Securities Law Commons^™

A Tale Of Two Cities: Mark Cuban, David Einhorn, And The Ethics Of Insider Trading Reform, John P. Anderson

Journal Articles

The similarities between the insider trading stories of Mark Cuban and David Einhorn suggest that their circumstances are not uncommon, and the contrasting results also help to illustrate some significant differences between the common law fraud-based insider trading regime in the U.S. and the statutory parity-of-information regime in Europe. And, as Congress and the SEC continue to weigh the merits of reform in the U.S., the examples of Cuban and Einhorn are particularly instructive for the reasons to be developed in the remaining sections of this Article. First, as will be explained in Part II of this Article, contrasting the …

Securities Regulation, George Lee Flint Jr.

SMU Annual Texas Survey

No abstract provided.

Negative Activism, Barbara A. Bliss, Peter Molk, Frank Partnoy

UF Law Faculty Publications

Shareholder activism has become one of the most important and widely studied topics in law and finance. To date, popular and academic accounts have focused on what we call “positive activism,” where activists seek to profit from positive changes in the share prices of targeted firms. In this Article, we undertake the first comprehensive study of positive activism’s mirror image, which we term “negative activism.” Whereas positive activists focus on increasing share prices, negative activists take short positions to profit from decreasing share prices.

We develop a descriptive typology of three categories of negative activism and use a private database …

Do Founders Control Start-Up Firms That Go Public?, Brian Broughman, Jesse M. Fried

Articles by Maurer Faculty

Black & Gilson (1998) argue that an IPO-welcoming stock market stimulates venture deals by enabling VCs to give founders a valuable "call option on control." We study 18,000 startups to investigate the value of this option. Among firms that reach IPO, 60% of founders are no longer CEO. With little voting power, only half of the others survive three years as CEO. At initial VC financing, the probability of getting real control of a public firm for three years is 0.4%. Our results shed light on control evolution in startups, and cast doubt on the plausibility of the call-option theory …

Environmental Injustice: How Treaties Undermine Human Rights Related To The Environment, Lisa E. Sachs, Lise Johnson, Ella Merrill

Columbia Center on Sustainable Investment Staff Publications

Growing cries for action to effectively address the climate and other environmental crises hold important implications for the governance of cross-border investments. Policymakers and environmental advocates have often overlooked how provisions granted by states in international investment agreements (IIAs) have been used by investors to challenge government measures taken in the public interest to protect the environment and advance environmental justice.

This 2019 paper, published in the Sciences Po Legal Review issue devoted to the climate crisis, explains how the investor-state dispute settlement (ISDS) mechanism, made available to investors in thousands of bilateral and multilateral trade and investment agreements, may …

Newman/Martoma: The Insider Trading Law's Impasse And The Promise Of Congressional Action, Tai H. Park

Fordham Journal of Corporate & Financial Law

The prohibition against insider trading is a judge-made law that has evolved for over fifty years, and has reached a critical impasse in two recent decisions in the Second Circuit Court of Appeals: United States v. Newman and United States v. Martoma. Judges of the Second Circuit are sharply divided over what conduct constitutes improper trading on material nonpublic information (“MNPI”), leaving the law in profound disarray. At bottom, the disagreement stems from a decades-old split within the judiciary about how to (1) ensure a fair securities marketplace, while (2) enabling institutional analysts to probe for corporate information in furtherance …

Multilateral Transparency For Security Markets Through Dlt, David C. Donald, Mahdi H. Miraz

Fordham Journal of Corporate & Financial Law

For decades, changing technology and policy choices have worked to fragment securities markets, rendering them so dark that neither ownership nor real-time price of securities are generally visible to all parties multilaterally. The policies in the U.S. National Market System and the EU Market in Financial Instruments Directive— together with universal adoption of the indirect holding system— have pushed Western securities markets into a corner from which escape to full transparency has seemed either impossible or prohibitively expensive. Although the reader has a right to skepticism given the exaggerated promises surrounding blockchain in recent years, we demonstrate in this paper …

Reconciling U.S. Banking And Securities Data Preservation Rules With European Mandatory Data Erasure Under Gdpr, Ronald V. Distante

Fordham Journal of Corporate & Financial Law

United States law, which requires financial institutions to retain customer data, conflicts with European Union law, which requires financial institutions to delete customer data on demand. A financial institution operating transnationally cannot comply with both U.S. and EU law. Financial institutions thus face the issue that they cannot possibly delete and retain the same data simultaneously. This Note will clarify the scope and nature of this conflict.

