Securities Law Commons^™

Pslra, Slusa, And Variable Annuities: Overlooked Side Effects Of A Potent Legislative Medicine, Michael J. Borden

Mercer Law Review

This Article highlights a harmful and far-reaching unintended consequence of two major pieces of securities litigation reform legislation1 that were passed as part of the Republican party's Contract with America in the mid-1990s. These reforms were justified, in part, on the grounds that they would benefit investors by improving disclosure of financial information by corporations. However, for many aggrieved investors, the effect of the legislation was just the opposite. Because of inadequate and misleading disclosures made by life insurance companies and their registered representatives, consumers were induced to purchase inappropriate investments carrying excessive fees that reduced the value of their …

Rules, Principles, And The Accounting Crisis In The United States, William Wilson Bratton

Articles

The Sarbanes-Oxley Act and the Securities Exchange Commission move too quickly when they prod the Financial Accounting Standards Board, the standard setter for US GAAP, to move immediately to a principles-based system. Priorities respecting reform of corporate reporting in the US need to be ordered more carefully. Incentive problems impairing audit performance should be solved first through institutional reform insulating the audit from the negative impact of rent-seeking and solving adverse selection problems otherwise affecting audit practice. So long as auditor independence and management incentives respecting accounting treatments remain suspect, the US reporting system holds out no actor plausibly positioned …

Comparisons Among Firms: (When) Do They Justify Mandatory Disclosure?, Sharon Hannes

ExpressO

Comparisons among firms play a major role in securities analysis. This essay asks if this fact justifies the mandatory nature of securities regulation. Once a firm approaches the public securities markets, federal securities regulations compel it to disclose financial information to the public. A seminal theory argues that firms would not otherwise commit to maintain optimal disclosure levels, since a disclosing firm bears all disclosure costs but does not gain all disclosure benefits.

This paper examines the robustness of this argument in relation to disclosure benefits which arise from comparisons among firms. Financial data of peer firms allows shareholders to …

Public Company Shareholders Acting As Owners: Three Reforms--Introducing The "Oversight Shareholder" (With E. Fogel & D. Addis), Edward C. Harris

All Faculty Scholarship

No abstract provided.

Dancing With Wolves: Regulation And De-Regulation Of Foreign Investment In China's Stock Market, Jiangyu Wang

ExpressO

China’s stock market is the world’s youngest one and the fastest-growing one as well. During the past decade, it has been developed with a variety of unique features, most of which are inconsistent with the concept of a viable market economy. China’s dualist regulatory regime has different sets of rules for domestic participants and foreign investors. For a long period, foreign investment in the stock market was subject to severe restrictions and effectively excluded from all market activities except in the B shares market. Fundamental changes, however, have occurred following China’s accession to the WTO, especially in the last two …

Entering The U.S. Securities Markets: Regulation Of Non-U.S. Issuers, Barbara Black

Faculty Articles and Other Publications

The U.S. securities markets offer the greatest opportunities for businesses that wish to raise additional capital or expand their shareholder base. Large non-U.S. corporations regularly tap the U.S. market for infusions of capital, and the securities of many non-U.S. corporations are listed on the New York Stock Exchange or traded on NASDAQ. Smaller non-U.S. entities, however, may be deterred from entering the U.S. markets because of concerns about the burdens of U.S. securities regulation. These concerns are legitimate: a decision to enter the highly-regulated U.S. securities markets should not be made lightly. For non-U.S. private issuers, perhaps the greatest difficulty …

Is Securities Arbitration Fair To Investors?, Barbara Black

Faculty Articles and Other Publications

Most disputes between customers and their brokerage firms are resolved through arbitration as a result of the Supreme Court's holding in Shearson/American Express, Inc. v. McMahon. McMahon was part of two larger trends of the Supreme Court: the Court's general pro-arbitration trend and its efforts to remove private securities fraud claims from federal court. Many investor advocates viewed McMahon as anti-investor, a view that continues to have support today.

This is an assessment of the current securities arbitration process from the perspective of an investor advocate. In my view, investors may fare better in arbitration than in litigation. Accordingly, the …

Protecting The Perception Of The Public Markets: At What Costs - The Effects Of Noisy Withdrawal On The Long Standing Attoney-Corporate Client Relationship, Todd J. Canni

St. Thomas Law Review

"Sarbanes-Oxley," this phrase has echoed in the minds of corporate attorneys for almost two years now. Over this period of time, most corporate attorneys have come to recognize the general breadth of this Act. Aside from having a basic understanding, however, do corporate attorneys know the true effects this Act and the corresponding proposal will have on the legal profession and the companies they represent? The scope of this article is concerned with just that. Specifically, this examination concerns the U.S. Securities and Exchange Commission's proposed "noisy withdrawal" provision. Briefly, noisy withdrawal refers to the final measures an attorney would …

Sec Enforcement Of Attorney Up-The-Ladder Reporting Rules: An Analysis Of Institutional Constraints, Norms And Biases, Michael A. Perino

Villanova Law Review (1956 - )

No abstract provided.

