Securities Law Commons^™

The Prototype Carbon Fund: A New Departure In International Trusts And Securities Law, Sophie Smyth

Sustainable Development Law & Policy

No abstract provided.

Time-Inconsistent Management & The Sarbanes-Oxley Act, Manuel A. Utset

Scholarly Publications

No abstract provided.

At A Loss: Congress, The Supreme Court And Causation Under Federal Securities Law, Michael J. Kaufman

Faculty Publications & Other Works

No abstract provided.

Private Litigation To Enforce Fiduciary Duties In Mutual Funds: Derivative Suits, Disinterested Directors And The Ideology Of Investor Sovereignty, Donald C. Langevoort

Georgetown Law Faculty Publications and Other Works

This article focuses on independent directors and the processes of mutual fund corporate governance. To be clear, I believe (and research shows) that disinterested directors do add value as a form of shareholder protection, and this fact justifies the SEC's efforts to strengthen their role. But they are far from a panacea. While that point alone is almost trite, exploring some of the unique features of mutual fund governance shows why judges and policymakers should not even try to reason by analogy to governance in other kinds of corporations. Yet that is exactly what Burks and its progeny have done. …

Attorney Liability Under The State Securities Laws: Landscapes And Minefields, Marc I. Steinberg, Chris Classen

Faculty Journal Articles and Book Chapters

Attorneys face significant liability exposure under the state securities laws, and they can be held primarily liable when they are "sellers" of securities, or under some state statutes, like California, when they are experts. Depending on the applicable jurisdiction and counsel's status relative to the subject client, secondary liability may be incurred. In a number of states, counsel has liability exposure based on materially aiding the primary violator with the requisite intent.

This article surveys and analyzes attorney liability under state securities law. After presenting a succinct overview of applicable state law in Part II, the article then provides a …

Minimizing Corporate Liability Exposure When The Whistle Blows In The Post Sarbanes-Oxley Era, Marc I. Steinberg, Seth A. Kaufman

Faculty Journal Articles and Book Chapters

Over the past few years, numerous newspapers and magazines have featured stories discussing whistleblowers. From Sherron Watkins at Enron to Cynthia Cooper at Worldcom, employees who reported perceived corporate fraud have received widespread attention. With this increased public focus, Congress chose to provide statutory protection in the whistleblower corporate or securities law context through enactment of the Sarbanes-Oxley Act of 2002 (SOX).

Prior to SOX, federal and state statutes (as well as common law) existed to protect whistleblowers in specific settings. For example, the False Claims Act provides protection to individuals who report fraudulent activities committed against the federal government. …

Suitability Claims And Unrecommended Securities Purchases: An Agency Theory Of Broker-Dealer Liability, Frederick Mark Gedicks

Faculty Scholarship

It is well-established that full-service broker-dealers have an obligation to recommend to their customers only the purchase of securities that are "suitable" to the customer's investment objectives and financial situation. There seems to be widespread agreement, however, that a broker-dealer cannot incur liability on suitability grounds unless it first recommends a securities purchase to a customer.

Accordingly, discount broker-dealers argue they are necessarily immune from liability on suitability claims because they act as "order clerks" who merely execute unsolicited customer orders; online discounters have adopted the same position. Full-service broker-dealers similarly argue that although they owe a suitability obligation for …

Rombach V. Chang: To 9(B) Or Not To 9(B), Scott D. Woller

NYLS Law Review

No abstract provided.

Introduction: The Fifth Annual A.A. Sommer, Jr. Lecture On Corporate, Securities & Financial Law, William Michael Treanor

Georgetown Law Faculty Publications and Other Works

Welcome and Introduction to the Fifth Annual A. A. Sommer, Jr. Lecture on Corporate, Securities & Financial Law, November 9, 2004 at Fordham University School of Law.