First, it will clarify the conflict by examining (1) the relevant laws, which are Europe’s General Data Protection Regulation (GDPR), the U.S. Bank Secrecy Act, and Securities and Exchange Commission (SEC) regulations, (2) …

The Layers Of Digital Financial Innovation: Charting A Regulatory Response, Teresa Rodriguez De Las Heras Ballell

Fordham Journal of Corporate & Financial Law

The increasing penetration of digital technologies in financial markets is evidenced by promising adoption rates among users, expanding presence of fintech firms and bigtech providing techfin services, and the growing use of fintech solutions by incumbents. The increasingly popular term "fintech" captures the accelerated transformation of contemporary financial markets driven and enabled by technology, and encapsulates its multifarious potential impact on services, market structures, and business models. This Article first aims to devise and propose an analytical framework to understand the digital challenges to financial regulation based on the "layers of digital financial innovation" theory. Accordingly, digital innovation (fintech) is …

Framing Regulation Around The Potential Liabilities Of Parties In The Blockchain & Smart Contract Industry, Jeceaca An

Fordham Journal of Corporate & Financial Law

Blockchains, which have been most significantly utilized by the technology, media, and telecommunication industry (TMT) and the financial sector, amassed global attention in the 2010s. This surging popularity may, however, cause the public to overlook the core characteristics of blockchain technology, and to consequently be unaware of the inherent risks at play when engaging with blockchains. Simply put, blockchain technology is an information storing technology that can be utilized in various ways, such as services to facilitate cryptocurrency exchanges and smart contracts. The recent widespread use of blockchain technology by unique parties has raised questions of how to deal with …

Global Investor Protection: Securities Law Enforcement Around The World, Matthew Diller, Martin Gelter, Eugenio J. Cardenas, Merritt B. Fox, Geoffrey Jarvis, Pierre-Henri Conac, Todd Cosenza, Jill Fisch, Yuliya Guseva, Elad Roisman, Sean Griffith

Fordham Journal of Corporate & Financial Law

No abstract provided.

Willfulness In A Post-Robare World: Evidence Of Subjective Intent, Not Negligence Conduct, Is Needed To Show Willful Violations Of Securities Laws, Kevin Aguirre

Fordham Journal of Corporate & Financial Law

The D.C. Circuit's holding in Robare Group, Ltd., v. SEC, potentially marks the end of at least twenty years of permissive judicial interpretation of the term "willful," as found in various provisions of securities laws-including the Investment Advisers Act of 1940. Traditionally, willful violations of securities laws only required evidence that defendants were aware of their conduct, not that they knew that their conduct was unlawful. This low burden of proof operates in practice as a negligence standard. However, Robare makes a key distinction between evidence of negligent conduct and "subjectively intentional" violations under section 207 of the Advisers Act …

Are Securities Laws Effective Against Climate Change? A Proposal For Targeted Climate Related Disclosure And Ghg Reduction, Nate Chumley

Fordham Journal of Corporate & Financial Law

The New York Attorney General filed a lawsuit against Exxon Mobil on October 24, 2018, claiming the company committed securities fraud in order to prop up the value of the company by publicly disclosing a higher proxy cost—or projected future cost—of climate change regulation than the internal cost used. Following this lawsuit, a federal class action was filed utilizing the same legal theory on the same facts. These lawsuits should be viewed as part of the larger history of lawsuits against large fossil fuel companies for climate change-related harms. Public nuisance theory largely captured a set of lawsuits against these …

The Fate Of State Investor Protection, Benjamin P. Edwards

Scholarly Works

In June 2019, the Securities & Exchange Commission made significant changes to the regulation of investment advice, issuing regulations and new interpretations of the Investment Advisers Act of 1940. Industry advocates have argued that states lack power to enact their own regulations on the theory that various federal statutes and regulations combine to preempt and sharply limit state authority. This article examines the current state of reforms around the country and the policy and legal arguments for and against limiting state efforts to raise the standards for investment advice.