Lawyers In The Moral Maze, Mark A. Sargent

Villanova Law Review (1956 - )

No abstract provided.

David Pays For Goliath's Mistakes: The Costly Effect Sarbanes-Oxley Has On Small Companies, 38 J. Marshall L. Rev. 671 (2004), Nathan Wilda

UIC Law Review

No abstract provided.

Over-Preemption Of State Vacatur Law: State Courts And The Faa, Jill I. Gross

Elisabeth Haub School of Law Faculty Publications

This Article will examine the state courts' approach to FAA preemption on a vacatur motion since the most recent Supreme Court FAA preemption decisions. This Article will demonstrate that, with little or no analysis, state courts over-apply the FAA to commercial arbitration awards, particularly the "manifest disregard" prong, causing what I call "over-preemption" and frustrating their own state's interests in the application of its arbitration law. Part II of this Article will briefly review Supreme Court FAA preemption jurisprudence. Part III of this Article will use illustrative state court decisions to demonstrate that the state courts are applying FAA preemption …

The Muddled Duty To Disclose Under Rule 10b-5, Donald C. Langevoort, G. Mitu Gulati

Faculty Scholarship

No abstract provided.

Legal And Ethical Duties Of Lawyers After Sarbanes-Oxley, Roger C. Cramton, George M. Cohen, Susan P. Koniak

Villanova Law Review (1956 - )

No abstract provided.

Avoiding Regulatory Mismatch In The Workplace: An Informational Approach To Workplace Safety Regulation, Thom Lambert

Faculty Publications

The purpose of this article is to do just that. As it turns out, there is fertile middle ground between the pure libertarian “do nothing” approach and the paternalistic command-and-control approach OSHA tends to favor. Even the middle ground “information-provision” approach a number of theorists have advocated (in imprecise terms) could be implemented several different ways, some of which would be more effective than others. It is therefore possible to make some systematic policy prescriptions that may aid regulators attempting to avoid regulatory mismatch.In the course of exploring the range of regulatory options, this article attempts to make several contributions …

Making It Easier To Milk The Cow: The Southern District Of New York Collapses The Culpable Participation Doctrine And Sidesteps The Private Securities Litigation Reform Act, Matthew W. Goulding

Villanova Law Review (1956 - )

No abstract provided.

Sarbanes-Oxley 307: Trusted Counselors Or Informers, M. Peter Moser, Stanley Keller

Villanova Law Review (1956 - )

No abstract provided.

Be Careful What You Wish For: How Accountants And Congress Created The Problem Of Auditor Independence, Sean M. O'Connor

Articles

Although corporate fraud is not held in check by our current audit process, in which auditors lack independence from the clients they inspect, numerous attempts to fix this problem have failed. This Article analyzes the history of auditing, which has been neglected in legal scholarship, to argue that the mandatory audit system created the problem of auditor independence. Accountants advocated for the system in order to gain the status of a learned profession; however, they received more than they bargained for. In particular, auditors incurred an obligation to the "investing public," but this undefined group does not actually control the …

What Caused Enron? A Capsule Social And Economic History Of The 1990s, John C. Coffee Jr.

Faculty Scholarship

The sudden explosion of corporate accounting scandals and related financial irregularities that burst over the financial markets between late 2001 and the first half of 2002 – Enron, WorldCom, Tyco, Adelphia and others – raises an obvious question: Why now? What explains the concentration of financial scandals at this moment in time? Much commentary has rounded up the usual suspects and placed the blame on a decline in business morality, an increase in "infectious greed," or other similarly subjective trends that cannot be reliably measured. Although none of these possibilities can be dismissed out of hand, approaches that simply reason …

The Option Element In Contracting, Avery W. Katz

Faculty Scholarship

Most contractual arrangements are either structured as options or include options as important elements. As a result, many of the major doctrines of contract law effectively operate to create or to set the terms of such options. For instance, it has long been recognized that a contract that is enforceable only through monetary liability operates in practice as an option, because as a legal matter the promisor retains the power either to perform or to breach and pay damages. Similarly, the doctrine of promissory estoppel, which attaches liability to precontractual statements in cases where they are reasonably relied upon, effectively …

