Securities Law Commons^™

The Coming Privatization Of Corporate Law, Dorothy S. Lund, Eric L. Talley

Faculty Scholarship

For more than a century, American corporate law has revolved around a simple competitive premise: State governments supply corporate law while companies choose their state of incorporation, and the market rewards the state offering the best corporate law product. Delaware’s longstanding market dominance (especially for public companies) is often explained through the confluence of its unusually attractive institutional package: expert judges, extensive precedent, a specialized bar, an enabling statute, and a legislature that — at least traditionally — treats corporate law as something to be calibrated technocratically rather than politicized.

Public, Private, Acquired, Alexander I. Platt, Matthew T. Wansley

Articles

For the last quarter-century, IPOs have been declining. SEC officials usually attribute the decline to startups’ choices to stay private. But that explanation is incomplete. As startups grow, they face a three-way choice between going public, staying private, and being acquired, and they have increasingly chosen the third option. In this Essay, we show how securities regulation pushes startups towards acquisitions by increasing the cost of raising capital and accessing liquidity in both public and private markets. We consider how the trend towards acquisitions could reduce competition, innovation, opportunities for diversification, and transparency. And we offer suggestions for how the …

Sticky Charters? The Surprisingly Tepid Embrace Of Officer-Protecting Waivers In Delaware, Jens Frankenreiter, Eric L. Talley

Faculty Scholarship

This article examines the response to Delaware’s much-heralded 2022 legal reform that permitted corporations, for the first time, to adopt charter provisions exculpating corporate officers from liability for breaching their fiduciary duty of care. Contrary to widespread predictions that corporate actors would swiftly adopt officer exculpation provisions, our analysis — using both traditional and generative artificial intelligence (AI) methods — reveals a surprisingly low rate of uptake, over three years after the reform’s enactment.

Our study makes both methodological and substantive contributions. Methodologically, we present a novel application of large language models (LLMs) to identify and interpret technical clauses in …

U.S. Shareholder Activism: Convergence With Japan, Nobuhisa Ishizuka

Faculty Scholarship

To many observers long accustomed to slow, incremental change, the current boom in shareholder activism in Japan comes as a surprise. The opening for U.S.-style activists was created by market conditions that eventually resulted in policy changes that attracted significant numbers of foreign investors. However, even the current market would not have emerged without a parallel evolution in U.S. hedge-fund tactics, which gradually shifted over a number of years to a sophisticated and more nuanced approach, one based on partnership and dialogue with target companies, in contrast to adversarial relationships and public campaigns. This article attempts to place current trends …

When Tokenized Real-World Assets Collide With Real World, Biying Cheng, David J. Reiss

Cornell Law Faculty Publications

The city of Detroit filed a public nuisance lawsuit in July of last year in the Michigan Circuit Court for the Third Judicial Circuit against Real Token, its co-founders and 165 affiliated entities, alleging building code and safety violations across over 400 Detroit residential properties.[1] RealT is a blockchain real estate platform that sells fractional interests in individual U.S. rental properties through the issuance of crypto security tokens.

On July 22, the judge issued a temporary restraining order — later converted into a preliminary injunction on Nov. 4 — barring RealT from collecting rent, pursuing evictions without a certificate of …

Is Delaware Different? Stockholder Lawyering In The Court Of Chancery, Jessica Erickson, Adam C. Pritchard, Stephen J. Choi

Law & Economics Working Papers

Delaware corporate law relies on stockholder litigation to police corporate misconduct. Judges in turn use attorneys’ fees to shape the incentives of the lawyers who pursue this litigation. This system of corporate accountability has come under increased scrutiny in recent years, with a series of decisions causing several high-profile companies to leave Delaware and prompting lawmakers to call for reform. Yet little empirical evidence exists about how Delaware judges set the attorneys’ fee awards that sustain this enforcement system. Using a hand-collected dataset of stockholder suits filed in the Court of Chancery, this Article offers the most comprehensive empirical analysis …

Who Gets A Seat At The Table? Stakeholder Participation In Sec Rulemaking, Yuliya Guseva, Irena Hutton, Adam C. Pritchard, Joseph Grundfest

Law & Economics Working Papers

We study how public participation shapes financial regulation using a novel dataset of 453 SEC rules proposed between 1995 and 2024. We collect over 81,000 public comments and 5,600 meetings between regulators and stakeholders related to those rules. Using large language models, we identify participants and extract structured measures of comment content and tone. We document asymmetries in stakeholder participation: retail investors dominate comment volume with shorter submissions, while institutional actors engage primarily through detailed comments and meetings with the SEC officials. Input from sophisticated stakeholders is more likely to be incorporated into the final rule release and informs rule …

The Sec’S Acceleration Shift And The Privatization Of Section 11 Claims, Leonardo Lupiano

Student Scholarship

In September 2025, the Securities and Exchange Commission announced that it would no longer consider issuer-investor arbitration provisions when deciding whether to accelerate the effectiveness of registration statements. Although framed as a small exercise of administrative restraint, this policy shift changes the conditions under which public offerings occur and may meaningfully affect how Section 11 of the Securities Act of 1933 is enforced. This Article examines the role acceleration has historically played as a practical constraint on arbitration clauses and analyzes how the Commission’s new neutrality reshapes the enforcement environment for Section 11 claims.

