Securities Law Commons^™

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 …

Exclusive Federal Jurisdiction For Implied Rule 10b-5 Actions: The Emperor Has No Clothes, Margaret V. Sachs

Scholarly Works

Courts have long assumed the existence of exclusive federal jurisdiction over private actions implied from section 10(b) of the Securities Exchange Act of 1934 and rule 10b-5. The result is not only to restrict forum choice for rule 10b-5 claimants but also to generate a host of questions concerning the extent of federal authority: whether rule 10b-5 actions are exempt from the claim and issue preclusive effects of state court decisions; whether state courts can hear defenses and state-created claims that involve rule 10b-5; and whether federal courts can stay rule 10b-5 actions in deference to state court litigation. In …

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 …