Adversarial Failure, Benjamin P. Edwards

Scholarly Works

Investors, industry firms, and regulators all rely on vital public records to assess risk and evaluate securities industry personnel. Despite the information's importance, an arbitration-facilitated expungement process now regularly deletes these public records. Often, these arbitrations recommend that public information be deleted without any true adversary ever providing any critical scrutiny to the requests. In essence, poorly informed arbitrators facilitate removing public information out of public databases. Interventions aimed at surfacing information may yield better informed decisions. Although similar problems have emerged in other contexts when adversarial systems break down, the expungement process to purge information about financial professionals provides …

Working Hard Or Making Work? Plaintiffs’ Attorney Fees In Securities Fraud Class Actions, Jessica M. Erickson

Law Faculty Publications

In this paper, we study attorneys’ fees awarded in the largest securities class actions: “mega-settlements.” Consistent with prior work, we find larger fee awards but lower percentages in these cases. We also find that courts are more likely to reject or modify fee requests made in connection with the largest settlements. We conjecture that this scrutiny provides an incentive for law firms to bill more hours, not to advance the case, to help justify large fee awards – “make work.” The results of our empirical tests are consistent with plaintiffs’ attorneys investing more time in litigation against larger companies, particularly …

Pushing The Envelope: Salzberg V. Sciabacucchi And Delaware's Evolving View Of The Internal Affairs Doctrine, Mark J. Loewenstein

Publications

In January, 2020, the Delaware Supreme Court handed down its decision in Salzberg v. Sciabacucchi, upholding a provision in a certificate of incorporation that designated the federal courts as the exclusive jurisdiction for the litigation of claims under the federal Securities Act of 1933. The inclusion of these provisions in Delaware charters and bylaws – often referred to as “Federal Forum Provisions” or FFPs – raised important questions as to the reach of the internal affairs doctrine. This doctrine provides that the jurisdiction of incorporation regulates the internal affairs of its corporations: the relationship among and between the corporate …

Not Everything Is About Investors: The Case For Mandatory Stakeholder Disclosure, Ann Lipton

Publications

Corporations are required to disclose specific types of information to the public, but only the federal securities laws impose generalized disclosure obligations that produce a holistic overview of corporate operations. While these disclosures are intended to benefit investors, they are accessible to anyone, and thus have long been relied upon by regulators, competitors, employees, and local communities to provide a working portrait of the country’s economic life.

Today, that system is breaking down. Congress and the SEC have made it easier for companies to raise capital without triggering securities reporting obligations, allowing modern businesses to grow to enormous proportions while …

The European Union Military: A Debate On The Need For A Common Defense Mechanism, Gonzalo Secaira

CMC Senior Theses

In a region affected by death and destruction brought on by two devastating world wars, the European Union has held peace and economic stability as its primary objective. Since its creation, the EU has expanded both in size and scope, becoming on the largest economic global actors in the world. In recent years, the EU has looked towards expanding its competencies to include common security and defense policies. Efforts on behalf of the EU to further integrate EU members have faced mixed reactions and opposition. One of these policies, the funding, and implementation of a European Union military has been …

Inflated Private Offering: Regulating Corporate Insiders And Market Moving Disclosures On Social Media, Marisa Papenfuss

Vanderbilt Law Review

This Note will explore Regulation FD’s development, from its enactment in 2000 to its status in the age of social media. It will ultimately propose a safe harbor provision that clearly delineates when issuers and corporate insiders are not subject to the regulation’s requirements. Part I provides an overview of Regulation FD’s provisions and enforcement as well as the SEC’s subsequent guidance, which attempts to elucidate the regulation’s application to new technologies. Part II analyzes the specific problems that arise when Regulation FD is applied to information distributed through social media and assesses scholars’ proposed solutions to these problems. Lastly, …

Credit Rating Agencies: Regulation And Liability, Colin Bradshaw

Lewis & Clark Law Review

In 2007, the economy crashed because of credit rating agency misconduct. Through the early 2000s, credit raters’ reckless pursuit of profits facilitated the enormous real estate and structured finance bubble that eventually burst in 2007. This Article examines the ratings industry and its institutions, their role in the crash, the regulation that led to their dominance in the markets, how that regulation changed in the wake of the economic crisis, and how they can be held liable today for present and future misconduct.

Section I describes what credit rating agencies (CRAs) are and what they do. Understanding the function of …

Addressing The Auditor Independence Puzzle: Regulatory Models And Proposal For Reform, Martin Gelter, Aurelio Gurrea-Martinez

Vanderbilt Journal of Transnational Law

Auditors play a major role in corporate governance and capital markets. Ex ante, auditors facilitate firms' access to finance by fostering trust among public investors. Ex post, auditors can prevent misbehavior and prevent financial fraud by corporate insiders. In order to fulfill these goals, however, in addition to having the adequate knowledge and expertise, auditors must perform their functions in an independent manner. Unfortunately, auditors are often subject to conflicts of interest, for example, resulting from the provision of nonaudit services but also because of the mere fact of being hired and paid by the audited company. Therefore, even if …