Mome In Hindsight, Ronald J. Gilson, Reinier Kraakman

Faculty Scholarship

Two decades ago, the Virginia Law Review published our article “The Mechanisms of Market Efficiency” (MOME), in which we tried to discern the institutional underpinnings of financial market efficiency. We concluded that the level of market efficiency with respect to a particular fact depends on which of several market mechanisms — universally informed trading, professionally informed trading, derivatively informed trading, and uninformed trading (each of which we explain below) — operates to reflect that fact in market price. Which mechanism is operative, in turn, depends on how widely the fact is distributed among traders, which, I turn, depends on the …

Measuring Share Price Accuracy, Merritt B. Fox

Faculty Scholarship

This Article concerns how to measure share price accuracy. It is prompted by the fact that many scholars believe that the prices established in the stock market affect the efficiency of the real economy. In their view, more accurate prices increase the amount of value added by capital-utilizing enterprises as these enterprises use society's scarce resources for the production of goods and services. More accurate share prices help improve both the quality of choice among new proposed investment projects in the economy and the operation of existing real assets currently in corporate hands.

The proposition that more accurate share prices …

Prescribing The Pill In Japan?, Curtis J. Milhaupt

Faculty Scholarship

Contrary to popular belief, corporate Japan is changing incrementally, to be sure, but changing nonetheless. One of the areas of greatest potential change is the legal and business environment for mergers and acquisitions ("M&A"), including hostile M&A. Recent amendments to Japan's Commercial Code in the areas of stock swaps and divestitures are helping to facilitate M&A transactions. At the same time, the constellation of shareholders in Japanese firms is changing as cross-shareholding declines and foreign investment increases. M&A activity in Japan has increased significantly in recent years.

Pslra, Slusa, And Defrauded Retirement Investors: Overlooked Side Effects Of A Potent Legislative Medicine, Michael J. Borden

Law Faculty Articles and Essays

This Article highlights a harmful and far-reaching unintended consequence of two major pieces of securities litigation reform legislation that were passed as part of the Republican party's Contract with America in the mid-1990s. These reforms were justified, in part, on the grounds that they would benefit investors by improving disclosure of financial information by corporations. However, for many aggrieved investors, the effect of the legislation was just the opposite. Because of inadequate and misleading disclosures made by life insurance companies and their registered representatives, consumers were induced to purchase inappropriate investments carrying excessive fees that reduced the value of their …

Should Issuers Be On The Hook For Laddering? An Empirical Analysis Of The Ipo Market Manipulation Litigation, Adam C. Pritchard, Stephen J. Choi

Articles

On December 6, 2000, the Wall Street Journal ran a front-page story exposing abuses in the market for initial public offerings (IPOs). The story revealed "tie-in" agreements between investment banks and initial investors seeking to participate in "hot" offerings. Under those agreements, initial investors would commit to buy additional shares of the offering company's stock in secondary market trading in return for allocations of shares in the IPO. As the Wall Street Journal related, those "[c]ommitments to buy in the after-market lock in demand for additional stock at levels above the IPO price. As such, they provide the rocket fuel …

Experiments In Comparative Corporate Law: The Recent Italian Reform And The Dubious Virtues Of A Market For Rules In The Absence Of Effective Regulatory Competition, Marco Ventoruzzo

Faculty Scholarship

The article addresses a sweeping Reform of corporate law which was enacted by the Italian government in 2003 and came into effect on January 1, 2004. The new statutory regulation significantly increases freedom of contract in corporate law, relying on the idea that the development of an efficient market for rules will allow the "natural selection" of the rules that better suit the need of the different stakeholders. Together - and to some extent to compensate for - this greater freedom of contract, new protections for minority shareholders have also been implemented. The reform also imports into the Italian legal …

Exchanges Of Multiple Stocks And Securities In Corporate Divisions Or Acquisitive Reorganizations, Douglas A. Kahn, Jeffrey S. Lehman

Articles

If specified conditions are satisfied, the Internal Revenue Code provides nonrecognition for gain or loss realized when stocks and securities of one corporation are exchanged for stocks and securities of another corporation. When the exchange is made as part of a corporate division (a split-off or a split-up), the principal nonrecognition provision is section 355; and when the exchange is made as part of an acquisitive reorganization, the principal nonrecognition provision is section 354. Complete nonrecognition is provided only when stock is exchanged solely for stock and securities are exchanged solely for securities of no greater principal amount. If, in …

Legal And Ethical Duties Of Lawyers After Sarbanes-Oxley, Roger C. Cramton, George M. Cohen, Susan P. Koniak

Cornell Law Faculty Publications

No abstract provided.

Squeeze-Outs, Freeze-Outs And Discounts: Why Is Illinois In The Minority In Protecting Shareholder Interests?, Charles W. Murdock

Faculty Publications & Other Works

No abstract provided.

Telling All: The Sarbanes-Oxley Act And The Ideal Of Transparency, David A. Westbrook

Journal Articles

No abstract provided.