Fordham Law School, with the support of Morgan, Lewis & Bockius, inaugurated the A. A. Sommer, Jr. Lecture Series in the fall of 2000 with the timely insights of the Securities and Exchange Commission's (the "SEC" or the "Commission") then-Chair Arthur Leavitt. Since then, the Sommer Lecture has continued to bring to Fordham such heavyweights as Mary Schapiro, President of National Association of Securities Dealers ("NASD") Regulation, Inc., SEC Commissioner Harvey Goldschmid, and …

The Sec At 70: Time For Retirement?, Adam C. Pritchard

Articles

The Article proceeds as follows. Part I explains the pathologies of the SEC and explores the relation between those pathologies and the SEC's status as an independent agency. Part II then outlines an alternative regulatory structure primarily situated within the executive branch. I also argue that such a relocation of authority would enhance regulatory effectiveness while simultaneously reducing the cost of excessive regulation. The Article concludes with some thoughts about the viability of my proposal.

Regulation Of Companies With Publicly Listed Share Capital In The People's Republic Of China, Nicholas C. Howson

Articles

Mr. Chairman, colleagues, and friends: It is a great honor for me to be able to address this group of experts and legislators, and many colleagues and friends, on a topic I care deeply about-the regulation of so-called public companies, both outside of China and, since the early 1990s, inside of China. First, and with many of the others invited to participate in this conference today and tomorrow, I thank the Office of Legislative Affairs ("OLA") of the State Council of the People's Republic of China ("PRC") as well as the China Securities Regulatory Commission ("CSRC") for convening this very …

The Sec At 70: Time For Retirement?, Adam C. Pritchard

Articles

As one grows older, birthdays gradually shift from being celebratory events to more reflective occasions. One's 40th birthday is commemorated rather differently from one's 2lst, which is, in turn, celebrated quite differently from one's first. After a certain point, the individual birthdays become less important and it is the milestone years to whch we pay particular attention. Sadly for entities like the Securities and Exchange Commission, it is only the milestone years (the ones ending in five or zero, for some reason), that draw any attention at all. No one held a conference to celebrate the SEC's 67th anniversary. Clearly …

What Counts As Fraud? An Empirical Study Of Motions To Dismiss Under The Private Securities Litigation Reform Act, Adam C. Pritchard, Hillary A. Sale

Articles

This article presents the findings of a study of the resolution of motions to dismiss securities fraud lawsuits since the passage of the Private Securities Litigation Reform Act (PSLRA) in 1995. Our sample consists of decisions on motions to dismiss in securities class actions by district and appellate courts in the Second and Ninth Circuits for cases filed after the passage of the Reform Act to the end of 2002. These circuits are the leading circuits for the filing of securities class actions and are generally recognized as representing two ends of the securities class action spectrum. Post-PSLRA, the Second …

Do Institutions Matter? The Impact Of The Lead Plaintiff Provision Of The Private Securities Litigation Reform Act, Adam C. Pritchard, Stephen J. Choi, Jill E. Fisch

Articles

When Congress enacted the Private Securities Litigation Reform Act in 1995 ("PSLRA"), the Act's "lead plaintiff' provision was the centerpiece of its efforts to increase investor control over securities fraud class actions. The lead plaintiff provision alters the balance of power between investors and class counsel by creating a presumption that the investor with the largest financial stake in the case will serve as lead plaintiff. The lead plaintiff then chooses class counsel and, at least in theory, negotiates the terms of counsel's compensation. Congress's stated purpose in enacting the lead plaintiff provision was to encourage institutional investors-pension funds, mutual …

Assessing The Deterrent Effect Of The Sarbanes-Oxley Act's Certification Provisions, Kathleen A. Lacey, Barbara C. George, Clyde Stoltenberg

Vanderbilt Journal of Transnational Law

In the 1970s, Congress reacted to the financial wrongdoing of Lockheed Corp. and others by enacting § 102 of the Foreign Corrupt Practices Act (FCPA), which (1) requires corporations to keep records that accurately reflect financial transactions and (2) mandates a system of internal accounting controls. Going a step further in 2002, Congress responded to the Enron scandal by imposing personal accountability on chief executive officers in the Sarbanes-Oxley Act (SOA). After recounting responses prior to the existence of the Securities and Exchange Commission (SEC) to corporate abuses and the historical background of the SEC's requirements for corporate financial reporting …

Rule 10b-5 And The "Unfitness" Question, Jayne W. Barnard

Faculty Publications

No abstract provided.

