Law Professors, Henry G. Manne

Vanderbilt Law Review

When Insider Trading and the Stock Market' appeared in November, 1966, I was fully prepared for a goodly amount of disagreement. I was not prepared however for the emotional, almost hostile response my book received from some members of the academic community. This is not to say that all the reviews by law professors were unsympathetic and emotional in tone. Indeed the majority of them were not, and while critical reviews outnumbered favorable ones, most were in some degree mixed, and the tone was generally scholarly, impersonal, and in many cases constructive But the response to my book in the …

Reform Of The Blue Sky Laws, James S. Mofsky

Vanderbilt Law Review

Some constructive recommendations can be made to generate meaningful reform of the blue sky laws within the states themselves. In this regard, it is important to separate those persons who would be in favor of revision as discussed in this article from those who would be opposed. As previously mentioned, corporate officials and businessmen associated with small firms directly affected by the blue sky laws would probably advocate reform, as would the investment bankers who underwrite such firms. These persons and firms must have substantial political muscle if they are to achieve significant results in the state capitols. Such strength …

The Case Against Insider Trading: A Response To Professor Manne, David Ferber

Vanderbilt Law Review

Professor Manne's article appears to be largely an attack on critics of his book Insider Trading and the Stock Market. I must confess I have not read his book. I did, however, read an earlier article by Professor Manne attacking the position of the Commission in the Texas Gulf case, and I once participated in a forum at which Professor Manne expressed his view that inside information should be something that a corporate official might sell. I disagree with Professor Manne's basic position that "[t]he debatable aspects of insider trading are capable of resolution through tools of economic analysis,"' as …

Taxation Of Preferred Stock In Corporate Reorganizations, Bruce E. Gagnon

Vanderbilt Law Review

Among the sections added to the revised version of the Internal Revenue Code of 1954 was section 306, designed to close a gaping loophole which might have permitted many taxpayers to withdraw earnings and profits from a corporation through the distribution and sale of preferred stock and to receive capital gains treatment at the shareholder level rather than the dividend treatment ordinarily applicable to such distributions. In this article, Professor Gagnon argues that, as applied to corporate reorganizations, section 306 falls far from its mark. After discussing the purpose and operation of section 306 and related sections, the author suggests …

The Public Offering And A Quest For Alternatives, Bart A. Brown, Jr., Clifford A. Roe, Jr., Scott B. Crooks

Vanderbilt Law Review

The year 1969 has seen a continuation of the strong new issues market that has commanded a significant portion of the attention of the investing public over the past few years. As a result, more and more closely held companies are seeking to raise funds through public offerings of their stock and thus share in the successes of this strong market. While the market conditions have been most encouraging,there have been other developments that have made the managements of some closely held companies reconsider the relative advantages and disadvantages of going public. Recent court decisions have strictly defined the legal …

Insider Liability For Short-Swing Profits Pursuant To Mergers And Related Transactions, James P. Hemmer

Vanderbilt Law Review

This article considers the problems presented by the application of section 16(b) of the Securities Exchange Act of 1934 to corporate merger transactions. Mr. Hemmer argues that the"matching across" proposal, which has been suggested by some commentators, should not be applied to the merger situation. Instead, the author advocates that the "possibility of abuse" test, which the courts have applied to conversion transactions, should also. be applicable to the corporate merger. Mr. Hemmer feels this approach will prevent the abuses for which section 16(b) was enacted and, at the same time, provide the courts with a flexible test for this …

Recent Cases, Law Review Staff

Vanderbilt Law Review

Criminal Law--Habeas Corpus-State Prison Regulation Prohibiting Prisoner from Preparing Petition for Fellow Inmates Held Invalid in Absence of Alternative Means of Assistance

============================

Securities Regulation--Corporation as a Director for the Purposes of Section 16(b) of the 1934 Securities Exchange Act

Texas Gulf Sulphur: Its Holdings And Implications, William N. Ozier

Vanderbilt Law Review

The purpose of this note is to analyze the holding in the Texas Gulf Sulphur case as it relates to prior law and to consider some of the problems raised by the decision. Some suggestions will also be made for possible resolution of the most disturbing questions raised by the decision.

