Securities Law Commons^™

The Sec Adds A New Weapon: How Does The New Admission Requirement Change The Landscape?, Paul Radvany

Cardozo Journal of Conflict Resolution

This Article will examine the SEC's revised settlement policy in the aftermath of Judge Rakoff's concerns about the SEC's longstanding "no admit, no deny" policy. In order to determine the import of the SEC's new settlement policy on the conduct of companies, as well as ongoing investigations and cases, this Article will also include analysis from lawyers who have advised their clients on the SEC's policy change.

Part II provides an overview of the SEC and its Enforcement Division, and describes the SEC's prosecutorial discretion. Part III examines Judge Rakoff's decisions in SEC v. Bank of Am. Corp.1 4 and …

The Pepperdine Model: Learn First-Then Practice, Robert A. Uhl, Judith Hale Norris

Cardozo Journal of Conflict Resolution

On January 8, 2010, FINRA's Investor Education Foundation awarded Pepperdine University School of Law's Straus Institute for Dispute Resolution a grant of $250,000 to establish a comprehensive clinical education program in investor advocacy.

The Sec Adds A New Weapon: How Does The New Admission Requirement Change The Landscape?, Paul Radvany

Faculty Scholarship

Over the past several years, the Securities and Exchange Commission (the “SEC”) has settled the vast majority of the cases it has brought. Some people have suggested, however, that settlements by public agencies such as the SEC should be scrutinized more closely. For instance, in a series of recent opinions, Judge Jed S. Rakoff of the Southern District of New York has “question[ed] the wisdom” of the SEC’s well-established practice of permitting defendants to enter into consent judgments while neither admitting nor denying the allegations. During the past two years, the SEC has implemented new policies that have altered its …

Nationalization And Necessity: Takings And A Doctrine Of Economic Emergency, Nestor M. Davidson

Faculty Scholarship

Serious economic crises have recurred with regularity throughout our history. So too have government takeovers of failing private companies in response, and the downturn of the last decade was no exception. At the height of the crisis, the federal government nationalized several of the country’s largest private enterprises. Recently, shareholders in these firms have sued the federal government, arguing that the takeovers constituted a taking of their property without just compensation in violation of the Fifth Amendment. This Essay argues that for the owners of companies whose failure would raise acute economic spillovers, nationalization without the obligation to pay just …

The New Regulation Of Small Business Capital Formation: The Impact - If Any - Of The Jobs Act, Rutheford B. Campbell Jr.

Kentucky Law Journal

No abstract provided.

The Effect Of The Jobs Act On Underwriting Spreads, Usha Rodrigues

Kentucky Law Journal

No abstract provided.

The Role Of The States In The Regulation Of Private Placements, Manning Gilbert Warren Iii

Kentucky Law Journal

No abstract provided.

Is The Independent Director Model Broken?, Roberta Karmel

Faculty Scholarship

No abstract provided.

Is The Independent Director Model Broken?, Roberta Karmel

Faculty Scholarship

No abstract provided.

Obligations And Potential Liabilities Of Attorneys In Public And Private Offerings, William O. Fisher

Law Faculty Publications

This chapter examines issues that attorneys face when performing services for developing companies, with particular focus on private offerings and the initial public offering ("IPO"). In private and public offerings, both the securities laws and the issuer's interests mandate that the offering document present full and fair disclosure of the issuer's business and financial condition. In assisting an issuer, attorneys share this goal; and can face liability if they err when providing services in such a transaction.

Towards A “Rule Of Law” Approach To Restructuring Sovereign Debt, Steven L. Schwarcz

Faculty Scholarship

No abstract provided.

The Self-Regulation Of Investment Bankers, Andrew F. Tuch

Scholarship@WashULaw

As broker-dealers, investment bankers must register with the Financial Industry Regulatory Authority (“FINRA”) and comply with its rules, including the requirement to “observe high standards of commercial honor and just and equitable principles of trade.” As the self-regulatory body for broker-dealers, FINRA functions as the equivalent of the self-regulatory bodies governing other professionals, such as lawyers and accountants. Unlike the self-regulation of these professionals, however, the self-regulation of investment bankers has thus far attracted scant scholarly attention.

This Article evaluates the effectiveness of this self-regulatory system in deterring investment bankers’ misconduct. Based on a hand-collected data set of every disciplinary …

Financial Conglomerates And Information Barriers, Andrew F. Tuch

Scholarship@WashULaw

The organizational structure of financial conglomerates gives rise to fundamental regulatory challenges. Legally, the structure subjects firms to multiple, incompatible client duties. Practically, the structure provides firms with a huge reservoir of non-public information that they may use to further their self-interests, potentially harming clients and third parties. The primary regulatory response to these challenges and a core feature of the financial regulatory architecture is the information barrier or Chinese wall. Rather than examine measures to strengthen information barriers, to date legal scholars have focused on the circumstances in which to deny them legal effect, while economists have focused on …

The Role Of Comparative Law In Shaping Corporate Statutory Reforms, Marco Ventoruzzo

Faculty Scholarship

This Essay discusses how comparative law played and plays a role in the statutory development of corporate laws. The influence of laws of other systems on the development of statutory law is common, explicit, and represents a tradition that accompanied legal reforms since the very beginning of the development of legislation.

