Securities Law Commons^™

Covid-19 Vs. Constitution; Limited Government's Unlimited Response, John A. Losurdo

DePaul Business & Commercial Law Journal

No abstract provided.

The "No License, No Chips" Policy: When A Refusal To Deal Becomes Reasonable, Sheng Tong

DePaul Business & Commercial Law Journal

No abstract provided.

The Dark Triad: Private Benefits Of Control, Voting Caps And The Mandatory Takeover Rule, Jorge Brito Pereira

DePaul Business & Commercial Law Journal

No abstract provided.

All Stick And No Carrot? Reforming Public Offerings, Stephen J. Choi, Adam C. Pritchard

Law & Economics Working Papers

The SEC heavily regulates the traditional initial public offering. Those regulatory burdens fuel interest in alternative paths for private companies to go public, “regulatory arbitrage.” The SEC’s response to the emergence of alternatives, most recently SPACs and direct listings, has been to suppress them by imposing heightened liability under Section 11 of the Securities Act. The SEC’s treatment of the traditional IPO regulatory process as a one-size-fits-all regime ignores the weaknesses of this process, in particular the informational inefficiency of the book-building process. In this essay we argue that the agency’s focus in regulating issuers going public should be on …

Critiquing The Sec's Ongoing Efforts To Regulate Crypto Exchanges, Carol R. Goforth

William & Mary Business Law Review

Despite the so-called “Crypto Winter” in the spring of 2022, which saw a deep plunge in global crypto markets, interest in the appropriate way to develop, use, and regulate cryptoassets and crypto-based businesses continues to be high. In the United States, a Presidential Executive Order and multiple bills that seek to tackle various issues of crypto regulation are regularly highlighted in the news, suggesting the appropriate treatment of crypto is a growing national priority. Despite these discussions, which tend to focus on finding a balanced way to regulate those within the industry without stifling the technology, the Securities and Exchange …

Bearer Negotiable Instruments: Addressing A Financial Intelligence Gap And Identifying Criminogenic Weaknesses, Hollis B. Kegg

Dissertations, Theses, and Capstone Projects

Bearer Negotiable Instruments (BNI) are a long-standing category of financial instruments used to transfer large amounts of money in ways that may not be subject to regulation, reporting, tracking, review, or oversight. There is limited information available on BNIs, and no evidence that any studies have been undertaken on BNIs alone, much less reported. Increasingly, BNIs are being used for illegal purposes including money laundering. This study gathers information about their characteristics, nature, purpose, legal status, and numbers. It also focuses on the crime risks associated with BNIs, the crime opportunities they facilitate, and the criminal weaknesses in the financial …

Shareholder Inspection Rights: From Credible Basis To Rational Belief, Lin (Lynn) Bai

Faculty Articles and Other Publications

Jurisdictions are split on the standard of proof for shareholder inspection lawsuits when inspections are for the purpose of investigating managerial misconduct. Delaware and its followers apply a credible basis standard that calls for extrinsic evidence, beyond mere suspicion, curiosity, or disagreement with management, to permit an inference of misconduct. A minority of jurisdictions require shareholders to show merely a rational belief that mismanagement likely happened. Rational belief can be satisfied by sound logic without referencing extrinsic evidence. The Delaware Supreme Court rejected rational belief for fear that a permissive standard would lead to a cascade of frivolous inspections, although …

Total Return Meltdown: The Case For Treating Total Return Swaps As Disguised Secured Transactions, Colin P. Marks

Pepperdine Law Review

Archegos Capital Management, at its height, had $35 billion in assets. But in the spring of 2021, in part through its use of total return swaps, Archegos sparked a $30 billion dollar sell-off that left many of the world’s largest banks footing the bill. Mitsubishi UFJ Group estimated a loss of $300 million; UBS, Switzerland’s biggest bank, lost $861 million; Morgan Stanley lost $911 million; Japan’s Nomura lost $2.85 billion; but the biggest hit came to Credit Suisse Group AG which lost $5.5 billion. Archegos, itself lost $20 billion over two days. The unique characteristics of total return swaps and …

Angels And Devils: The Early Crypto Entrepreneurs, Darian M. Ibrahim

Popular Media

No abstract provided.