Regulatory History And Judicial Review, Todd Phillips, Anthony L. Moffa

Faculty Publications

The Administrative Procedure Act requires federal agencies to simply "incorporate in the rules adopted a concise general statement of their basis and purpose" after they receive comments from the public, and the Supreme Court ruled in Overton Park that courts are to adjudicate whether rules are arbitrary and capricious based on agencies' contemporaneous rationales. Judge-created doctrines incentivize agencies to rely on these "concise" statements to elucidate their rationales, and as a result, rulemaking preambles have ballooned in size as agencies seek to insulate themselves from critical courts.

This article contends that although the APA's statutory requirement is in tension with …

Liability For Non-Disclosure In Ipos, Albert H. Choi, Kathryn E. Spier

Articles

A privately-informed entrepreneur may withhold material information from prospective investors who may sue the firm ex post for (alleged) non-disclosure. Absent liability, the entrepreneur has an excessive incentive to withhold bad news and pursue socially-wasteful projects. Liability deters inefficient non- disclosure and prevents capital misallocation. Any damage award received by investors is partially offset by a reduction in equity value. Depending on the likelihood of court error and litigation cost, the socially-optimal damage award may be either zero or the minimum necessary for full deterrence. The private incentive to waive liability may be socially excessive or insufficient. Positive and normative …

Sustainability Assurance, Andrew F. Tuch, Luca Enriques, Alessandro Romano

Scholarship@WashULaw

A robust literature examines sustainability disclosures by public corporations, but legal scholarship has largely overlooked the role of third-party assurance—or verification—of such disclosures. This is a notable omission given the extensive literature on the auditing of financial statements, a related form of assurance.

This article responds by examining the role of assurance in sustainability reporting. In keeping with the theme of this symposium volume, it draws on US and EU law. Our discussion begins in Part I with sustainability disclosures, focusing on the requirements and practices of public companies. In Part II, we introduce sustainability assurance as well as assurance …

Flows, Financing Decisions, And Institutional Ownership Of The U.S. Equity Market, Alon Brav, Dorothy S. Lund, Lin Zhao

Faculty Scholarship

This Article analyzes the relationship between flows to institutional investment managers, corporate financing decisions, and institutional ownership of U.S. public equity. In so doing, it provides new evidence about the drivers of institutional investor growth in equity ownership over the past two decades. Contrary to conventional narrative, we find that equity capital flows into the “Big Three” investment managers have slowed in recent years, with substantial differences between each institution. We also present a framework to understand how fund characteristics and corporate actions such as stock buybacks and equity issuances combine to shape the evolution of institutional ownership, including that …

"Activist" Versus "Passive" Investors: A Closer Look At Proxy Contests And The Contemporary Balance Of Advantage, John C. Coffee Jr.

Faculty Scholarship

The era of the hostile takeover has clearly given way to the era of the proxy contest led by an activist hedge fund. Today, a record number of such contests are underway, and they have changed the board composition at many U.S. companies and caused a record number of CEO resignations. But there is a mystery here: when activist funds negotiate for changes with target managements, they often obtain meaningful changes in the board of directors and corporate policies. However, when activists attempt a proxy contest, they have generally been unsuccessful, winning only a small number of seats in a …

Trophy Assets, Aneil Kovvali

Articles

Rich people like to own things that make them look cool. When the thing in question is a car, house, or boat, the implications are limited. But sometimes very rich people own assets that are more important. Within media, Elon Musk acquired Twitter, Jeff Bezos ac-quired the Washington Post, and Patrick Soon-Shiong acquired the Los Angeles Times. There has also been a craze for aerospace: Musk with Space X, Bezos with Blue Origin, Richard Branson with Virgin Galactic, and going back further, Howard Hughes with Hughes Aircraft Company. It is often difficult to understand the behavior in purely finan-cial terms, …

Crypto Litigation And Market Efficiency, Robert E. Bishop, Bradford Levy, Frank Partnoy, Daniel Taylor, Andrew Yeh

Faculty Scholarship

This paper investigates, for the first time in the literature, the factors that should matter to courts in determining whether a crypto  market is “efficient,” meaning that prices are sufficiently responsive to information. Based on new empirical evidence and a series of event studies, we recommend a new judicial framework for assessing market  efficiency in crypto litigation.