Focusing on modern corporate law, I argue (but the argument could be extended to many other legal fields) that it is necessary to distinguish two basic ways in which comparative law influences legal reforms in one particular jurisdiction. The first one is through regulatory competition among different systems. In …

Mechanism Design In M&A Auctions, Steven J. Brams, Joshua Mitts

Faculty Scholarship

The recent controversy over "Don't Ask, Don't Waive" standstills in M&A practice highlights the need to apply mechanism design to change-of-control transactions. In this Article, we propose a novel two-stage auction procedure that induces honest bidding among participants while potentially yielding a higher sale price than an open ascending, a sealed-bid first price, or a Vickrey second-price auction. Our procedure balances deal certainty with value maximization through the Nobel Prize-winning principle of incentive compatibility, making participation in the M&A auction and honest disclosure of reservation prices in the parties' interests rather than relying solely on heavy-handed ex-post enforcement. Moreover, the …

Lessons From Sec V. Citigroup: The Optimal Scope For Judicial Review Of Agency Consent Decrees, Dorothy S. Lund

Faculty Scholarship

On November 28, 2011, Judge Jed S. Rakoff of the United States District Court for the Southern District of New York in Manhattan declined to approve a consent judgment between the Securities and Exchange Commission (SEC) and Citigroup. Because Citigroup had not admitted or denied the allegations in the consent decree, Judge Rakoff concluded that he was unable to make an informed judgment about the merits of the settlement. Judge Rakoffs decision has garnered serious criticism from legal observers and rekindled discussion about the scope of judicial review of agency consent decrees, which have become a valuable agency enforcement tool. …

Money Market Funds Run Risk: Will Floating Net Asset Value Fix The Problem?, Jeffrey N. Gordon, Christopher M. Gandia

Faculty Scholarship

The instability of money market mutual funds (“MMF”), a relatively new form of financial intermediary that connects short-term debt issuers with funders who want daily liquidity, became manifest in the financial crisis of 2007-2009. The bankruptcy of Lehman Brothers, a major issuer of money market debt, led one large fund to “break the buck” (that is, violate the $1 net asset valuation convention (“NAV”)) and triggered a run on other funds that was staunched only by major interventions from the U.S. Treasury and the Federal Reserve. One common reform proposal has been to substitute “floating NAV” for “fixed NAV,” on …

Fee-Shifting Bylaw And Charter Provisions: Can They Apply In Federal Court? – The Case For Preemption, John C. Coffee Jr.

Faculty Scholarship

In the first months after a decision of the Delaware Supreme Court upholding a fee-shifting bylaw under which the unsuccessful plaintiff shareholder was required to reimburse all defendants for their legal and other expenses in the litigation, some 24 public companies adopted a similar provision – either by means of a board-adopted bylaw or by placing such a provision in their certificate of incorporation (in the case of companies undergoing an IPO). In effect, private ordering is introducing a one-sided version of the “loser pays” rules. Indeed, as drafted, these provisions typically require a plaintiff who is not completely successful …

Extraterritorial Avoidance Actions: Lessons From Madoff, Edward R. Morrison

Faculty Scholarship

The Madoff case continues to provide fertile ground for testing boundaries of the U.S. Bankruptcy Code (Code). In July 2014, Judge Rakoff issued an important decision regarding the extraterritorial scope of the Code’s avoidance rules. The Trustee for the Madoff Estate, Irving Picard, sought to recover cash withdrawn by “feeder funds.” These funds pooled customer assets, invested them in Bernard L. Madoff Investment Securities (Madoff Securities), withdrew proceeds from the investment prior to Madoff’s SIPA filing, and distributed the proceeds to customers before the funds themselves collapsed. The funds are located abroad: one, Fairfield Sentry, is a British Virgin Islands …

The Ban Has Lifted: Now Is The Time To Change The Accredited-Investor Standard, Larissa Lee

Utah Law Review

Lifting the ban on general advertising and general solicitation will ultimately change how emerging companies receive funding. With greater access to previously untapped investors, more new businesses will be able to get on their feet and be successful. This success depends on the regulation of these offerings to ensure they are free of fraud and that investors maintain confidence in the market.

