Securities Law Commons^™

The Minority Report: When Should Publicly Traded Corporations Be Required To Disclose Material Information To Its Shareholders Under Item 303?, Alicia Mayo

St. John's Law Review

(Excerpt)

Due to the social distancing mandate during the COVID-19 pandemic, the demand for cloud-based platforms conducting virtual meetings grew drastically. ON24, a cloud-based digital platform that provides interactive webinars, virtual events, and multimedia content experiences, was one of the companies that experienced “explosive growth.” ON24’s customers increased from 760 customers to 1,900 from December 31, 2015 to September 30, 2020, and its revenue increased by fifty-nine percent from the previous year. ON24’s annual recurring revenue is driven by the company’s ability to acquire new customers while maintaining and expanding its existing client relationships. On February 3, 2021, ON24 commenced …

Embattled Sec Climate-Related Disclosure Regulation, Thomas M. Madden

William & Mary Business Law Review

This Article informs the reader as to the current state of the U.S. Securities and Exchange Commission’s (SEC or Commission) Release No. 33-11275, The Enhancement and Standardization of Climate-Related Disclosures for Investors (the Final Rules), approved and then stayed by the Commission in March of 2024 and now being challenged in the Eighth Circuit Court of Appeals. It argues that the Final Rules are sound and should be upheld for seven articulated reasons, taking into account the arguments made by petitioners and amici curiae in the Eighth Circuit. Moreover, the Article argues that even with Chevron overturned, the Final Rules …

Variable Life Insurance And The Federal Securities Laws, Maine Law Review

Maine Law Review

The Securities and Exchange Commission has recently ruled that variable life insurance contracts are "securities" within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934 and, therefore, subject to the registration and disclosure requirements of those acts. Perhaps more significantly, the SEC also found the Investment Company Act of 1940 and the Investment Advisers Act of 1940 applicable to companies issuing variable life insurance, but decided to exempt insurance companies from the requirements of these statutes in deference to developing state regulation. This comment explores the legal issues raised by the SEC decision.

Variable Life Insurance And The Federal Securities Laws, Maine Law Review

Maine Law Review

The Securities and Exchange Commission has recently ruled that variable life insurance contracts are "securities" within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934 and, therefore, subject to the registration and disclosure requirements of those acts. Perhaps more significantly, the SEC also found the Investment Company Act of 1940 and the Investment Advisers Act of 1940 applicable to companies issuing variable life insurance, but decided to exempt insurance companies from the requirements of these statutes in deference to developing state regulation. This comment explores the legal issues raised by the SEC decision.

The Constitutionality Of The Maine Takeover Bid Disclosure Law, Maine Law Review

Maine Law Review

With the March 24, 1978 enactment of the Maine Takeover Bid Disclosure Law, more than two-thirds of the states purported to regulate the making of corporate tender offers. The Maine Act, which is by and large typical, requires that persons making tender offers (or takeover bids), by which the offeror attempts to control the target company through purchase of its shares, disclose certain specified information fully and accurately so as to guarantee adequate time for the dissemination and consideration of the disclosed information. During the 1960's, tender offers became a popular method of acquiring control of publicly traded corporations. Sound …

Guide To Sec And Business Open Source Corporate Intelligence, Lawrence J. Trautman, Brian Elzweig, Neal F. Newman

Faculty Scholarship

An agency of the U.S. intelligence community observes, "The explosion of open source intelligence (OSINT) in recent years has transformed how governments and people around the world consume and process information about society and global issues." It is likely that "We all use open-source and probably don't even realize it, but we also use it for different reasons. You might use open-source information to do a credibility check and to find out more about the person selling you something on Facebook marketplace." Others "may research someone… met on a dating app or before hiring someone for a job." Every use …

Does Climate Disclosure Work To Reduce Greenhouse Gas Emissions? Emerging Evidence Suggests Cautious Optimism, Cynthia A. Williams

Seattle University Law Review

Significant regulatory resources have been spent developing global, voluntary climate and sustainability disclosure standards, such as the TCFD, TNRD, and ISSB’s Sustainability and Climate Disclosure standards, or domestically required disclosures, such as in the EU and in the U.S. Thus, it is important to evaluate whether this disclosure, particularly voluntary, qualitative disclosure, will have the power to shift the allocation of capital, will have a significant effect on the management of climate risk within firms, and ultimately will reduce climate change risk and biodiversity loss.