Market efficiency tests based on event studies have played an important role in other areas of litigation, particularly securities litigation, where courts frequently rely on what have become known as the “Cammer factors.” Academics have not yet assessed the extent to which market …

Sec Committee Approves Ai Recommendations Drafted By Indiana Law Faculty Member Alvin Velazquez, Maurer School Of Law - Indiana University

Keep Up With the Latest News from the Law School (blog)

The Securities and Exchange Commission’s Investor Advisory Committee (IAC) Friday (Dec. 5) approved new recommendations urging public companies to provide clearer, more consistent information about how they use artificial intelligence. The recommendations passed with strong support: 14 votes in favor, two abstentions, and two against.

The proposal, drafted by Indiana University Maurer School of Law Professor Alvin Velazquez, responds to the rapid rise of AI across corporate America and widespread investor concern that current disclosures are confusing, inconsistent, or overly promotional.

Leaving Delaware? The Essential Role Of Specialized Corporate Courts, Zohar Goshen, Tomer S. Stein

Faculty Scholarship

Following the Delaware Court of Chancery’s invalidation of Elon Musk’s fifty-six- billion-dollar compensation package, Tesla moved its incorporation from Delaware to Texas. Shortly thereafter, Delaware’s legislature, seeking to protect Delaware’s dominant incorporation position, passed the most sweeping corporate law amendments in fifty years.

Both supporters of Musk and defenders of Delaware’s judiciary have accused each other of partisanship, but neither side has addressed the central question: What is the role of specialized corporate courts?

This Essay presents a novel theory of why such courts are necessary. Corporate disputes are distinct because they arise within ongoing relationships between shareholders and management, …

Interest Rates, Venture Capital, & Financial Stability, Hilary J. Allen

Scholarly Articles in Law Reviews & Journals

As central banks tightened interest rates during 2022 and 2023, important debates arose regarding the relationship between monetary policy and financial stability. This Article illuminates one path through which the prolonged period of accommodative monetary policy from 2009-2021 impacted financial stability: it traces how easy money and yield-seeking behavior in the wake of the Global Financial Crisis and COVID-19 pandemic led to a bubble in the venture capital industry, which in turn spawned a crypto bubble as well as a run on the VC-favored Silicon Valley Bank. This Article uses this account to illustrate the importance of proactive financial regulation …

Contracting For Consumer Trade Compliance, Christine Abely

Law Faculty Scholarship

Export compliance is becoming increasingly important for parties required to abide by U.S. law, including many online sellers of consumer products. These retailers' contractual terms with their customers set forth a number of provisions governing the relationship between them, including those which deal with arbitration, indemnification, disclaimer of warranties, and other issues. Many such agreements also purport to create obligations on the part of the consumer as to export control and sanctions compliance relative to the products they purchase. These contract provisions attempt to do so, however, in often markedly different ways, and with language that may leave notable gaps …

The Gamification Of Banking, Colleen Baker, Christopher K. Odinet

Faculty Scholarship

Gamification is coming to banking. This phenomenon is already gain-ing ground in advertising, healthcare, manufacturing, and, more recently, with the GameStop and AMC meme stock saga in securities trading. The idea behind gamification is to make transactions seem fun, playful, and even casino-like in order to elicit habit-forming, addictive-like effects with consumers. This Article argues that the rise of financial technology (“fintech”) firms and their ever-growing business relationships with incumbent financial institutions has created the necessary conditions for gamification to take hold in the banking sector. In order to explore this observation, we undertake a study of current examples of …

The Sec Proposed Cybersecurity Infrastructure Rules And New Disclosure Requirements, Neal F. Newman, Lawrence J. Trautman, Brian Elzweig

Faculty Scholarship

In addition to regulation of securities market issuers, the Securities & Exchange Commission (SEC) is also responsible for regulation of those entities that provide the networks, either electronic or physical, that enable the functioning of our securities markets. On February 9, 2022, the Commission published a Release for Cybersecurity Risk Management for Investment Advisers, Registered Investment Companies, and Business Development Companies containing proposals that, if adopted, would establish a new cybersecurity incident reporting and disclosure regime and require registered investment advisers (“advisers”) and investment companies (“funds”) to implement policies and procedures designed to address cyber risks. The comment period for …

Is Confidential Supervisory Information Material To Investors? Evaluating The Conflict Between Banking And Securities Law, Peter Conti-Brown, Patrick M. Corrigan, Jeffery Y. Zhang

Law & Economics Working Papers

A central goal of modern US securities law is the transparency of corporate information through mandatory public disclosures. This goal is in tension with a central goal of banking law, namely, the practice of preserving opacity of the information exchanged between banks and bank supervisors to ensure the safety and soundness of individual banks and the entire banking system. That informational opacity in banking known as "confidential supervisory information" (CSI) applies equally to all banks, whether or not they sell securities subject to public disclosure requirements. The disclosure of CSI is prohibited by law and practice, with dire consequences for …

