Securities Law Commons^™

Policy Work In Securities Arbitration, Christine Lazaro

Journal of Civil Rights and Economic Development

(Excerpt)

I have been a securities lawyer my entire professional career. I began my career representing financial services firms being sued by investors and investigated by the regulators. We handled their defense in a variety of forums, including Court, the Securities and Exchange Commission (SEC), and the Financial Industry Regulatory Authority (FINRA). FINRA is the primary self-regulatory organization tasked with regulating brokerage firms under the Securities Exchange Act of 1934.

From private practice, I joined St. John’s Law School, initially as a supervising attorney with the Securities Arbitration Clinic, and later as a Professor of Clinical Legal Education. Joining the …

"Tuah Much To Handle": Why The Current Oversight On Cryptocurrency Is Insufficient, Adam Gross

University of Cincinnati Law Review

No abstract provided.

Reporting Materiality Under The Sec Cybersecurity Disclosure Rules: How Corporate Boards Balance Duty And Risk For Cyber Threats And Incidents, Deborah Slattery-Pereira

American University Business Law Review

The Security Exchange Commission’s (SEC) cybersecurity rules require that public companies disclose a material cyber threat or incident and the impact of the incident on the company’s business Corporate boards must disclose any cyber-related information that would affect a reasonable shareholder’s investment decisions. These rules delegate to the corporate board and management the decision of which cybersecurity events qualify as material to investors. Directors and officers must also decide when and how to disclose to the SEC, and what information to report.

The SEC Cybersecurity Rules increase compliance and litigation costs for public companies, as shareholders can use this information …

Finding Law When There Is None: An Analysis Of Litigation Concerning Non–Fungible Tokens (Nfts), Shelby T. Roberts, O. Hayden Griffin, Iii

University of Miami Business Law Review

The development of new technologies tends to give rise to the same quandary: how can these technologies flourish while also protecting citizens from any collateral consequences? How much latitude and freedom should innovators be given in pursuing these technologies is often debated. Non–fungible tokens (NFTs) are one of several products that utilize blockchain technology. NFTs have been hailed by some as the future of commerce while others have derided NFTs as a scam–ridden fad. With virtually no legislation or regulations specifically designed to govern NFTs, a content analysis of litigation involving NFTs was conducted as an effort to help determine …

Do Representative Payments Matter?, Brian T. Fitzpatrick, Colton Cronin

Vanderbilt Law School Faculty Publications

For many decades, courts have awarded the representative plaintiffs who bring class actions an extra payment when the actions recover something for the class. It has long been thought that the payments are necessary to induce a class member to step forward and serve as a representative, and, without them, many class actions would go away. Indeed, we show that the payments had become all but ubiquitous in non-securities class actions. In 2020, however, the United States Court of Appeals for the Eleventh Circuit became the only circuit to hold the payments unlawful. We test whether the Eleventh Circuit's decision …

The Private Offering: Rule 146 And Offeree Sophistication, Maine Law Review

Maine Law Review

The fundamental premise of the Securities Act of 1933 is that protection of the investor is achieved by requiring the dissemination of information essential to an informed investment decision. Carved from this general requirement are exemptions from registration dealing with certain types of securities and transactions. This lack of clarity has created a situation in which the SEC continues to list the characteristics of a private offering while the judiciary seizes upon particular factors as determinative tests. In response to the need for "greater certainty in the application of the Section 4(2) exemption, the SEC has recently proposed Rule 146 …

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 Private Offering: Rule 146 And Offeree Sophistication, Maine Law Review

Maine Law Review

The fundamental premise of the Securities Act of 1933 is that protection of the investor is achieved by requiring the dissemination of information essential to an informed investment decision. Carved from this general requirement are exemptions from registration dealing with certain types of securities and transactions. This lack of clarity has created a situation in which the SEC continues to list the characteristics of a private offering while the judiciary seizes upon particular factors as determinative tests. In response to the need for "greater certainty in the application of the Section 4(2) exemption, the SEC has recently proposed Rule 146 …

Corenco V. Schiavone: The Cash Tender Offeror As Corporate Raider, Maine Law Review

Maine Law Review

The concern of both the federal and state courts in the litigation between Schiavone and Corenco was to provide adequate protection to the existing shareholders of the target company during the battle for corporate control. Viewed together, these cases illustrate the limits of federal protection and the possibility of further protection through state law. This Note analyzes the rationales of both decisions and considers whether further regulation is warranted.

