Securities Law Commons^™

Who Can Be Against Fairness? The Case Against The Arbitration Fairness Act, Peter B. Rutledge

Cardozo Journal of Conflict Resolution

In this brief essay, I hope to lay out the case against the Arbitration Fairness Act. Part I of this Article addresses the "findings" on which the act is premised. It explains how in several respects the current research on arbitration flatly contradicts the premises animating those findings (in other respects, the data is incomplete, so the "findings" at best are better described as "untested hypotheses" or "assumptions"). Part II of this Article explains why postdispute arbitration is not a viable alternative to our present system of enforceable predispute arbitration clauses.

Sovereign Wealth Funds And Corporate Governance: A Minimalist Response To The New Mercantilism, Ronald J. Gilson, Curtis J. Milhaupt

Faculty Scholarship

Keynes taught years ago that international cash flows are always political. Western response to the enormous increase in the number and the assets of sovereign wealth funds (SWFs), and other government-directed investment vehicles that often get lumped together under the SWF label, proves Keynes right. To their most severe critics, SWFs are a threat to the sovereignty of the nations in whose corporations they invest. The heat of the metaphors matches the volume of the complaints. The nations whose corporations are targets of investments are said to be threatened with becoming "sharecropper" states if ownership of industry moves to foreign-government …

Corporate Therapeutics At The Securities And Exchange Commission, Jayne W. Barnard

Faculty Publications

No abstract provided.

Corporate America Fights Back: The Battle Over Waiver Of The Attorney-Client Privilege, Michael L. Seigel

UF Law Faculty Publications

This Article addresses a topic that is the subject of an on-going and heated contest between the business lobby and its lawyers, on the one side, and the U.S. Department of Justice on the other. The fight is over federal prosecutors' escalating practice of requesting that corporations accused of criminal wrongdoing waive their attorney-client privilege as part of their cooperation with the government. The Department of Justice views privilege waiver as a legitimate and critical tool in its post-Enron battle against white collar crime. The business lobby views it as encroaching on corporations' fundamental right to protect confidential attorney-client communications. …

Codes Of Ethics And State Fiduciary Duties: Where Is The Line?, Z. Jill Barclift

Faculty Scholarship

The important function of disclosure under federal securities laws and regulations, and the role of management in running the affairs of the corporation consistent with state fiduciary principles have a history of discord. The recent mandates of the Sarbanes-Oxley Act (“SOX Act” or “SOX”), and the Security and Exchange Commission’s (“SEC”) implementing regulations continue to increase the disclosure obligations of public companies. This article examines the implementation of code of ethics requirements under SOX. It examines the SEC’s regulations, which implement SOX requirements on the disclosure of codes of ethics, and self-regulatory agency (“SRO” or “listing agency”) rules on codes …

Takeover Regulation As A Wolf In Sheep's Clothing: Taking U.K Rules To Continental Europe, Marco Ventoruzzo

Faculty Scholarship

Aesop was an optimist. In his cautionary fable that inspired the famous admonition about wolves in sheep's clothing, the predator intentionally dons a sheep's fleece in order to sneak up on a lamb. His disguise, it turns out, is so effective that he ends up being mistaken for the real thing and killed by another wolf. According to Aesop, even the most effective fraud can turn against its perpetrator, and justice be done. The results are not always so salutary with other clandestine predators, including legal rules that appear aimed at protecting vulnerable groups, but instead provide valuable tools to …

Markets, Systemic Risk, And The Subprime Mortgage Crisis, Steven L. Schwarcz

Faculty Scholarship

The recent subprime mortgage meltdown is undermining financial market stability and has the potential to cause a true systemic breakdown, collapsing the world's financial systems like a row of dominoes. This essay uses the subprime crisis to demonstrate that existing protections against systemic risk, which focus on banks and largely ignore financial markets, are anachronistic and misguided. Because companies increasingly access financial markets without going through banks, an effective framework for containing systemic risk must focus on markets.

Do Investors In Controlled Firms Value Insider Trading Laws? International Evidence, Laura Nyantung Beny

Articles

This article characterizes insider trading as an agency problem in firms that have a controlling shareholder. Using a standard agency model of corporate value diversion through insider trading by the controlling shareholder, I derive testable hypotheses about the relationship between corporate value and insider trading laws among such firms. The article tests these hypotheses using firm-level cross-sectional data from twenty-seven developed countries. The results show that stringent insider trading laws and enforcement are associated with greater corporate valuation among the sample firms in common law countries, a result that is consistent with the claim that insider trading laws mitigate agency …

Stoneridge Investment Partners V. Scientific-Atlanta: The Political Economy Of Securities Class Action Reform, Adam C. Pritchard

Articles

I begin in Part II by explaining the wrong turn that the Court took in Basic. The Basic Court misunderstood the function of the reliance element and its relation to the question of damages. As a result, the securities class action regime established in Basic threatens draconian sanctions with limited deterrent benefit. Part III then summarizes the cases leading up to Stoneridge and analyzes the Court's reasoning in that case. In Stoneridge, like the decisions interpreting the reliance requirement of Rule 10b-5 that came before it, the Court emphasized policy implications. Sometimes policy implications are invoked to broaden the reach …

Congress, The Supreme Court And The Proper Role Of Confidential Informants In Securities Fraud Litigation., Michael J. Kaufman

Faculty Publications & Other Works

No abstract provided.