In this Article, several interrelated questions will be discussed. First, what does the empirical evidence …

Should We Watch The Watcher Or The Watched? The Transparency Debate In Auditor Regulation, Sarah Williams

Faculty Scholarship

Federal law has mandated the use of outside auditors by public companies since 1934. For much of that time, the audit industry watched itself. It monitored audit quality and decided how to address auditor misconduct. In 2002, Congress created the Public Company Accounting Oversight Board (“PCAOB” or “Board”) to watch the auditors. The legislation designed a regulatory scheme that presumed audit performance could be improved through an open and cooperative relationship between the regulator and the regulated audit firm. Congress created accountability for the agency by mandating that it disclose its oversight activities to the public (an approach characterized as …

Shocking Financed Emissions: The Effect Of Economic Volatility On The Portfolio Footprinting Of Financial Institutions, Ilmi Granoff, Tonya Lee

Sabin Center for Climate Change Law

Many financial institutions are now calculating and disclosing their financed emissions, a class of metrics enabling these institutions to calculate the greenhouse gas (GHG) emissions associated with investment and lending activities. These institutions have widely adopted the metric to estimate exposure to climate-related financial risk associated with GHG-emitting activities and to provide shareholders and investors a picture of how their financial activity impacts global climate change. Financed emissions metrics, despite widespread adoption, face two key methodological challenges: lack of comparability of outputs within and between portfolios, and vulnerability of calculations to portfolio volatility. Markets are naturally volatile, but the economic …

A Look Back In Time: Analyzing The Success And Value Of The 2014 Amendments To Rule 2a-7 And Reporting On Form N-Cr In Light Of The March 2020 Market Events, Jocelyn Near

Catholic University Law Review

Money market funds have frequently been a target of regulation by the Securities and Exchange Commission (“SEC”). Perhaps the most expansive regulation came as a response to the 2008 financial crisis, in which the Reserve Primary Fund “broke the buck.” The SEC’s misguided 2014 reforms exacerbated the inherent risks of money market funds, including the risk of runs and first mover advantage, particularly with the implementation of Form N-CR. Form N-CR requires a money market fund to publicly report when various events occur, including when a retail or government money market fund’s current net asset value per share deviates downward …

Materiality In The Long Now: Navigating The Intersection Of Decision-Making, Time, And Strategy, Daniel M. Labovitz, Alexander Kontoleon

Dickinson Law Review (2017-Present)

Existing formulations of materiality in the federal securities laws contain an inherent limitation because they don’t adequately account for how risks and opportunities change over time. This can mislead investors looking to understand how well a company is poised to avoid long-dated risks and take advantage of evolving opportunities because those risks and opportunities don’t neatly fit into the rubric of “likelihood of occurrence times magnitude of harm equals materiality.” This is because the likelihood of any long-dated risk occurring within a short reporting time frame will always approach zero, which means the traditional model of materiality will always classify …

Disclosure, Greenwashing, And The Future Of Esg Litigation, Barbara Ballan, Jason J. Czarnezki

Washington and Lee Law Review

The Environmental, Social, and Governance (“ESG”) disclosure movement is expanding both voluntarily, as businesses choose to disclose this information, and mandatorily, as government agencies impose disclosure requirements. As ESG disclosure expands, so do the litigation risks. “Greenwashing” refers to presenting false or misleading environmental or sustainability (i.e., “green”) qualities of products, services, or practices. Businesses may greenwash consumers as well as investors with false and misleading ESG disclosures in advertising, securities filings, or other public statements activating greenwashing litigation from investors and consumers. This Article addresses (1) the laws and regulations that cover consumer and securities greenwashing litigation, (2) how …

Franchising Law In The United States Between Theory And Practice: Heads Up For Foreign Investors, Radwa Elsaman

Touro Law Review

As a dynamic vehicle for fostering investment opportunities, both domestically and internationally, franchising spans a diverse array of industrial sectors, encompassing both goods and services. The United States plays a highly influential role in global franchise industry promotion, with a vast majority of International Franchise Association members representing American companies. Present data underscores that franchising has extended its reach to virtually every sector of the American economy. Notably, the United States stands among just four common law nations that have established dedicated franchise legislation, operating at both state and federal levels. This framework includes provisions for pre-sale disclosure, registration of …

Socially Acceptable Securities Fraud, Christine Hurt

Faculty Journal Articles and Book Chapters

What is a lie? Moreover, where is it a lie? Lies are bad. Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934 create liability for issuer firms and individuals who make “an untrue statement of a material fact” or omit “a material fact required to be stated therein or necessary to make the statements therein not misleading.” In the ninety years since the passage of the Securities Exchange Act, however, the number of ways in which market participants may publicly disseminate statements that will be consumed by investors has exploded; does 10b-5 really apply to all these …

Regulating Congressional Insider Trading: The Rotten Egg Approach, Sarah Williams