Real Insider Trading, Michael A. Perino

Faculty Publications

In popular rhetoric, insider trading cases are about leveling the playing field between elite market participants and ordinary investors. Academic critiques vary. Some depict an untethered insider trading doctrine that enforcers use to expand their power and enhance their discretion. Others see enforcers beset with agency cost problems who bring predominantly simple, easily resolved cases to create the veneer of vigorous enforcement. The debate has, to this point, been based mostly on anecdote and conjecture rather than empirical evidence. This Article addresses that gap by collecting extensive data on 465 individual defendants in civil, criminal, and administrative actions to assess …

Arbitration Law Update: 2019–2020 (July 2020), Scott Eichorn, Elissa Germaine

Faculty Publications

(Excerpt)

This article summarizes leading arbitration cases during the last year that are of particular relevance to the securities arbitration practitioner, as well as cases on the horizon for the coming year. The decided cases focus on class arbitration, arbitrability, customer identification, discovery abuse, grounds to modify arbitration awards, enforceability of arbitration agreements, and challenges to Regulation Best Interest. The upcoming cases focus on class arbitration and arbitrability.

A Tangled Web: Can Arbitration Be The Answer To Resolving Manufactured Credit Event Disputes?, Adam Eisenbud

Cardozo Journal of Conflict Resolution

Derivatives are financial contracts whose value is derived from, or reliant upon, another asset. Perhaps the most popular derivatives for retail investors are stock options, whose value is derived from the price of an underlying equity. In recent years, financial institutions have developed several innovative derivative products. These products are typically born out of an unmet need in the financial marketplace. Credit derivatives, for example, were created in order to let financial clients mitigate credit risk. A wellknown type of credit derivative is the credit default swap ("CDS"), a privately held, negotiable bilateral contract that allows a lender to transfer …

Cross-Border Regulation Of Securities Markets In Asean, Wai Yee Wan

Research Collection Yong Pung How School Of Law

How does cross-border regulation of securities markets work in Association of South East Asian Nations (ASEAN)? How closely are the securities markets coordinated within ASEAN from the regulatory perspective? What is the optimal regulatory model of integration of securities markets that balances the economic benefits of integration and yet minimizes the risks of contagion and advances the state’s national goals? The issues posed by these questions are important against the background of strong growth of the Asian economies and Asian capital markets, and how the ASEAN states can take advantage of such growth to facilitate economic growth. According to the …

Federal Forum Provisions And The Internal Affairs Doctrine, Dhruv Aggarwal, Albert H. Choi, Ofer Eldar

Faculty Scholarship

A key question at the intersection of state and federal law is whether corporations can use their charters or bylaws to restrict securities litigation to federal court. In December 2018, the Delaware Chancery Court answered this question in the negative in the landmark decision Sciabacucchi v. Salzberg. The court invalidated “federal forum provisions” (“FFPs”) that allow companies to select federal district courts as the exclusive venue for claims brought under the Securities Act of 1933 (“1933 Act”). The decision held that the internal affairs doctrine, which is the bedrock of U.S. corporate law, does not permit charter and bylaw provisions …

Stay In The Fight With Civility And Professionalism, David Spratt

Scholarly Articles in Law Reviews & Journals

No abstract provided.

The Indian Securities Fraud Class Action: Is Class Arbitration The Answer?, Brian T. Fitzpatrick, Randall S. Thomas

Vanderbilt Law School Faculty Publications

In 2013, India enacted one of the most robust private enforcement regimes for securities fraud violations in the world. Unlike in most other countries, Indian shareholders can now initiate securities fraud lawsuits on their own, represent all other defrauded shareholders unless those shareholders affirmatively opt out, and collect money damages for the entire class. The only thing missing is a better financing mechanism: unlike the United States, Canada, and Australia, India does not permit contingency fees, so class action lawyers cannot front the costs of litigation in exchange for collecting a percentage of what they recover. On the other hand, …

Introduction: The Rise Of Fintech, Andrew F. Tuch

Scholarship@WashULaw

This foreword introduces "The Rise of Fintech," a series of essays published in a symposium issue of the Washington University Journal of Law & Policy. The contributions examine the structure of firms and markets, considering fintech activities occurring within existing firms and regulatory perimeters and activities that spill over the boundaries we currently take for granted. The contributors examine the emerging regulatory responses to fintech, taxonomizing them. They consider which regulatory approaches, or ecosystems, will best help fintech to develop. They examine how fintech applies to fundraising, examining initial coin offerings (ICOs) and equity crowdfunding, techniques that attract attention for …