Securities Law Commons^™

Inclusive Crowdfunding, Andrew A. Schwartz

Publications

Securities “crowdfunding” — the sale of unregistered securities over the internet to large numbers of investors, each of whom contributes only a small amount — is a new concept that comes in at least three types: (1) retail crowdfunding under Title III of the federal JOBS Act of 2012; (2) accredited crowdfunding under Title II of the JOBS Act, which is legally restricted to accredited investors; and (3) intrastate crowdfunding under state law. Which of these three types — all at the dawn of their existence — holds the most promise?

Without claiming to finally resolve the issue, this Article …

Disruptive Technology And Securities Regulation, Chris Brummer

Fordham Law Review

    Nowhere has disruptive technology had a more profound impact than in financial services—and yet nowhere do academics and policymakers lack a coherent theory of the phenomenon more, much less a coherent set of regulatory prescriptions. Part of the challenge lies in the varied channels through which innovation upends market practices. Problems also lurk in the popular assumption that securities regulation operates against the backdrop of stable market gatekeepers like exchanges, broker-dealers, and clearing systems—a fact scenario increasingly out of sync in twenty-first-century capital markets.

    This Article explains how technological innovation “disrupts” not only capital markets but also the exercise of …

How Algorithmic Trading Undermines Efficiency In Capital Markets, Yesha Yadav

Vanderbilt Law School Faculty Publications

This Article argues that the rise of algorithmic trading undermines efficient capital allocation in securities markets. It is a bedrock assumption in theory that securities prices reveal how effectively public companies utilize capital. This conventional wisdom rests on the straightforward premise that prices reflect available information about a security and that investors look to prices to decide where to invest and whether their capital is being productively used. Unsurprisingly, regulation relies pervasively on prices as a proxy for the allocative efficiency of investor capital.

Algorithmic trading weakens the ability of prices to function as a window into allocative efficiency. This …

Broader Is Better: How Courts Should Determine Whether Or Not An Allegation Of Fraud Falls Under The Preemption Provision Of The Securities Litigation Uniform Standards Act, Jennifer Rose Roeske

St. John's Law Review

(Excerpt)

This Note argues that the correct approach for interpreting the scope of SLUSA's preemption language is the "literalist" approach taken by the Sixth Circuit. Part I of this Note lays out the legal framework of the Reform Act of 1995, Congress's intent in enacting the legislation, and the unintended consequences that flowed from the PSLRA's heightened pleading requirements. Part I also discusses SLUSA, what led to its passage, and its preemption language. Additionally, it looks at the Supreme Court's interpretation of preemption statutes generally, as well as the Supreme Court's broad interpretation of SLUSA in Merrill Lynch, Pierce, Fenner …

Extraterritorial Criminal Enforcement Of Securities Fraud Regulations After United States V. Vilar, Edgardo Rotman

University of Miami Law Review

In August 2013, the Court of Appeals for the Second Circuit in the case of United States v. Vilar denied extraterritorial application of the criminal law antifraud provisions contained in the Securities Exchange Act. The specific object of this paper is to criticize this decision and negate its premises.

After delving in depth into the notion of extraterritoriality, the paper offers a dynamic interpretation of the 1922 Supreme Court’s decision in United States v. Bowman, which is still the governing precedent on extraterritorial application of criminal laws. Furthermore, the paper criticizes the application of the 2010 Supreme Court’s decision …

Guide To Structuring Resales Of Restricted Securities Held By Control And Non-Control Holders Under Federal And Arkansas Law, John F. Griffee

University of Arkansas at Little Rock Law Review

No abstract provided.

