Securities Law Commons^™

Evolutionary Enforcement At The Securities And Exchange Commission, Jayne W. Barnard

Faculty Publications

Hundreds of critics in the past eighteen months have heaped abuse on the SEC Enforcement Division. How could the Division have missed so much misbehavior on Wall Street? How could the Division's young lawyers have been charmed by Bernie Madoff and thwarted from discovering his terrible crimes? Most critics seem to agree that the Division's most urgent needs include developing substantially more financial sophistication among Division lawyers and investigators; better communications within the Commission and with other federal agencies; and a meaningful system for handling tips and processing information. The SEC's response to its critics has been remarkable. The Commission …

Blue Skies Ahead: Auction Rate Securities And The Need For A Private Right Of Action For New York Investors, Stephanie Myers

Pace Law Review

No abstract provided.

Corporate Governance In The Courtroom: An Empirical Analysis, Jessica Erickson

William & Mary Law Review

Conventional wisdom is that shareholder derivative suits are dead. Yet this death knell is decidedly premature. The current conception of shareholder derivative suits is based on an empirical record limited to suits filed in Delaware or on behalf of Delaware corporations, leaving suits outside this sphere in the shadows of corporate law scholarship. This Article aims to fill this gap by presenting the first empirical examination of shareholder derivative suits in the federal courts. Using an original, hand-collected data set, my study reveals that shareholder derivative suits are far from dead. Shareholders file more shareholder derivative suits than securities class …

Evolving Regulation Of Corporate Governance And The Implications For D&O Liability: The United States And Australia, Joan T.A. Gabel, Nancy R. Mansfield, Paul Von Nessen, Austin W. Hall, Andrew Jones

San Diego International Law Journal

This Article compares the modern corporate regulatory environments in the United States and Australia, including an analysis of the climate for Directors & Officers (D & O) liability coverage. Comparing these regulations across two large markets with similar historical bases for assessing director and officer liability allows us to explore which reforms may be more effective as new scandals emerge.

Opening The Rule 10b-5 Floodgates: Ninth Circuit Split In Gilead Sciences Leaves The Loss Causation Pleading Standard In Limbo , Brandon J. Stoker

BYU Law Review

No abstract provided.

In Re Williams Securities Litigation—Wcg Subclass: How Dura Met Daubert, Bryan L. Phipps

BYU Law Review

No abstract provided.

Placebo Ethics, Usha Rodrigues, Mike Stegemoller

Scholarly Works

While there are innumerable theories on the best remedy for the current financial crisis, there is agreement on one point, at least: increased transparency is good. We look at a provision from the last round of financial regulation, the Sarbanes Oxley Act of 2002 (SOX), which imposed disclosure requirements tailored to prevent some of the kinds of abuses that led to the downfall of Enron. In response to Enron's self-dealing transactions, Section 406 of SOX required a public company to disclose its code of ethics and to disclose immediately any waivers from that code the company grants to its top …

Reframing Financial Regulation, Charles K. Whitehead

Cornell Law Faculty Publications

Financial regulation today is largely framed by traditional business categories. The financial markets, however, have begun to bypass those categories, principally over the last thirty years. Chief among the changes has been convergence in the products and services offered by traditional intermediaries and new market entrants, as well as a shift in capital-raising and risk-bearing from traditional intermediation to the capital markets. The result has been the reintroduction of old problems addressed by (but now beyond the reach of) current regulation, and the rise of new problems that reflect change in how capital and financial risk can now be managed …

Removal Of Covered Class Actions Under Slusa: The Failure Of Plain Meaning And Legislative Intent As Interpretative Devices, And The Supreme Court's Decisive Solution, J. Tyler Butts

William & Mary Business Law Review

No abstract provided.

The Implications Of Ifrs On The Functioning Of The Securities Antifraud Regime In The United States, Lance J. Phillips

Michigan Law Review

The United States is home to one of the most investor-friendly securities antifraud regimes in the world. Corporate misstatements that form the basis for a cause of action under one of the many antifraud provisions arise in a variety of contexts, an important one being as violations of U.S. generally accepted accounting principles ("GAAP"). For several years, the Securities and Exchange Commission has been considering changing the standardized accounting practice in the United States from GAAP to International Financial Reporting Standards ("IFRS") to promote comparability between global investment opportunities. IFRS is a principles-based system of accounting, while GAAP is rules …

Cleaning The Murky Safe Harbor For Forward-Looking Statements: An Inquiry Into Whether Actual Knowledge Of Falsity Precludes The Meaningful Cautionary Statement Defense, Allan Horwich

Faculty Working Papers

Congress included a safe harbor for forward-looking statements in the 1995 Private Securities Litigation Reform Act. This affords certain issuers and other specified persons limited protection from civil liability for damages under the Securities Act of 1933 and the Securities Exchange Act of 1934 when the projections or objectives in a forward-looking statement are not realized, i.e., turn out to be false. The safe harbor contains two principal elements, in addition to protection for "immaterial" statements: one prong where projections are accompanied by "meaningful cautionary statements," the second prong where the plaintiff fails to prove that the speaker made the …