Uncovering A Gatekeeper: Why The Sec Should Mandate Disclosure Of Details Concerning Directors' And Officers' Liability Insurance Policies, Sean J. Griffith

Faculty Scholarship

This Article explores the connection between corporate governance and directors’ and officers’ (D&O) insurance. It argues that D&O insurers act as gatekeepers and guarantors of corporate governance, screening and pricing corporate governance risks to maintain the profitability of their risk pools. As a result, in a well-working insurance market, D&O insurance premiums would convey the insurer's assessment of a firm's governance quality. Simply stated, firms with better corporate governance would pay relatively low D&O premiums, while firms with worse corporate governance would pay more. This simple relationship could signal important information to investors and other capital market participants. Unfortunately, the …

Does The Efficient Market Theory Help Us Do Justice In A Time Of Madness, William O. Fisher

Law Faculty Publications

This Article questions how well the efficient market theory, as applied by event studies, works in cases originating during the Internet, high-tech, and telecommunications bubble of 1998 to 2001. In doing so, the Article discusses technical and theoretical challenges to the efficient market theory. Principally, however, this Article argues that the use of the efficient market theory-and relatedly the event study methodology-is inappropriate in bubble cases for normative reasons. The normative connection between the efficient market theory-applied through event studies-and the lOb-5 elements-reliance, materiality, loss causation, and damages-presupposes that the market acts rationally. Market professionals supposedly impose that rationality through …

Aol Time Warner And The False God Of Shareholder Primacy, Matthew T. Bodie

All Faculty Scholarship

The blockbuster merger between AOL and Time Warner, in the twilight of the dot-com boom, is now characterized as perhaps the worst business combination ever. Shareholders lost over $200 billion in value; the deal's architects were forced out in disgrace; and the surviving executives jettisoned the AOL name as if towipe clean our collective memory. Despite the merger's seismic effects, relatively little has been written about its potential legal ramifications. In this article, I suggest that the collapse of AOL Time Warner is a cautionary tale for those who would advocate greater adherence to the norm of shareholder primacy. Before …

Developing A Law/Business Collaboration Through Pace's Securities Arbitration Clinic, Jill I. Gross

Elisabeth Haub School of Law Faculty Publications

This article details an interdisciplinary collaboration between the Securities Arbitration Clinic at Pace Law School (“SAC”) and the graduate program at Pace University's Lubin School of Business, designed and initiated by the authors. The purpose of the collaboration is to provide a co-curricular learning experience to both J.D. and graduate business students1 while enhancing the pro bono legal services delivered by SAC to its clients. Part I of this article details the history of SAC before the authors initiated the collaboration, and the reasons SAC needed financial expertise. Part II of this article describes models of interdisciplinary collaboration, particularly between …

The Corporation As Insider Trader, William K.S. Wang, Mark J. Loewenstein

Faculty Scholarship

No abstract provided.

Investment Banks As Fiduciaries: Implications For Conflicts Of Interest, Andrew F. Tuch

Scholarship@WashULaw

Investment banks play an intermediary role in the financial system that is integral to its efficient operation. A core, and highly visible, part of their work involves providing financial advisory services to institutional clients on transactions that have strategic importance, such as mergers and acquisitions. As these services are but one aspect of the broad and diverse range of financial services that investment banks typically provide, challenges such as conflicts of interest inevitably arise. Somewhat anomalously, the question of whether these firms owe fiduciary duties to their clients when providing financial advisory services has received little regulatory, judicial or scholarly …

Executive Compensation: If There's A Problem, What's The Remedy? The Case For "Compensation Discussion And Analysis", Jeffrey N. Gordon

Faculty Scholarship

High levels of executive compensation have triggered an intense debate over whether compensation results primarily from competitive pressures in the market for managerial services or from managerial overreaching. Professors Lucian Bebchuk and Jesse Fried have advanced the debate with their recent book, Pay Without Performance: The Unfulfilled Promise of Executive Compensation, which forcefully argues that current compensation levels are best explained by managerial rent-seeking, not by arm's-length bargaining designed to create the optimum pay and performance nexus. This paper expresses three sorts of reservations with their analysis and advances its own proposals. First, enhancing shareholder welfare is not, as a …

Demystifying Causation In Fraud-On-The-Market Actions, Merritt B. Fox

Faculty Scholarship

An issuer makes a positive, material misstatement in violation of Rule 10b-5. What must an investor who purchases the issuer's shares on the open market show to establish causation in a "fraud-on-the-market" action for damages? After years of confusion in the lower courts, the Supreme Court recently granted certiorari on the question in the case of Broudo v. Dura Pharmaceuticals.