Special Purpose Acquisition Companies: Wall Street’S Latest Shell Game, Daniel J. Morrissey

Arkansas Law Review

Special Purpose Acquisition Companies (“SPACs”) have been called “Wall Street’s biggest gold rush of recent years.” In reality, they are just another version of an old strategy to exploit a loophole in the federal securities laws that issuers of stock have used to avoid full registration with the SEC, the federal agency set up to administer and enforce the securities laws. The SPAC process circumvents that important protection for investors by taking private firms public through the back door—merging them into shell corporations. Those are companies whose shares are widely held but have no operations or assets.

The Failure Of Market Efficiency, William Magnuson

BYU Law Review

Recent years have witnessed the near total triumph of market efficiency as a regulatory goal. Policymakers regularly proclaim their devotion to ensuring efficient capital markets. Courts use market efficiency as a guiding light for crafting legal doctrine. And scholars have explored in great depth the mechanisms of market efficiency and the role of law in promoting it. There is strong evidence that, at least on some metrics, our capital markets are indeed more efficient than they have ever been. But the pursuit of efficiency has come at a cost. By focusing our attention narrowly on economic efficiency concerns—such as competition, …

The Sec's Spac Solution, Karen Woody, Lidia Kurganova

Scholarly Articles

The SPAC craze has ebbed and flowed over the past few years, creating fortunes and ruining others. The SEC stepped into the mix in 2022 and proposed rules governing SPACs. The proposed rules artfully balance the interests of investor protection while retaining some of the featured characteristics of SPACs as innovative ways to take companies public. This Article details the history of SPACs, including their benefits and risks, and analyzes the SEC’s proposed rules, arguing that the SEC is well within its Congressional authority to regulate SPACs, and that the proposed rules are both well-tailored and necessary.

Safe Harbors In The Shadows: Extending 10b5-1 Plans To Cover Shadow Trading, Karen E. Woody, M. Cole Davidson

Scholarly Articles

Insider trading, or trading while in possession of material nonpublic information, remains the legal conundrum it has been for over four decades. The governing rule prohibiting insider trading is Rule 10b-5, passed in 1943 by the Securities and Exchange Commission (SEC) in order to clarify Section 10(b) of the Securities Exchange Act. Notably, neither Rule 10b-5 and Section 10(b) mention the term “insider trading.” In fact, scholars and historians have opined that insider trading was not considered by Congress as one of the aims of Section 10(b) or Rule 10b-5. Without any statutory guidance regarding insider trading, the legal contours …

Brief Of First Amendment And Securities Law Scholars As Amici Curiae In Support Of Respondent: National Center For Public Policy Research V. Securities And Exchange Commission, Sarah C. Haan

Scholarly Articles

Amici are law professors with significant expertise in corporate and securities law, and constitutional law, particularly regarding the First Amendment. They have published extensive analyses about the Shareholder Proposal Rule, shareholder voting, corporate democracy, First Amendment “coverage,” the constitutionality of mandatory disclosures, and various related issues. Amici thus have particular expertise in the First Amendment issues raised by the parties in this case.

Amici submit this brief to respond to Intervenor National Association of Manufacturers’ extreme argument that Rule 14a-8 violates the First Amendment. This position ignores—and NAM repeatedly overlooks—the vital function of proxy solicitation in modern corporate governance and …

Goldman Sachs Group, Inc V. Arkansas Teacher Retirement System, Davis Capps

Tennessee Law Review

No abstract provided.

Legal Guardrails For A Unicorn Crackdown, Alexander I. Platt

Michigan Law Review Online

The Securities and Exchange Commission (SEC) is undertaking a historic effort to redraw the boundary between public and private companies. After years of watching—and sometimes encouraging—the explosive growth in less tightly regulated private markets and the proliferation of so-called “unicorns,” the agency is now reasserting its authority.