Breaking Bucks In Money Market Funds, William A. Birdthistle

All Faculty Scholarship

This Article argues that the Securities and Exchange Commission’s first and most significant response to the economic crisis increases rather than decreases the likelihood of future failures in money market funds and the broader capital markets. In newly promulgated regulations addressing the "breaking of the buck" in the $3 trillion money market - a debacle at the fulcrum of the 2008 financial meltdown - the SEC endorses practices that obfuscate rather than illuminate the capital markets, including fixed pricing for money market funds, potentially riskier portfolio requirements, and the continued use of discredited ratings agencies. These policies, premised implicitly upon …

Breaking Bucks: Sec Regulation By Obfuscation, William A. Birdthistle

All Faculty Scholarship

This Article argues that the Securities and Exchange Commission’s first and most significant response to the economic crisis profoundly contradicts widely accepted theoretical and regulatory approaches to financial oversight. More alarmingly, the SEC’s newest rules increase rather than decrease the likelihood of future failures in money market funds and the broader capital markets.

Scholars – of both neoclassical and behavioral economic theory – have long insisted that transparency and disclosure play essential roles in ensuring efficient capital markets and sound financial regulation. Professors Gilson and Kraakman notably argued that the efficient capital market hypothesis, and its reliance on a market …

Investment Indiscipline: A Behavioral Approach To Mutual Fund Jurisprudence, William A. Birdthistle

All Faculty Scholarship

Next Term, in Jones v. Harris, the Supreme Court will be called upon to resolve philosophical divergences on a massive, critical, yet academically slighted subject: the dysfunctional system through which almost one hundred million Americans attempt to save more than ten trillion dollars for their retirement. When this case was in the Seventh Circuit, two of the foremost theorists of law and economics, Chief Judge Frank Easterbrook and Judge Richard Posner, disagreed vociferously on competing analyses of the investment industry. The Supreme Court’s ruling will not only resolve the intricate fiduciary and doctrinal issues of this dispute but also have …

Fiduciary Exemption For Public Necessity: Shareholder Profit, Public Good, And The Hobson's Choice During A National Crisis, Robert J. Rhee

Faculty Scholarship

This Article is written as two discrete, independently accessible topical sections. The first topical section, presented in Part I of this Article, is a case study of Bank of America’s acquisition of Merrill Lynch and the impact of a flawed merger execution on the board’s subsequent decisions. The second topical section, presented Parts II-IV of this Article, advances a theoretical basis for fiduciary exemption during a public crisis. The financial crisis of 2008 was the worst economic disaster since the Great Depression. It nearly resulted in a collapse of the global capital markets. A key event in the history of …

An Insight Into Insider Trading In Greater China, Greg Tzu Jan Yang

Maryland Series in Contemporary Asian Studies

No abstract provided.

The East Asia Summit And The Regional Security Architecture, Ralf Emmers, Joseph Chinyong Liow, See Seng Tan

Maryland Series in Contemporary Asian Studies

No abstract provided.

Trusts Versus Corporations: An Empirical Analysis Of Competing Organizational Forms, A. Joseph Warburton

College of Law - Faculty Scholarship

This paper studies the effects of organizational form on managerial behavior and firm performance, from an empirical perspective. Managers of trusts are subject to stricter fiduciary responsibilities than managers of corporations. This paper examines the ramifications empirically, by exploiting data generated by a change in British regulations in the 1990s that allowed mutual funds to organize as either a trust or a corporation. I find evidence that trust law is effective in curtailing opportunistic behavior, as trust managers charge significantly lower fees than their observationally equivalent corporate counterparts. Trust managers also incur lower risk. However, evidence suggests that trust managers …

The U.S. As Reluctant Shareholder: Government, Business And The Law, Barbara Black

Faculty Articles and Other Publications

Despite the likelihood of future bailouts, the government articulated a consistent policy to deal with private enterprise failure, and there is no rule book for how the government should act This is not surprising; the philosophy of free market capitalism, so deeply engrained in the U.S. economic system, is difficult to reconcile with government's rescue of businesses that fail in that system. Unlike some other countries, the U.S. government does not invest surplus funds or engage in entrepreneurial activities for economic gain. The phrase "nationalizing private business" conveys serious negative connotations.

Accordingly, how the government behaves when it is a …

On Regulating Conflicts Of Interest In The Credit Rating Industry, Lin (Lynn) Bai

Faculty Articles and Other Publications

This paper discusses issues giving rise to conflict of interest concerns in the credit rating industry and examines whether and how those issues are addressed in the current regulation that builds on the guidelines of the Credit Rating Agency Reform Act of 2006, the SEC rules that were initially adopted in 2007 and recently amended in 2009, and the internal code of conducts of rating agencies. The examination leads to a conclusion that conflict of interest at the individual rating analyst level and some concerns of conflict of interest at the agency level have been largely addressed in the current …

The Performance Disclosures Of Credit Rating Agencies: Are They Effective Reputational Sanctions?, Lin (Lynn) Bai