This Article argues that the confusion in the lower courts has arisen because they have analyzed the issue in terms of the twin concepts of "transaction causation" and "loss causation." They initially developed this bifurcated framework as a way …

Causation By Presumption? Why The Supreme Court Should Reject Phantom Losses And Reverse Broudo, John C. Coffee Jr.

Faculty Scholarship

Over a quarter of a century ago, Judge Henry Friendly coined the term "fraud by hindsight" in upholding the dismissal of a proposed securities class action. As he explained, it was too simple to look backward with full knowledge of actual events and allege what should have been earlier disclosed by a public corporation in its Security and Exchange Commission (SEC) filings. Because hindsight has twenty/twenty vision, plaintiffs could not fairly "seize [] upon disclosures" in later reports, he ruled, to show what defendants should have disclosed earlier.

Today, a parallel concept – "causation by presumption" – is before the …

Understanding Dura, Merritt B. Fox

Faculty Scholarship

On April 19, 2005, the Supreme Court announced its unanimous opinion in Dura Pharmaceuticals, Inc. v. Broudo, concerning what a plaintiff must show to establish causation in a Rule 10b-5 fraud-on-the-market suit for damages. The opinion had been awaited with considerable anticipation, being described at the time of oral argument in the Financial Times, for example, as the "most important securities case in a decade." After the opinion was handed down, a representative of the plaintiffs' bar lauded it as a unanimous ruling protecting investors' ability to sue. A representative of the defendant's bar equally enthusiastically hailed it as …

Toward A Reform-Minded Model For Securities Law Enforcement, Cristie Ford

All Faculty Publications

This paper examines a significant shift in enforcement practice at the United States Securities and Exchange Commission, originating under the Chairmanship of William Donaldson but likely to continue beyond it. This shift is a response to a crisis of corporate governance, exemplified by recent scandals among various public corporations and financial services institutions, and to the demonstrated inadequacy of SEC enforcement tools to respond to that crisis. While the SEC's new approach, which I call the Reform Undertaking, is incomplete, I argue that if properly implemented it may have the potential to spur institutional reform not only in corporate governance, …

Letting Billions Slip Through Your Fingers: Empirical Evidence And Legal Implications Of The Failure Of Financial Institutions To Participate In Securities Class Action Settlements, James D. Cox, Randall S. Thomas

Faculty Scholarship

In a pilot study we published two years ago, we reported that nearly two-thirds of the institutional investors with financial losses in 53 settled securities class actions fail to submit claims. As a consequence of this failure substantial sums they were entitled to receive were given to others. This article presents the results of a much more extensive investigation of the frequency with which financial institutions submit claims in settled securities class actions. We combine an empirical study of a much larger set of settlements with the results of a survey of institutional investors about their claims filing practices. Consistent …

The Corporation As Insider Trader, Mark J. Loewenstein, William K.S. Wang

Publications

With regard to issuer purchases, some of the traditional policy rationales against insider trading do not apply or apply with less force. Nevertheless, courts, commentators, and the SEC have all stated or assumed that a public corporation violates rule 10b-5 by buying its own shares in the market based on material, nonpublic information. In rule 10b-5 cases involving face-to-face transactions, several circuit courts have ruled that the company may not purchase its own stock based on material information not known to the seller. No good reason exists not to apply these precedents to stock market trades by issuers, especially because …

The Supreme Court, Rule 10b-5, And The Federalization Of Corporate Law, Mark J. Loewenstein

Publications

This Article examines Supreme Court jurisprudence since 1997 under the federal securities laws in light of the Court's earlier securities law decisions and in light of its recent decisions construing the Constitution and federal statutes as they relate to the regulation of business. These post-1977 cases strongly suggest that the much-heralded new federalism philosophy of the Supreme Court is not a factor in securities law cases or in business cases generally. Indeed, the opposite seems to be the case. In this context, new federalism cases appear to be an anomaly, with the reality being that the Court is still as …