Faculty Scholarly Works

A 2004 study revealed that the stock portfolios of members of Congress were consistently outperforming those of the investing public. The financial success of federal lawmakers was statistically correlated to the use of nonpublic information obtained while performing legislative responsibilities—reasonably characterizable as insider trading. Cries of dismay over such profiteering by lawmakers have been echoing in the public domain since Samuel Chase, Maryland’s representative in the Continental Congress, directed colleagues to corner the flour market in 1778 after learning that copious quantities of it would be purchased by the government to support the Continental Army. Notwithstanding efforts to apply insider …

Rational Investing Or Speculative Fever?: Spacs, Robinhood, And Digital Assets—Securities Markets Or Casinos?, Thomas Lee Hazen

FIU Law Review

This article focuses a recurring theme – speculation in the financial markets. The 2010-2020 decade set the stage for a new round of speculative activity starting in 2021. In the article that follows I reflect on a new wave of speculation and three current examples of speculative activity. The article concludes that regulators should be cautious about over-regulation of SPACs and gamified trading. The article also supports the regulation of digital assets (crypto currencies and NFTs) as securities.

Climate, Clarity, Controversy: A Constitutional, Statutory, And Policy Analysis Of The Sec’S Proposed Climate Disclosure Rules, Astoneia O. Moss

Emory Business Law Review

The burgeoning ESG movement has heightened investors’ interest in how companies steward the environment in which they operate; manage their human capital; and implement strategies to effectively manage and fulfill the desires of stakeholders. As a result, the SEC has sought to implement a mandatory climate-related disclosure regime to provide investors with public companies’ climate-related data to assist in the investment decision-making process. The proposed climate-related disclosure rule has faced criticism from businesses, politicians, and legal scholars on constitutional, statutory, and policy grounds. This Comment concludes that based on the statutory language of the Securities Act of 1933 and Securities …

Comment Letter On Sec’S Proposed Rule On Conflicts Of Interest Associated With The Use Of Predictive Data Analytics By Broker-Dealers And Investment Advisers, File Number S7-12-23, Sergio Alberto Gramitto Ricci, Christina M. Sautter

Faculty Works

This comment letter responds to the Securities and Exchange Commission’s proposed rule Release Nos. 34-97990; IA-6353; File Number S7-12-23 - Conflicts of Interest Associated with the Use of Predictive Data Analytics by Broker-Dealers and Investment Advisers. Our comments draw on our scholarship relating to laypersons’ participation in securities markets and the corporate sector as well as on the role of technology in corporate governance.

We express concerns that the SEC’s proposed regulation undermines individuals’ ability to access capital markets in an efficient and cost-effective manner. In the era of excessive concentration of equities ownership and power, often with negative societal …

Taking Stock Of Startup Stock Options: Addressing Disclosure And Liquidity Concerns Of Startup Employees, John R. Dorney

Vanderbilt Law Review

U.S. capital markets are becoming increasingly private. Initial public offerings have steadily declined since the 1990s, and private companies are remaining private over twice as long as they have in the past. Furthermore, private company financing has reached unprecedented levels. Private securities offerings now greatly outpace the value of publicly traded securities. Additionally, recent regulatory changes seem to be accelerating this shift from the public to the private markets. One result of this shift is that private company valuations have grown immensely, so much so that private companies with valuations of over $1 billion exist and are known as “unicorns.” …

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.

Event-Driven Suits And The Rethinking Of Securities Litigation, Merritt B. Fox, Joshua Mitts

Faculty Scholarship

Event-driven securities suits-ones that arise after an issuer has experienced some kind of disaster-have become increasingly prevalent in recent years. These suits are based on the fraud-on-the-market doctrine, a doctrine that ultimately gives rise to the bulk of the damages paid out in settlements and judgments pursuant to private litigation under the U.S. securities laws. The theory behind fraud-on-the-market cases is that when an issuer's share price has been inflated by a Rule-10b-5-violating misstatement, investors who purchased shares at the inflated price have suffered a compensable injury if they still hold the shares after the inflation is gone. Although these …

Closing The Auditor Loophole: Towards A More Perfect Work-Product Waiver Doctrine, Evan Mulbry

Michigan Business & Entrepreneurial Law Review

The Supreme Court created strong protections for the attorney’s thought processes and analysis in Hickman v. Taylor. However, the Court in Arthur Young & Co. created a loophole enabling opposing lawyers to access the lawyer’s thought processes and legal strategies. This loophole was created when the Court allowed discovery of an auditor’s tax workpapers, and lower courts then interpreted this decision to imply that disclosing information to the outside auditor constitutes a waiver of attorney work-product protections. This loophole can be corrected through a Congressional statute that impacts the Federal Rules of Evidence, which would protect communications between outside auditors …

Spac Regulation—Past, Present And Future, E. Ramey Layne, K. Stancell Haigwood

University of Arkansas at Little Rock Law Review

No abstract provided.