Do Representative Payments Matter?, Brian T. Fitzpatrick, Colton Cronin

Vanderbilt Law School Faculty Publications

For many decades, courts have awarded the representative plaintiffs who bring class actions an extra payment when the actions recover something for the class. It has long been thought that the payments are necessary to induce a class member to step forward and serve as a representative, and, without them, many class actions would go away. Indeed, we show that the payments had become all but ubiquitous in non-securities class actions. In 2020, however, the United States Court of Appeals for the Eleventh Circuit became the only circuit to hold the payments unlawful. We test whether the Eleventh Circuit's decision …

Minority Day Hearing On American Innovation And The Future Of Digital Assets: From Blueprint To A Functional Framework, Hilary J. Allen

Legislative Testimony & Comments

When we hear from the crypto industry that existing regulation is incompatible with their technology, that is a misdirection. It is entirely possible for a blockchain-based technology business to comply with existing investor protection and financial stability regulation. However, for many crypto businesses, it may be true that existing regulation is incompatible with the economics of their business model, especially if their business model depends on doing things that we have learned, over the years, tend to harm people. But we have little to lose as a society from limiting the profitability of this kind of business model; unfortunately, the …

The Safe Harbor For Leveraged Buyouts In Bankruptcy, David G. Carlson

Articles

No abstract provided.

The Past, Present, And Future Of Proxy Voting Choice, Dorothy S. Lund

Faculty Scholarship

This article provides an early attempt at understanding what voluntary pass-through voting could mean for the marketplace. I first provide an overview of my argument in my 2018 Journal of Corporation Law article and the events that followed. I then survey passthrough voting initiatives that have taken hold at three asset managers — BlackRock, Vanguard, and State Street. I then conclude with some preliminary observations about how voting choice is likely to affect the proxy voting landscape and outline open questions.

Beyond Issuers: The Future Of Private Securities Litigation, Joshua Mitts

Faculty Scholarship

Private securities litigation has traditionally been viewed as a subfield of corporate governance, reducing agency costs by disciplining wayward management. In this brief Symposium essay, I argue that the future of private securities litigation lies beyond issuers. I discuss how a fraud claim under Rule 10b-5 can be understood as a kind of economic tort, and set out, in broad strokes, an economic analysis of claims against non-issuer defendants. I then consider emerging trends in the case law against non-issuers in social media and market manipulation cases. I conclude by identifying some challenges and opportunities for securities litigation in a …

The Sec, Fraud, And Cryptocurrencies, Lawrence J. Trautman, Brian Elzweig, Neal F. Newman

Faculty Scholarship

The SEC’s Strategic Plan for Fiscal Years 2022–2026 is focused on the impact of the rapidly developing rate of change in new technologies that provide for markets to be more interconnected and interdependent than ever. Because Congress has yet to give the SEC, or any other agency, express authority to regulate cryptocurrency, the SEC has taken a regulation-by-enforcement approach. The SEC’s recent enforcement efforts relating to crypto asset securities were substantial, with enforcement actions addressing a range of alleged misconduct in the crypto asset securities space, including billion- dollar crypto fraud schemes; unregistered crypto asset offerings, platforms, and intermediaries; and …

Amending Regulation D’S Accredited-Investor Definition To Allow Natural Persons To Opt Out Of Unwanted Regulatory Protections, John Orcutt

Law Faculty Scholarship

Everyone can invest in the heavily regulated registered (or public) securities market, but the more lightly regulated unregistered securities markets are more restricted. The most important unregistered securities market for capital-raising purposes is Rule 506 of Regulation D, which has grown to become the United States’ largest capital-raising market. Far more capital is raised each year in Rule 506 offerings than registered offerings, and the Rule 506 market is where many of the country’s highest-growth (and highest-return) entrepreneurial companies sell their securities. But most Americans are excluded from investing in the Rule 506 market because it is fundamentally restricted to …

Debt Tokens, Andrea Tosato, Diane Lourdes Dick, Christopher K. Odinet

Faculty Scholarship

The worlds of crypto and bankruptcy have collided. Once-prominent, fast-growing, and even politically influential platforms for trading cryptocurrencies have imploded spectacularly. Gone are the glossy advertisements, celebrity endorsements, and proclamations that blockchain operates as a law unto itself. Instead, insolvent crypto businesses—including the crypto exchange giant FTX—find themselves in bankruptcy court, no different from any other failed enterprise. These bankruptcies reveal a startling reality: individual investors who placed their trust in these platforms have been stripped of their digital assets. In their stead, they hold hard-to-collect claims against these defunct platforms.

Amid the chill of the crypto winter, bankruptcy has …