The Sum Of Its Parts: The Lawyer-Client Relationship In Initial Public Offerings, Jeremy R. Mcclane

Fordham Law Review

    This Article examines the impact of the quality of a lawyer's working relationship with his or her client on one of the most important types of capital markets deal in a company's existence: its initial public offering (IPO). Drawing on data from interviews with equity capital markets lawyers at major law firms, and analyzing data from IPOs in the United States registered with the Securities and Exchange Commission between June 1996 and December 2010, this study finds a strong association between several measures of IPO performance and the familiarity between the lead underwriter and its counsel, as measured by the …

Let Sleeping Regs Lie: A Diatribe On Regulation A'S Futility Before And After The J.O.B.S. Act, Neal F. Newman

Faculty Scholarship

Did Congress do the right thing when it attempted to revise Regulation A through Title IV of the J.O.B.S. Act or was their legislative effort an exercise in futility?

On April 4 2012, President Obama signed into law the J.O.B.S. (Jumpstart Our Business Startups) Act. The Act’s intent is to ease the regulatory burden on smaller companies when issuing securities in both private and public offerings. This paper’s specific focus is on the Act’s Title IV. Title IV makes revisions to Regulation A, a private securities offering exemption promulgated under the Securities Act of 1933.

A big problem with Regulation …

Drafting And Securitizing Participation Mortgages: A Re-Introduction, Spencer J. Coopchik, Yildiray Yildirim

The Journal of Business, Entrepreneurship & the Law

This Paper will reintroduce, explore, and expand on the financing arrangement known as a Participation Mortgage. First, this Paper will cover the features, history, and policy purposes behind the mortgage. Second, the Paper will focus on legal mechanics and drafting considerations of Participation Mortgages, so they may later be securitized. Finally, the Paper will explore the possibility and legality of creating Participation Mortgaged Backed Securities to be sold in the secondary market.

Clearinghouses And Regulation By Proxy, Yesha Yadav

Georgia Journal of International & Comparative Law

Related to Georgia Journal of International and Comparative Law Conference: The New Roles of Corporations in Global Governance.

Loss Causation, Economic Loss Rules And Offset Defenses – Dismissal Motion Practice After Acticon A.G. V. China North East Petroleum Holdings Ltd., Laurence A. Steckman, Robert E. Conner, Kris Steckman Taylor

Touro Law Review

No abstract provided.

Assessing Irving Picard’S Writ Of Certiorari In Picard V. Jp Morgan Chase: Another Chapter In The Saga Of Bernie Madoff And His Impact On The Securities Industry, Bryce Cullinane

The Journal of Business, Entrepreneurship & the Law

An objective analysis of Picard's writ shows the Second Circuit should be affirmed. Picard's arguments are long on emotional appeal and customer-centric public policy but short on the law. The Second Circuit decision is in line with the intent of Congress. Furthermore, adopting Picard's interpretation would raise many issues and create many problems in the financial services industry. Part II of this note provides background on SIPA and the Securities Investor Protection Corporation (SIPC), as well as Section 544 of the Code. Part III provides background on the Picard case, including a brief discussion of Madoff's scheme and Picard's work …

Adding A Due Diligence Defense To § 13(B) And Rule 13b 2 – 2 Of The Securities Exchange Act Of 1934, Michael Evans

Washington and Lee Law Review

No abstract provided.

Superior Supererogation: Why Credit Default Swaps Are Securities Under The Investment Advisers Act Of 1940, J. Tyler Kirk

William & Mary Business Law Review

No abstract provided.

Better Go It Alone: An Extension Of Fiduciary Duties For Investment Fund Managers In Securities Class Action Opt-Outs, Brian J. Shea

William & Mary Business Law Review

Securities class actions provide a vehicle for plaintiffs to recover billions of dollars in settlement awards. Given the prevalence of institutional investors in the market for publicly traded securities, it is no surprise that large investment funds are often implicated as lead plaintiffs in securities class actions. Despite having recoverable claims in many of these settlements, these investment funds often fail to participate in the action on behalf of their beneficiaries (their investors). Some scholars argue that fund managers have a fiduciary obligation to participate in claim filing and monitoring processes in an effort to recover settlement awards and to …