Puelo V Topel: The Court Got It Wrong, Charles W. Murdock

Faculty Publications & Other Works

No abstract provided.

A Primer On Pleading Securities Fraud Under Plsra: The Seventh Circuit’S Decision In Tellabs, Charles W. Murdock

Faculty Publications & Other Works

No abstract provided.

The Milberg Weiss Prosecution: No Harm, No Foul?, Michael A. Perino

Faculty Publications

(Excerpt)

In the late 1990s, the lawyers at Milberg Weiss Bershad Hynes & Lerach were the undisputed kings of securities fraud class actions. Melvyn Weiss, the dean of the securities class action bar and a co-founder of the firm, ran its New York office. Bill Lerach, frequently described as the most hated man in Silicon Valley because of his penchant for suing high technology issuers, ruled its west coast operations. To say that the validity of the firm’s business was a matter of some contention, vastly understates matters. Although some view securities class actions as a necessary supplement to under-resourced …

The Sarbanes-Oxley Act And Ethical Corporate Climates: What The Media Reports; What The General Public Knows, Cheryl L. Wade

Faculty Publications

(Excerpt)

The question for participants in the Securities Regulation Section’s program at the 2008 AALS Annual Meeting was whether recent securities regulation reforms hit their mark. I focus in this essay on The Sarbanes-Oxley Act of 2002 (SOX or the Act), the most important legislative reform of securities markets in recent decades. Enacted to assuage public outrage about corporate greed and malfeasance ignited by media reports describing debacles at Enron, WorldCom, Adelphia, Tyco and other companies in 2001 and 2002 (the Corporate Scandals), SOX represented a legislative and political response to public resentment of what some considered a morally impaired …

The Intersection Between Finance And Intellectual Property: Trade Secrets, Hedge Funds, And Section 13(F) Of The Exchange Act, Erin E. Martin

NYLS Law Review

No abstract provided.

Mother Jones Meets Gordon Gekko: The Complicated Relationship Between Labor And Private Equity, Matthew T. Bodie

All Faculty Scholarship

In 2007 private equity firms came under increasing scrutiny for the favorable tax treatment accorded to their fund managers' compensation. Labor, particularly the Service Workers International Union (SEIU), was instrumental in bringing this issue to the attention of the media and the public. However, SEIU's private equity campaign is just one way in which the union is pursuing its primary concern: increasing the ranks of its members. This Article examines the role that the SEIU private equity campaign plays both in the overall debate about private equity taxation as well as the union's negotiations with private equity firms. It argues …

Demystifying Hedge Funds: A Design Primer, Henry Ordower

All Faculty Scholarship

Describes and analyzes hedge fund structures in the context of the United States statutes and regulations that inform those structures.

A Better Approach For Balancing Authority And Accountability In Shareholder Derivative Litigation, Ann M. Scarlett

All Faculty Scholarship

Corporations present an interesting illustration of the authority versus accountability dilemma. Shareholders elect the directors of the corporation and the law vests those directors with almost unlimited authority to manage the corporation. Yet, shareholders have few effective means for holding directors accountable for their decisions other than through shareholder derivative litigation. In such litigation, the business judgment rule serves as the mechanism by which courts attempt to balance directors' authority to make decisions for the corporation against shareholders' right to hold directors accountable for those decisions.

As this Article discusses, numerous theories exist as to the proper formulation of the …

Confusion And Unpredictability In Shareholder Derivative Litigation: The Delaware Courts' Response To Recent Corporate Scandals, Ann M. Scarlett

All Faculty Scholarship

The Delaware courts responded to the recent wave of corporate scandals, exemplified by Enron and WorldCom, by changing their approach to shareholder derivative litigation. This Article analyzes the Delaware courts' response to these scandals and concludes that the courts have created doctrinal confusion and introduced unpredictability into derivative litigation. This Article also analyzes the future negative consequences for shareholders, corporations, directors, investors, and other litigants. Finally, this Article proposes improvements for derivative litigation that may alleviate the confusion and unpredictability created by the Delaware courts' response to the recent scandals.

In Re Cardinal Health, Inc. Securities Litigation, Lucas T. Charleston

NYLS Law Review

No abstract provided.

Globalization And Corporate Social Responsibility: Challenges For The Academy, Future Lawyers, And Corporate Law, Faith Stevelman

NYLS Law Review

No abstract provided.