As the standard currently stands, it is likely that the removal of the ban will result in a regulatory gap, which may take advantage of several investors. The accredited investor standard should be changed to reflect not only …

Financial Innovation And Flexible Regulation: Destabilizing The Regulatory State, Cristie Ford

All Faculty Publications

The author examines the regulatory failures leading up to the financial crisis, the rise of “flexible regulation,” the effects of financial innovation on regulation, and three different case studies that illuminate the drastic effects of that innovation: the Basel II banking regulations, the Canadian Asset-Backed Commercial Paper market, and the process for writing the Volcker Rule. Finally, she examines the underlying assumptions that should be re-examined in order to create more effective regulatory policies.

National And Coordinated Approaches To Securities Regulation: The Latest Initiatives In Historical Context, David L. Johnston, Kathleen Rockwell, Cristie Ford

All Faculty Publications

If securities regulation is any indication, few countries in the world take their federalism as seriously as Canada does. Notwithstanding an increasingly globalised world, the central reality of Canadian federalism will continue to influence the enactment and enforcement of effective capital markets regulation. In the latest development, on September 8, 2014 the federal government and four participating provinces announced draft legislation, including a new uniform provincial act and new federal legislation, to establish a new Cooperative Capital Markets Regulator (CCMR). Some provinces are strongly opposed, including Québec, which has promised to challenge the proposed regime on constitutional grounds. This chapter …

A Canadian Model Of Corporate Governance, Carol Liao

All Faculty Publications

What is Canada’s actual legal model to govern its corporations? Recent landmark judicial decisions indicate Canada is shifting away from an Anglo-American definition of shareholder primacy. Yet the Canadian securities commissions have become increasingly influential in the governance sphere, and by nature are shareholder-focused. Shareholders’ rights have increased well beyond what was ever contemplated by Canadian corporate laws, and the issue of greater shareholder vs. board control has now become the topic of live debate. The future of Canada's overall model seems to rest on what will be more compelling: the constancy of the corporate statutes and trajectory of the …

A Canadian Model Of Corporate Governance: Where Do Shareholders Really Stand?, Carol Liao

All Faculty Publications

This feature article in the Director Journal summarizes the findings from the report, "A Canadian Model of Corporate Governance: Insights from Canada's Leading Legal Practitioners," produced for the Canadian Foundation for Governance Research and the Institute of Corporate Directors (also available on SSRN).

In the report, interviews were conducted with 32 leading senior legal practitioners across Canada to opine on the fundamental principles that are driving the development of Canadian corporate governance. The report found that Canadian common law has made the process of considering stakeholders in the "best interests of the corporation" more overt, well beyond what is assumed …

An Introduction To The Symposium And An Examination Of Morrison’S Impact On The Presumption Against Extraterritoriality, Franklin A. Gevurtz

McGeorge School of Law Scholarly Articles

No abstract provided.

Liability And Admission Of Wrongdoing In Public Enforcement Of Law, Samuel W. Buell

Faculty Scholarship

Some judges and scholars have questioned the social value of the standard form in which the Securities and Exchange Commission settles its corporate enforcement actions, including the agency’s use of essentially unreviewed consent decrees that include no admission of liability or wrongdoing. This essay for a symposium on SEC enforcement provides an analysis of the deterrent effects of the three main components of settlements in public enforcement of law: liability, admission, and remedy. The conclusions are the following. All three components have beneficial deterrent effects. Cost considerations nonetheless justify some settlements that dispense with liability or admission, or even both. …

Towards More Sustainable And Less Crisis-Driven Financial Regulation, Steven L. Schwarcz

Faculty Scholarship

No abstract provided.

The Governance Structure Of Shadow Banking, Steven L. Schwarcz

Faculty Scholarship

No abstract provided.

Rollover Risk: Ideating A U.S. Debt Default, Steven L. Schwarcz

Faculty Scholarship

This article examines how a U.S. debt default might occur, how it could be avoided, its potential consequences if not avoided, and how those consequences could be mitigated. To that end, the article differentiates defaults caused by insolvency from defaults caused by illiquidity. The latter, which are potentiated by rollover risk (the risk that the government will be temporarily unable to borrow sufficient funds to repay its maturing debt), are not only plausible but have occurred in the past. Moreover, the ongoing controversy over the federal debt ceiling and the rise of the shadow-banking system make these types of defaults …

The Gathering Storm: Restructuring Sovereign Contingent Liabilities, Lee C. Buchheit, Mitu Gulati

Faculty Scholarship

The contingent liabilities of a sovereign, such as guarantees of the debts of third parties, can normally be kept off the balance sheet of the sovereign guarantor. That is their charm. As the debt to GDP ratios of many developed countries approach red-zone levels, contingent liabilities are increasingly being favored over direct, on-the-balance-sheet, borrowings.

But what happens if a country carrying large contingent liabilities needs to restructure its debt? The borrower dare not leave its contingent claims out of the restructuring. To do so would risk undermining the financial predicates of the sovereign’s economic recovery program should the beneficiaries of …