The Next British Invasion Is Securities Crowdfunding: How Issuing Non-Registered Securities Through The Crowd Can Succeed In The United States, Robert H. Steinhoff

University of Colorado Law Review

Securities crowdfunding is the novel concept of using the power of the Internet to raise business capital through the "crowd." British companies and investors have proven adept at using the relatively new medium of crowdfunding as a means of providing much needed capital to startups and other small businesses. This Comment examines securities crowdfunding in the United Kingdom in an effort to show how this means of capital formation might succeed in the United States once the SEC implements proposed rules exempting crowdfunded securities from registration. Other commentators have already provided ample criticism of the crowdfunding exemption in the JOBS …

The Nonfinancial Returns Of Crowdfunding, Andrew A. Schwartz

Publications

Securities crowdfunding — the sale of unregistered securities to the public over the Internet — has come under attack before it has even begun. Legal scholars in particular have expressed concern that investors will lose any money they invest in crowdfunding companies. Even assuming that this may be true from a purely financial perspective, these critics are missing an important point: Crowdfund investors with negative returns will not simply have lost their money, but rather they will have spent it (at least in part) on nonpecuniary benefits, including entertainment, political expression and community building. These nonfinancial returns of crowdfunding are …

Is The Price Right? An Empirical Study Of Fee-Setting In Securities Class Actions, Michael A. Perino, Lynn A. Baker, Charles Silver

Faculty Publications

Every year, fee awards enable millions of people to obtain access to justice and strengthen the deterrent effect of the law by motivating lawyers to handle class actions. But little research exists on why judges award the amounts they do or whether they size fee awards correctly. The process remains a black box. Through a detailed study of 431 securities class actions that settled in federal district courts from 2007 through 2012, this Article presents the first empirical study to peer inside that black box. In contrast to prior analyses, this study relies on the actual court filings in each …

"We're Cool" Statements After Omnicare: Securities Fraud Suits For Failures To Comply With The Law, James D. Cox

Faculty Scholarship

As part of a symposium celebrating the multiple contributions of the late Alan Bromberg, this article examines implications flowing from the Supreme Court’s recent decision in Omnicare Inc. v. Laborers District Council Construction Industry Pension Fund. Because Omnicare lands so squarely on the Court’s earlier opaque opinion in Virginia Bankshares, Inc. v. Sandberg addressing the treatment of the materiality of opinion statements, Omnicare is the new currency in the realm that will have far-reaching implications. In Virginia Bankshares, the Supreme Court quickly concluded shareholders would attach significance to the board of directors’ statement that the cash-out merger …

Brief Of Prof. Steven L. Schwarcz As Amicus Curiae, Steven L. Schwarcz

Faculty Scholarship

No abstract provided.

The Digital Shareholder, Andrew A. Schwartz

Publications

Crowdfunding, a new Internet-based securities market, was recently authorized by federal and state law in order to create a vibrant, diverse, and inclusive system of entrepreneurial finance. But will people really send their money to strangers on the Internet in exchange for unregistered securities in speculative startups? Many are doubtful, but this Article looks to first principles and finds reason for optimism.

Well-established theory teaches that all forms of startup finance must confront and overcome three fundamental challenges: uncertainty, information asymmetry, and agency costs. This Article systematically examines this “trio of problems” and potential solutions in the context of crowdfunding. …

Securities - Insider Trading - The Effects Of The New Eec Draft Insider Trading Directive, Douglas A. Nystrom

Georgia Journal of International & Comparative Law

No abstract provided.

The Value Of Public-Notice Filing Under Uniform Commercial Code Article 9: A Comparison With The German Legal System Of Securities In Personal Property, Jens Hausmann Dr.

Georgia Journal of International & Comparative Law

No abstract provided.