Proportionate Securities Regulation: The Potential For Scaled Treatment Of Junior Issuers, Janis P. Sarra

All Faculty Publications

Particular features of Canada’s capital market inform our consideration of moving towards a more proportionate regulatory system. Specifically, Canada has a large number of small public companies; its market cap is concentrated largely in four provinces; it has a particular focus on mining, resources and technology; and a significant number of issuers are cross-listed on US exchanges. Canadian securities regulators have already recognized some measure of proportionate regulation in their national instruments, based on the type of listing. The paper suggests that a number of overriding principles or considerations should be taken into account in respect of a further move …

The Mediation Of Securities Class Action Suits, Jed D. Melnick, Daniel Weinstein, Michael Young, Mary Jo Barry, Max Berger, Michael Goodstein, Gregory Markel, Samuel H. Rudman, Alan Salpeter

Cardozo Journal of Conflict Resolution

On September 27, 2007, a packed Moot Court Room at the Benjamin N. Cardozo School of Law welcomed two prominent JAMS mediators, Judge Daniel Weinstein (Ret.) and Michael Young, Esq., to a symposium on the mediation of securities class actions. Judge Weinstein and Mr. Young were joined by a panel of distinguished practitioners from all sides of the securities class action bar, including plaintiffs' lawyers Max Berger and Sam Rudman, defense lawyers Gregory Markel and Alan Salpeter, and insurance carrier lawyers Mary Jo Barry and Michael Goodstein.

Deconstructing Equity: Public Ownership, Agency Costs, And Complete Capital Markets, Charles K. Whitehead, Ronald J. Gilson

Cornell Law Faculty Publications

The traditional law and finance focus on agency costs presumes that the premise that diversified public shareholders are the cheapest risk bearers is immutable. In this Essay, we raise the possibility that changes in the capital markets have called this premise into question, drawn into sharp relief by the recent private equity wave in which the size and range of public companies being taken private expanded significantly. In brief, we argue that private owners, in increasingly complete markets, can transfer risk in discrete slices to counterparties who, in turn, can manage or otherwise diversify away those risks they choose to …

Hedge Funds And Public Disclosure Requirements: Is The Sec Telling Secrets?, James B. Robertson

Nevada Law Journal

No abstract provided.

Public Pension Funds As Shareholder Activists: A Comment On Choi And Fisch, Randall Thomas

Vanderbilt Law School Faculty Publications

The world of shareholder activism has expanded dramatically over the past twenty years so that it now contains a broad set of actors carrying on a wide range of activities. At one end of the spectrum, hedge fund activist shareholders have taken large investment positions in targeted companies and spent significant amounts of money lobbying aggressively for a host of structural changes at these corporations. At a more intermediate level of activism are the labor union pension funds. The union funds have been active, making innovative uses of the federal securities laws to get shareholder proposals on corporate ballots and …

How Do Securities Laws Influence Affect, Happiness, & Trust?, Peter H. Huang

Publications

This Article advocates that securities regulators promulgate rules based upon taking into consideration their impacts upon investors' and others' affect, happiness, and trust. Examples of these impacts are consumer optimism, financial stress, anxiety over how thoroughly securities regulators deliberate over proposed rules, investor confidence in securities disclosures, market exuberance, social moods, and subjective well-being. These variables affect and are affected by traditional financial variables, such as consumer debt, expenditures, and wealth; corporate investment; initial public offerings; and securities market demand, liquidity, prices, supply, and volume. This Article proposes that securities regulators can and should evaluate rules based upon measures of …

The Fetishization Of Independence, Usha Rodrigues

Scholarly Works

According to conventional wisdom, a supermajority independent board of directors is the ideal corporate governance structure. Debate nevertheless continues: empirical evidence suggests that independent boards do not improve firm performance. Independence proponents respond that past studies reflect a flawed definition of independence.

Remarkably, neither side in the independence debate has looked to Delaware, the preeminent state source for corporate law. Comparing Delaware's notions of independence with those of Sarbanes-Oxley and its attendant reforms reveals two fundamentally different conceptions of independence. Sarbanes-Oxley equates independence with outsider status. An independent director is one who lacks financial ties to the corporation and is …

A Forensic Study Of Daewoo's Corporate Governance: Does Responsibility For The Meltdown Solely Lie With The Chaebol And Korea?, Joongi Kim

Northwestern Journal of International Law & Business

At the end of 1999, one of the largest conglomerates in the world, the Daewoo Group, collapsed in a spectacular fashion. During its peak, Daewoo was a sprawling enterprise with over 320,000 employees with 590 subsidiaries overseas that operated in over 110 countries. Its management received widespread praise and academic recognition for its success. Yet, when the Asian financial crisis hit in 1997, it managed to commit a deception worth 22.9 trillion won ($15.3 billion) that was termed the "biggest accounting fraud in history, surpassing WorldCom and Enron . . . ." Years later, inner-workings of the conglomerate are finally …

Credit Derivatives Market Design, Creating Fairness And Sustainability, Janis P. Sarra

All Faculty Publications

Now that the first wave of the financial crisis has been resolved through the coordinated efforts of regulators and banks, it is important to address some of the systematic weaknesses of the current financial system. One such weakness is the inappropriate incentive effects of the market for credit derivatives, and in particular, for credit default swaps. As a risk management tool, credit derivatives were originally an effective means of diversifying lending risk. Credit derivatives have worked to cover exposures where there have been credit events of the underlying reference entities. To date, the global market for derivatives has operated largely …