Federal Deregulation Of Small Issues Of Securities: Rule 240, Maine Law Review

Maine Law Review

The fundamental purpose of the Securities Act of 1933 is the protection of the investor through the disclosure and distribution of information necessary to informed investment decisions. This disclosure is achieved through section 53 of the Act, which requires that, with certain enumerated exceptions, all issues of securities offered for sale to the public through the mails or other instrumentalities of interstate commerce shall be registered with the Securities and Exchange Commission. When filed, the registration statement becomes a public document setting forth all material facts about the offered securities and the issuer. No offer of securities is lawful until …

How Active Cftc Enforcement Could Benefit Crypto, Carol R. Goforth

Pace Law Review

Commodity Futures Trading Commission (CFTC) crypto enforcement rose to record levels in 2023, prompting applause from some observers and criticism from others. In fact, the CFTC’s enforcement agenda is not out of step with other federal agencies such as the Securities and Exchange Commission (SEC), which has also been incredibly active in the crypto industry. It might seem that this is bad news for crypto, given that both the CFTC and SEC have been angling to become the primary regulator for these new assets. In reality, proof that the CFTC is active in enforcing the law against crypto entrepreneurs and …

Through A Glass Darkly: How Securities Disclosures Give A Distorted View Of The Economy, Gerald F. Davis

Seattle University Law Review

Our understanding of the American economy often relies on stylized facts derived from mandatory disclosures by listed corporations. Data vendors like Standard & Poor’s vacuum up 10Ks and proxy statements into databases, and scholars distill these into tentative maps. This may have been adequate for a postwar economy centered on asset-heavy manufacturers, but it is increasingly out of step with an information-based economy. Companies listed on the stock market are fewer in number and less representative than they were, light in tangible assets and people, and heavy on IP. Basic facts such as what industry they are in are increasingly …

New, Derivative: Third-Party Litigation Finance And Derivatives Regulation, Martin Flores

Washington and Lee Law Review Online

Litigation finance is globally abundant and largely unregulated in the United States. The mechanics behind third-party litigation finance are simple: The funder fronts litigation costs in exchange for a promised share of the proceeds if the litigant succeeds. While the normative debate about the value of these contracts in society endures, the litigation finance industry has new players in hedge funds and other opaque investment firms seeking high returns from risky litigation. Many scholars agree on whether to regulate these third-party litigation finance firms. The key debate rages on how to rein in an unbridled industry.

To add to this …

West V. Multibanco Comermex, S.A.: Application Of The Securities Laws To Foreign Certificates Of Deposit, Peter J. Stocks

Maine Law Review

The persistent debate concerning which investment instruments constitute "securities" for purposes of the Securities Act of 1933 and the Securities Exchange Act of 1934 is as old as the Securities Acts themselves. The Supreme Court has addressed the issue eight times without putting the debate to rest. In Marine Bank v.Weaver, the Court held that a certificate of deposit (CD) issued by a bank regulated under "the federal banking laws" is not a "security" within the meaning of the Securities Exchange Act of 1934. The Court of Appeals for the Ninth Circuit has twice, since Weaver, addressed the issue of …

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

Cardozo Law Review

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 …

Calpers V. Anz Securities: Securities Time Bars, Whit Kendall

MC Law Review

Statutes of limitations and statutes of repose are critical mechanisms that help to limit liability in civil actions. In many instances, these two time bars are paired together in order to protect a defendant from an interminable threat of liability. Although these time limits are present in many types of statutes, they are especially important in statutes involving securities offerings because of the need to protect financial security. In the Securities Act of 1933 ("Securities Act"), there are two time bars, a statute of limitations and a statute of repose, which attempt to protect potential defendants from liability regarding the …

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 …

Book Review—Environmental, Social, Governance: The Professional’S Guide To The Law And Practice Of Esg, William J. Donohue

Dickinson Law Review (2017-Present)

No abstract provided.

A New Era Of Accountability? The Holding Foreign Companies Accountable Act’S Pursuit Of Regulatory Equality, Robert Ruelas

Northwestern Journal of International Law & Business

This paper discusses the Holding Foreign Companies Accountable Act (HFCAA) as a response to the long-standing regulatory disparities between U.S. and foreign firms listed on U.S. stock exchanges, with particular regard to foreign firms from China. The HFCAA requires that any firms listed on U.S. stock exchanges be subject to inspections by the Public Company Accounting Oversight Board (PCAOB) or face delisting, aiming to eliminate historic regulatory disparities. The paper begins by highlighting the historic regulatory gap in oversight resulting from China’s lack of cooperation with U.S. regulators and continues by discussing the investor harm from various scandals that could …

Navigating The Intersection Of Regulation And Vulnerability: The Evolving Landscape Of Cybersecurity In Investment Management And The Imperative For Comprehensive Safeguards, Giezi Rios

Catholic University Journal of Law and Technology

No abstract provided.