Sec V. Bauer: If The Glove Fits, It's Insider Trading, Kramer Ortman

Catholic University Law Review

Until SEC v. Bauer, insider trading has never been applied within the context of an open-ended mutual fund. In alleging insider trading against Jilaine Bauer, an account executive of a mutual fund, the SEC originally won summary judgment; however, the case on appeal saw the SEC drop its original theory, the classical theory of insider trading, in favor of the alternative misappropriation theory. This Note argues that the misappropriation theory applies in the context of open-ended mutual funds by recognizing that the policy reasons underlying the prohibitions against insider trading are centered on the principles of fairness, market integrity, …

Reconciling Tax Law And Securities Regulation, Omri Marian

University of Michigan Journal of Law Reform

Issuers in registered securities offerings must disclose the expected tax consequences to investors investing in the offered securities (“nonfinancial tax disclosure”). This Article advances three arguments regarding nonfinancial tax disclosures. First, nonfinancial tax disclosure practice, as the Securities and Exchange Commission (the SEC) has sanctioned it, does not fulfill its intended regulatory purposes. Currently, nonfinancial tax disclosures provide irrelevant information, sometimes fail to provide material information, create unnecessary transaction costs, and divert valuable administrative resources to the enforcement of largely-meaningless requirements. Second, the practical reason for this failure is the SEC and tax practitioners’ unsuccessful attempt to address investors’ heterogeneous …

Judgment Day For Fraud-On-The-Market: Reflections On Amgen And The Second Coming Of Halliburton, Donald C. Langevoort

Georgetown Law Faculty Publications and Other Works

The Supreme Court has reaffirmed the "fraud on the market" presumption of reliance, facilitating large scale class actions for this kind of securities fraud. This essay traces the road from its decision last year in Amgen to this year's reaffirmation in Halliburton II, and considers some of the issues that will emerge as lower courts struggle with Halliburton II's secondary holding--that the issue of "price impact" is crucial to class certification, even if the burden of proof is on the defendants.

Putting The “Uniform” Back In The Securities Litigation Uniform Standards Act Of 1998: The Case For Employing A Reasonable Relationship Approach, Christopher R. Bellacicco

Catholic University Law Review

No abstract provided.

Culture Wars: Rate Manipulation, Institutional Corruption, And The Lost Normative Foundations Of Market Conduct Regulation, Justin O'Brien

Seattle University Law Review

The global investigations into the manipulation of the London Interbank Offered Rate (Libor) have raised significant questions about how conflicts of interest are managed for regulated entities contributing to benchmarks. An alternative framework, which brings the management of the rate process under direct regulatory supervision, is under consideration, coordinated by the International Organization of Securities Commissions taskforce. The articulation of global principles builds on a review commissioned by the British government that suggests rates calculated by submission can be reformed. This paper argues that this approach is predestined to fail, precisely because it ignores the lessons of history. In revisiting …

Is The Independent Director Model Broken?, Roberta S. Karmel

Seattle University Law Review

At common law, an interested director was barred from participating in corporate decisions in which he had an interest, and therefore “dis-interested” directors became desirable. This concept of the disinterested director developed into the model of an “independent director” and was advocated by the Securities and Exchange Commission and court decisions as a general ideal in a variety of situations. This Article explores doubts regarding the model of an “independent director” and suggests that director expertise may be more important that director independence. The Article then discusses shareholder primacy and sets forth alternatives to the shareholder primacy theory of the …

Taking Stock: Insider And Outsider Trading By Congress, Jeanne L. Schroeder

William & Mary Business Law Review

Spring 2012 saw the enactment of the “Stop Trading on Congressional Knowledge Act of 2012” or “STOCK Act.” It supposedly repealed an exemption from the federal securities laws that made insider trading by members of Congress “totally legal.” As every securities lawyer knows, however, there never was such an exemption. Representatives and Senators have always been subject to the same rules as the rest of us. It is just that insider-trading law is so incoherent that legal scholars sharply disagreed as to when, or even if, trading by government officials on the basis of material nonpublic information gleaned from their …