A key arrow in the agency’s regulatory quiver is its authority under section 12(g) of the Securities Exchange Act of 1934 (Exchange Act) to force private companies to “go public” when they reach a certain size. The provision requires any company whose shares are “held of record” by more than 2,000 persons to …

Transition-Denial And Structural Adjustment: Causation And Culpability In The Cuban Economy Culpability In The Cuban Economy, Jose Gabilondo

Faculty Publications

In 2020, Cuba implemented the Tarea Ordenamiento (Tarea), the most significant economic reform since the construction of the socialist economy after the Revolution. Signaling an eclectic brand of Cuban socialism, the Tarea clears away three decades of tried and failed economic doctrines, drawing a new fiscal border around state enterprises, nodding to market realities, and preparing the island for greater insertion into the world economy. While the political economy of post-Castro Cuba has changed in this way, the United States continues to subject the island to an unprecedented program of unilateral sanctions, universally condemned as a breach of human rights, …

Did The Superbowl Ad Curse Heighten Defined Contribution Plan Fiduciary Duties?: Deciphering The Legal And Ethical Landscape Of Cryptocurrency Options In 401(K)S, Lauren K. Valastro

Sturm College of Law: Faculty Scholarship

Regulating cryptocurrency’s place in America’s most popular retirement savings vehicle generates thorny legal, ethical, and social justice dilemmas. Too little regulation could hurt those at highest risk of underfunded retirement. Too much could exacerbate existing racial, ethnic, and gender inequities.

Though recent regulatory efforts suggest 401(k) administrators violate their fiduciary duty of care by offering cryptocurrency investment options to plan participants, the established fiduciary regime protects 401(k) plan participants from cryptocurrency risk while respecting their savings preferences. Yet, the current framework falls short of ethically and equitably serving all plan participants, particularly members of underserved communities — a problem largely …

Mother Nature On The Run: The Sec, Climate Change Disclosure, And The Major Questions Doctrine, J. Robert Brown Jr.

Sturm College of Law: Faculty Scholarship

The Securities and Exchange Commission (SEC or Commission) has proposed a rule that addresses the disclosure needs of investors with respect to climate change. The proposal would require that public companies tell investors about the risks to their business associated with climate change and explain the system and strategy of governance for monitoring those risks. In addition, the proposal would mandate the disclosure of certain greenhouse gas emissions.

The SEC’s proposal arrived contemporaneously with the Supreme Court’s announcement of the “major questions” doctrine. A deliberate attempt to limit the authority of the executive branch, the doctrine would restrict agencies from …

Woke Capital Revisited, Jennifer S. Fan

Seattle University Law Review

Inclusive corporate leadership is now at the forefront of discussions related to corporate governance. Two corporate theories help to explain the rise in prominence of diversity, equity, and inclusion (“DEI”) efforts in corporate leadership. First, an expanded definition of corporate purpose which elevated the idea of the importance of stakeholders, contributed to the momentum from business and legal quarters for broader corporate inclusion. Second, the increasing publicness of corporations—the social expectation of how large, typically public corporations should act given their position of power—also led to corporations becoming more active in the DEI space. It is against this backdrop that …

When Congress Passes The Buck: How Russia’S Invasion Of Ukraine Exposed Flaws In Granting The President Sanctioning Powers, Artem M. Joukov, Samantha M. Caspar

Seattle University Law Review

The United States (U.S.) Constitution provides few limitations on endowing the Executive Branch with powers to govern foreign trade, which was initially granted to the Legislature. In a world where global trade dominates, the power over foreign trade can be more important than the power over domestic matters. Leaving unrestrained trade authority to the Executive Branch may cause hazards for Americans and foreigners alike. Russia’s war in Ukraine demonstrates the flaws in permitting the Executive Branch to unilaterally sanction foreign states. This Article demonstrates how reactive Executive Branch policies infringed on the welfare and safety of American citizens and foreigners …

Pedaling Backwards: Examining The King County Board Of Health’S Choice To Repeal Its Bicycle Helmet Law, Schuyler M. Peters

Seattle University Law Review

In Part I, this Comment will explain the Helmet Law itself and the timeline that ultimately led to its repeal. Part II will focus on the positive impact of the Helmet Law, the dangers associated with the repeal, why the repeal should not have occurred in the manner it did, and what societal costs stem from the BOH’s decision. Part III will address the actions that must be taken to revoke this repeal and the reasons behind these alternative pathways, including an Equity Impact Review study specifically on the consequences of repeal, a collaborative outreach program to bring helmets to …

The Most Important Decision In Federal Securities Law - Texas Gulf Sulphur, Marc I. Steinberg

Faculty Journal Articles and Book Chapters

Although decided 55 years ago, the Second Circuit’s decision in Texas Gulf Sulphur may be viewed as the most important case under the U.S. securities laws. The decision addressed several landmark issues, including insider trading, company disclosure obligations, and the concept of materiality. Although a number of its rulings subsequently were rejected by the U.S. Supreme Court, others remain good law today. From a comparative perspective, Texas Gulf Sulphur also is a significant decision. Many of the principles enunciated by the Second Circuit in that decision today have been adopted by developed securities markets outside of the United States.