The Business Of Securities Class Action Lawyering, Stephen Choi, Jessica M. Erickson, Adam C. Pritchard

Indiana Law Journal

Plaintiffs’ lawyers in the United States play a key role in combating corporate fraud. Shareholders who lose money as a result of fraud can file securities class actions to recover their losses, but most shareholders do not have enough money at stake to justify overseeing the cases filed on their behalf. As a result, plaintiffs’ lawyers control these cases, deciding which cases to file and how to litigate them. Recognizing the agency costs inherent in this model, the legal system relies on lead plaintiffs and judges to monitor these lawyers and protect the best interests of absent class members. Yet …

Discretionary Investing By 'Passive' S&P 500 Funds, Peter Molk, Adriana Z. Robertson

UF Law Faculty Publications

So-called passive index funds—investment funds that are designed to track a pre-specified underlying index—have become a dominant force in the investing landscape, collectively controlling over $12 trillion in assets. It is widely assumed that these funds are obligated to follow their underlying index, and that fund managers cannot, or do not, select portfolios that deviate from that of the index. As a result, various critics have attacked these funds, including raising concerns about their corporate governance incentives to fears about their influence on market efficiency.

We show that this assumption is overly simplistic both as a matter of law and …

The Sec And "Major Questions Doctrine" Questions, Donna M. Nagy

Articles by Maurer Faculty

Nearly two years ago, in the wake of the Supreme Court’s formal adoption of what it termed the “major questions doctrine,” the Wall Street Journal reported a prediction that “‘every corporate securities lawyer in America is going to now fashion their arguments against SEC rulemaking to force-fit it into [that doctrine].’” As articulated by the sharply divided 6- 3 majority in West Virginia v. EPA, major questions doctrine (MQD) analysis is warranted in certain “extraordinary cases” involving a “transformative expansion” in a federal agency’s regulatory authority that is premised on “a merely plausible textual basis for the agency action.” Extraordinariness, …

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.

How To Interpret The Securities Laws?, Zachary J. Gubler

Seattle University Law Review

In discussions of the federal securities laws, the SEC usually gets most of the attention. This makes some sense. After all, it is the agency charged with administrating the securities laws and regulating the industry as a whole. It makes the majority of the laws; it engages in enforcement actions; it reacts to crises; and it, or sometimes even its individual commissioners, intervene publicly in policy debates. Often overlooked in such discussion, however, is the role of the Supreme Court in shaping securities law, and a new book by Adam Pritchard and Robert Thompson demonstrates why this is an oversight. …

Reconciling Disjunct Cryptocurrency Securities Enforcement With Purchaser Expectations, Jacob E. Simmons

Seattle University Law Review

The Southern District of New York’s July 2023 decision in SEC v. Ripple Labs, Inc. has been touted as a monumental win for cryptocurrency purchasers and related businesses. The Ripple court held that, except institutional investor transactions, all sales of Ripple’s XRP token were not investment contracts, a class of security subject to federal securities law. The court’s ruling meant that Ripple could not be held liable for the unregistered trading of XRP beyond its sales to institutional investors. Ripple adds new insights to a pervasive policymaking dilemma addressed in this Note: is the Securities and Exchange Commission’s (SEC) regulatory …

The Vitruvian Shareholder, Sergio Alberto Gramitto Ricci

Faculty Works

The proportions of Leonardo's Vitruvian Man allow the human figure to fit a circle and a square, which in Renaissance iconography represent respectively the secular and divine dimensions. Good canons allow for a proportionate and simultaneous coexistence of the two natures of humankind. Human shareholders have two natures, too: one as investors and one as human beings. Similar to the Vitruvian Man, a shareholder with good proportions fits a metaphorical circle and a metaphorical square: the former represents the human dimension, and the latter represents the investor. I dub retail investors who proportionately balance their interests as human beings who …

Fractionalizing Investment Securities: Using Fintech To Expand Financial Inclusion, Steven L. Schwarcz, Robert Bourret

Faculty Scholarship

Recent innovations in financial technology, or “FinTech,” are enabling the fractionalization of investment securities, such as shares of stock and bonds. We explain how this fractionalization can fundamentally expand financial inclusion both for investors and for businesses, including small and medium-sized enterprises (SMEs). Using the fractionalization of investment securities as a model, we also counter the argument that FinTech-enabled transactions should not need regulation because they are governed by mathematical algorithms under so-called smart contracts. Additionally, we derive and test a regulatory framework to identify and help to mitigate the risks caused by fractionalization. In the process, we also explain …