Control Of Corporate Indemnification:A Proposed Statute, James H. Cheek, Iii

Vanderbilt Law Review

The recent unprecedented increase in the number of suits filed against corporate executives under the Federal antitrust and securities laws has again focused attention on the risks of executive liability " and the corresponding problem of attracting top men as corporate directors. Faced with this dilemma, corporations have drafted bylaws providing for the maximum identification allowed under applicable state law. The state legislatures, on the other hand, have attempted to prevent misuse of the power to indemnify, while at the same time trying to insure adequate protection for those who serve as directors. Mr. Cheek argues that the legislatures have …

The Underwriter's Duty Of "Due Diligence" Under Section 11 Of The Securities Act: Reflections On Barchris, Theodore W. Lenz

Vanderbilt Law Review

The Securities Act of 1933 seeks to protect the investing public by putting into the hands of the potential securities purchaser information upon which he can base an enlightened investing choice. The participants in a public distribution of securities--including the underwriters are required to collect, accurately and completely in a registration statement and an accompanying prospectus, the relevant facts about the company issuing the securities. Failure to do so will render the participants liable under section 11 of the Act. The Act then imposes a duty of care on the underwriter and enforces that duty by the threat of civil …

Corporate Securities As "Business Property", Thomas G. Bost

Vanderbilt Law Review

Inadequacies of the statutory definition of "capital asset" have led the courts to develop the concept of "business property," which serves to distinguish everyday business activities from investment activities.This concept is now being applied by courts in a wide variety of factual situations involving corporate securities. However, unless objective, easily ascertainable limits to the "business property" concept are found, confusion and inconsistency may mark the development of future case law. The rules developed by the American Law Institute's Discussion Draft Study of Definitional Problems in Capital Gains Taxation appear to provide these objective limits. Because they are consistent with the …

Rights And Obligations In The Mutual Fund: A Source Of Law, James M. Anderson

Vanderbilt Law Review

The proposals of this note, the thrust of statutory regulation, the trend of the case law and the direction of recent developments are all consistent. In a practical sense, the suggestions here attempt to provide a reasonable source of law for the men of the industry and for the courts in search of an authoritative system of behavioral standards. If, for example, a mutual fund has enjoyed such vigorous growth that the percentage fee now charged by the advisers has lost its relevance to the actual cost of management, the disgruntled shareholder or the apprehensive director would seek information on …

Business Associations--1964 Tennessee Survey, Daniel J. Gifford

Vanderbilt Law Review

In Denny v. Phillips & Buttorff Corp.,' the United States Court of Appeals for the Sixth Circuit affirmed a judgment of the United States Court for the Middle District of Tennessee which awarded $235,000 in fees plus $6,227.98 in expenses to counsel representing minority stockholders in a suit which had been brought to force cancellation of a purchase by the Phillips & Buttorff Corp. from the instrumentalities of the controlling stockholders of such corporation of 60,000 shares of stock in Win. R.Moore Dry Goods Company for $2,700,000. The purchase of the Moore stock had apparently been used as a means …

Rule 10b-5 And The Stockholder's Derivative Action, Lewis D. Lowenfels

Vanderbilt Law Review

This article focuses upon a new, emerging private cause of action based upon section 10(b) and rule 10b-5-a stockholder's derivative action initiated on behalf of a corporation which has been defrauded in connection with the purchase or sale of securities. Five reported cases, three decided in the last three months of 1964, have sustained a stockholder's derivative suit based upon section 10(b) and rule 10b-5. The significance of these decisions becomes apparent, not only when one considers that the derivative suit has traditionally been an internal corporate matter governed exclusively by state law, but also when one focuses upon the …

Corporations -- Effect Of Statements Made In Stock Prospectus, Law Review Staff

Vanderbilt Law Review

In the case of United Funds, Inc. v. Carter Products, Inc.,' the City Circuit Court of Baltimore, Maryland, handed down a decision which" broke new legal ground." The case, involving the effect of statements made in stock prospect uses on a corporation's future actions, has provoked surprisingly little discussion by legal commentators, and none at all on the "new" ground it broke. The purpose of this comment is to examine the Carter Products decision, to attempt to place it in proper legal perspective, and finally to evaluate it as a new development in the law.

Creditors' Rights And Security Transactions -- 1962 Tennessee Survey, Forrest W. Lacey

Vanderbilt Law Review

Tanner v. Mobley presented the problem of who may bring an action to recover usury. The plaintiff in the action, brought to recover usury and purge a trust deed and note of usury, was the daughter-in-law and grantee of the maker of the note and trust deed. The note and trust deed were executed in 1952. In 1954 the property covered by the trust deed was conveyed to plaintiff in consideration of her promise to pay the note and care for the grantor. Plaintiff continued to make payments on the note for several years after the death of grantor in …

Creditors' Rights And Security Transactions -- 1961 Tennessee Survey (Ii), Forrest W. Lacey

Vanderbilt Law Review

During the period under survey there were few cases dealing with creditors' rights or security transactions. One of these, Cannon Mills, Inc.v. Spivey,' presented the question of whether the mere filing of a bill to subject the property of an insolvent debtor for the benefit of creditors created a lien lis pendens, or whether registration of the lien was necessary before it became effective. The facts were as follows. A judgment creditor with a nulla bona return filed a general creditors' bill on October 18, to subject the property of an insolvent debtor for the benefit of all his creditors. …