Regulating Dynamic Risk In Changing Market Conditions, Susan Navarro Smelcer, Anne Tucker, Yusen Xia

William & Mary Business Law Review

How successful are the SEC's attempts to regulate dynamic risk in financial markets? Using mutual fund disclosure data from two financial shocks--the Puerto Rican debt crisis and COVID-19--this Article finds evidence that SEC open-ended regulations, like the obligation to disclose changing market conditions, are largely successful in capturing dynamic, future risk. Funds engage in widespread and, often, detailed disclosures for new risks--although these disclosures vary widely in specificity. But not all funds disclose new risks. This creates perverse incentives for funds to opt out of disclosure or downplay threats with boilerplate language when new risks are emerging. This Article recommends …

A Response To Calls For Sec Mandated Esg Disclosure, Amanda M. Rose

Vanderbilt Law School Faculty Publications

This Article responds to recent proposals calling for the SEC to adopt a mandatory ESG-disclosure framework. It illustrates how the breadth and vagueness of these proposals obscures the important--and controversial-- policy questions that would need to be addressed before the SEC could move forward on the proposals in a principled way. The questions raised include some of the most contested in the field of corporate and securities law, such as the value of interjurisdictional competition for corporate charters, the right way to conceptualize the purpose of the corporation, the proper allocation of managerial power as between the board and shareholders, …

Striving For Simplicity: Updates To Regulation S-K Items 101 And 105, John D. Frey

Louisiana Law Review

The article discusses the amendments implemented by the U.S. Securities and Exchange Commission (SEC) to its Regulation S-K regulating the disclosure of non-financial statements for the benefits of both registrants and investors.

Transparency For Whom? Grounding Land Investment Transparency In The Needs Of Local Actors, Sam Szoke-Burke

Columbia Center on Sustainable Investment Staff Publications

Transparency is often seen as a means of improving governance and accountability of investment, but its potential to do so is hindered by vague definitions and failures to focus on the needs of key local actors.

In this new report focusing on agribusiness, forestry, and renewable energy projects (“land investments”), CCSI grounds transparency in the needs of project-affected communities and other local actors. Transparency efforts that seek to inform and empower communities can also help governments, companies, and other actors to more effectively manage operational risk linked to social conflict.

Troublingly, the report finds that:

• Disclosures around land investments continue …

Pension Fiduciaries And Climate Change: A Canadian Perspective, Maziar Peihani

All Faculty Publications

Climate change has emerged as a major issue of financial risk for Canadian pension funds when determining where to place investments. The author argues that while such pension funds recognize climate change as an issue that holds the potential for significant financial risk, the funds’ current approach to climate-related risks faces critical limitations. The author identifies the current practices of the five largest pension funds in Canada when faced with climate-related financial risks, then discusses the key shortcomings in current practices among the pension funds in three main areas.
First, the author examines organizational governance, which seeks to understand investment …

Esg And Climate Change Blind Spots: Turning The Corner On Sec Disclosure, Cynthia A. Williams, Donna M. Nagy

Articles by Maurer Faculty

This article examines four areas in which the SEC, for more than a decade, resisted reform or impeded shareholders’ access to sought-after environmental, social, and governance (ESG) information. These areas are: (1) the SEC’s refusal to act on several rulemaking petitions submitted during the years 2009 to 2018, which called for expanded ESG disclosure; (2) the SEC’s grudging promulgation of rules concerning social disclosures as required by Congress in the Dodd-Frank Act of 2010; (3) the SEC’s 2020 revisions to SEC Rule 14a-8, which make the submission of shareholder proposals more difficult, thereby thwarting investor efforts to raise ESG concerns; …

An Overview Of Brokercheck And The Central Registration Depository, Christine Lazaro, Albert Copeland

Faculty Publications

(Excerpt)

Securities brokers are governed by a unique regulatory framework, subject to both extensive state and federal statutory and regulatory regimes. The vast bulk of federal regulation and oversight of brokers and brokerage firms has been delegated to the Financial Industry Regulatory Authority (“FINRA”), a self-regulatory organization with the power to govern its members’ conduct. FINRA operates under the oversight of the Securities and Exchange Commission (the “SEC”), a federal agency established by the federal securities laws.

FINRA was created on July 26, 2007 through the consolidation of the National Association of Securities Dealers (“NASD”) and the member regulation, enforcement …