Faculty Articles and Other Publications

The SEC has recently added new provisions to the credit rating agency regulation. These provisions require credit rating agencies to disclose publicly their rating actions and performance measurements. The new requirements seek to achieve two goals: (1) deter conflicts of interest in the credit rating industry by invoking the reputational sanction power of performance statistics, and (2) help new entrants to the industry build a track record so they can compete with established agencies. This paper reveals empirical evidence that the current disclosure requirements cannot achieve these goals and makes recommendations on how the regulation should be improved in light …

"Controlling" Securities Fraud: Proposed Liability Standards For Controlling Persons Under The 1933 And 1934 Securities Acts, Nancy Staudt

Faculty Working Papers

This Student Note investigates the history and intent underlying the controlling person liability provisions of the 1933 and 1934 Securities Act. It notes that courts have adopted a ranges of standards for holding controlling persons liability, but whichever standard is chosen--that standard is applied to both Acts. This note argues that courts should impose unique liability standards for each statute in order to fully realize Congress' purpose in adopting the laws.

How To Improve Retail Investor Protection After The Dodd-Frank Wall Street Reform And Consumer Protection Act, Barbara Black

Faculty Articles and Other Publications

The Dodd-Frank Wall Street Reform and Consumer Protection Act gives the Securities and Exchange Commission authority to address two issues especially important to retail investors. First, section 913 requires the SEC to conduct a six-month study on the effectiveness of existing standards of care for broker-dealers and investment advisers and specifically authorizes the SEC to establish a fiduciary duty for broker dealers. Second, section 921 grants the SEC authority to prohibit the use of predispute arbitration agreements that would require investors to arbitrate future disputes arising under the federal securities laws and regulations or the rules of a self-regulatory organization. …

Introduction: The Sec At 75, Barbara Black

Faculty Articles and Other Publications

This Introduction begins with a brief look back at the creation of the SEC and then examines the present-day agency's expression of its mission. It next reviews the Blueprint's assessment of the agency and its proposal for reform and then turns to the Obama Administration's Financial Regulatory Reform and its proposals relating to the SEC. Finally, this Introduction describes five issues to which the panelists paid particular attention: the SEC's mission, competition among financial markets, the proposal to merge the SEC and the Commodity Futures Trading Commission (CFTC), the role of financial market networks in systemic risk regulation, and the …

Enumerating Old Themes? Berle’S Concept Of Ownership And The Historical Development Of English Company Law In Context, Lorraine E. Talbot

Seattle University Law Review

This paper offers some tentative suggestions as to why Berle’s work has been read and interpreted so selectively in the United Kingdom. I suggest that this must be partly attributable to the historical developments in English company law that entrenched the notion of shareholder ownership claims. Specifically, unincorporated associations’ normative values—that members are owners and there is no distinction between small organizations with no share dispersal and large organizations with wide share dispersal—have a continuing influence on this entrenched notion of shareholder ownership claims. First, I provide an overview of the origins of English company law. Next, I address how …

Sec Interpretive Guidance For Climate Related Disclosures, Nickolas M. Boecher

Sustainable Development Law & Policy

No abstract provided.

See No Evil? Revisiting Early Visions Of The Social Responsibility Of Business: Adolf A. Berle’S Contribution To Contemporary Conversations, Erika George

Seattle University Law Review

Much corporate legal scholarship considers such fact patterns as beyond the scope of the discipline’s core concerns. Yet, increasingly, questions are asked concerning the scale and scope of modern corporate power. This Article will challenge the conventional understanding of what the core discipline of corporate law should encompass and argues that the failure to focus on precisely these sorts of factual scenarios involving allegations of corporate complicity in human rights violations and environmental degradation is misguided and short-sighted.

Neo-Brandeisianism And The New Deal: Adolf A. Berle, Jr., William O. Douglas, And The Problem Of Corporate Finance In The 1930s, Jessica Wang

Seattle University Law Review

This essay revisits Adolf A. Berle, Jr. and The Modern Corporation and Private Property by focusing on the triangle of Berle, Louis D. Brandeis, and William O. Douglas in order to examine some of the underlying assumptions about law, economics, and the nature of modern society behind securities regulation and corporate finance in the 1930s. I explore Douglas and Berle’s academic and political relationship, the conceptual underpinnings of Brandeis, Berle, and Douglas’s critiques of modern finance, and the ways in which the two younger men—Berle and Douglas—ultimately departed from their role model, Brandeis.

How To Avoid The Constraints Of Rule 10b-5(B): A First Circuit Guide For Underwriters, 43 J. Marshall L. Rev. 931 (2010), Eric H. Franklin

UIC Law Review

No abstract provided.

Short Selling In A Financial Crisis: The Regulation Of Short Sales In The United Kingdom And The United States, Katherine Mcgavin

Northwestern Journal of International Law & Business

In a well-regulated market with minimal risk of abuse, the liquidity and information efficiency benefits of short selling far outweigh its potential harm. Contrary to the recent hostility short sellers face from market regulators and the popular press, short sellers in aggregate are neither market villains nor agents of destruction. While a small minority of short sellers have exploited lax regulation and inattentive enforcement of anti-abuse rules to manipulate stock prices and earn substantial fees, these rare episodes suggest that the world's major capital markets need better enforcement of existing rules and not new rules per se. The failure of …