Exhuming Nondelegation . . . Intelligibly, Zachary R.S. Zajdel

Fordham Journal of Corporate & Financial Law

Whether by avalanche or a thousand cuts, the intelligible principle test may be awaiting its untimely demise at the behest of a reinvigorated nondelegation movement. Perhaps looking to speed up the decomposition, the Fifth Circuit in Jarkesy v. Securities and Exchange Commission struck down the SEC’s discretion to pursue enforcement actions with its own Administrative Law Judges or in federal court as unconstitutionally delegated legislative power. This Note posits that Jarkesy was rightly decided but rife with uncompelling reasoning. Establishing this requires a detour into the meaning of the Necessary and Proper Clause, the significance of the separation of powers, …

Startups In The Whirlpool Of Divorce, Mira Ganor

Michigan Business & Entrepreneurial Law Review

Startups use stock options to compensate their employees. An employee’s divorce could result in a change in the formal ownership of the startup securities. However, the startup, the employee, and the former spouse of the employee all have considerable and conflicting interests in the outcome of the allocation of the employee’s securities as part of a divorce settlement. I argue that the startup, along with the relevant tax rules, imposes obstacles on the transferability of the securities to the employee’s former spouse that are likely to distort the settlement outcome. An inefficient outcome is likely because the person who may …

Preparing For The Crypto Winter: Complexities In Cryptocurrency Exchange Insolvencies, Roula Khairalla

Canada-United States Law Journal

No abstract provided.

Eliminating Cash Bail In Washington State—Amending Criminal Rule 3.2, Simran Kaur

Seattle University Law Review

This Note discusses the following three parts. Part I provides an overview of the cash bail system, its history, and its contemporary use in Washington state. Part II presents the effects of bail on pretrial release, analyzing low-income and racial inequalities and the adverse impacts it can have on the accused. Part III focuses on solutions and alternatives to the cash bail system, using other states as case studies.

Selective Patronage, Omari Scott Simmons

Seattle University Law Review

Contemporary academic corporate governance narratives have a blind spot. They focus on institutions, rules, regulations, processes, procedures, intermediaries, and market forces. Yet, missing in this narrative, is the impact of corporate leadership. Ignoring the “black box” of corporate leadership, particularly individual actors, renders an incomplete descriptive assessment as well as potential miscalculations. The examination of key historical figures and their corporate activism provides an important lens through which to identify potential challenges and opportunities related to the contemporary ESG movement.

Generally, this essay examines corporate leadership’s potential to address socio-political issues through the prism of Civil Rights Movement activism. Specifically, …

Promoting Corporate Diversity: The Uncertain Role Of Institutional Investors, Jill Fisch

Seattle University Law Review

Two developments are having an impact on corporate decisions. One is the increased engagement by institutional intermediaries and a shift in the focus of that engagement from corporate governance to environmental and social issues. The other is a heightened societal awareness of diversity, equity, and inclusion (DEI) issues, particularly the importance of diversity in corporate leadership. This Article considers the intersection between the two. It describes how institutional investors have focused their attention on increasing diversity in corporate leadership, the potential motivations for that focus, and the impact of that focus, to date. It highlights the tensions that result from …

America’S Hidden Citizens: The Untold Stories Of The Unconscionable Deportations Of Its International Adoptees, Halley Cody

Seattle University Law Review

This Note addresses how the U.S. should rectify the harms it has perpetrated on non-citizen adoptees by amending the current deportation statutes to prevent their deportation. Part I addresses the history of adoption in the U.S. and related effects on immigration law. Part II highlights the stories of Adam Crapser and Philip Clay, who were adopted by American families who failed to naturalize them as minors, and who were subsequently deported after they sustained criminal records. Part III examines the policy goals behind deportation as a consequence of criminal convictions, as well as remedies instituted to prevent unwarranted deportation and …