Securities Law Commons^™

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 It supposedly repealed an exemption from the federal securities laws that made insider trading by members of Congress “totally legal.”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 …

Proposed Crowdfunding Regulations Under The Jobs Act: Please, Sec, Revise Your Proposed Regulations In Order To Promote Small Business Capital Formation, Rutheford B. Campbell Jr.

Law Faculty Advocacy

The Jobs Act was enacted to promote efficient access to external capital by small businesses. Title III of the Jobs Act offers small businesses the chance of efficient financial intermediation through crowdfunding. The crowdfunding exemption is not self-executing but, instead, requires regulatory implementation by the SEC.

The Commission’s first iteration of its crowdfunding rules fails to offer small businesses efficient access to external capital. Principally, this is because the proposed crowdfunding rules: (1) require excessive disclosures, especially regarding smaller crowdfunding offerings; (2) fail to offer small businesses relying on the crowdfunding exemption two-way safe harbor integration protection; and (3) fail …

Drastic Times Call For Drastic Risk Measures: Why Value-At-Risk Is (Still) A Flawed Preventative Of Financial Crises And What Regulators Can Do About It, Andrew L. Mcelroy

The Journal of Business, Entrepreneurship & the Law

Bank regulators recently proposed the most fundamental reforms to U.S. banking law in decades, yet the value-at-risk statistic--replete with known deficiencies--remains the basis of the capital adequacy requirement. Consequently, there exists an unresolved tension in the law: the purpose of the banking rules is to require riskier financial institutions to hold additional capital, yet the value-at-risk statistic used to make this assessment induces a perverse incentive to hold the riskiest securities. Overlaid on this framework is the wide latitude afforded to banks in designing their value-at-risk models. This Article explores foreseeable issues with the regulatory reliance on value-at-risk. Moreover, it …

The Systemic Risk Paradox: Banks And Clearinghouses Under Regulation, Felix B. Chang

Faculty Articles and Other Publications

Consolidation in the financial industry threatens competition and increases systemic risk. Recently, banks have seen both high-profile mergers and spectacular failures, prompting a flurry of regulatory responses. Yet consolidation has not been as closely scrutinized for clearinghouses, which facilitate trading in securities and derivatives products. These nonbank intermediaries can be thought of as middlemen who collect deposits to ensure that each buyer and seller has the wherewithal to uphold its end of the deal. Clearinghouses mitigate the credit risks that buyers and sellers would face if they dealt directly with each other.

Yet here lies the dilemma: large clearinghouses reduce …

Teenage Crowdfunding, Andrew A. Schwartz

Publications

Teenage startups are in the public interest and should be encouraged, yet the federal CARD Act of 2009 eliminated credit card financing for many such companies, cutting off an important source of early-stage business capital for teenage entrepreneurs. Since then, however, Congress passed the CROWDFUND Act of 2012 which will allow teenagers to raise early-stage financing through Internet crowdfunding. Teens, being masters of the Internet, are well positioned to exploit this new opportunity, with the upshot being that securities crowdfunding may become an important way for youthful entrepreneurs to fund their business dreams.

High-Frequency Trading: A Regulatory Strategy, Charles R. Korsmo

University of Richmond Law Review

No abstract provided.

Do The Securities Laws Matter? The Rise Of The Leveraged Loan Market, Elisabeth De Fontenay

Faculty Scholarship

One of the enduring principles of federal securities regulation is the mantra that bonds are securities, while commercial loans are not. Yet the corporate bond and loan markets in the U.S. are rapidly converging, putting significant pressure on the disparity in their regulatory treatment. As securities, corporate bonds are subject to onerous public disclosure obligations and liability regimes, which corporate loans avoid entirely. This longstanding regulatory distinction between loans and bonds is based on the traditional conception of a commercial loan as a long-term relationship between the borrowing company and a single bank, in contrast to bonds, which may be …

Putting The Securities Laws To The Test: The Long-Standing Approach To Federal Securities Regulation Is Not Working, Elisabeth De Fontenay

Faculty Scholarship

No abstract provided.

Brief Of Financial Economists As Amici Curiae In Support Of Respondents, Ernest A. Young

Faculty Scholarship

No abstract provided.

Brief Of Common Law Scholars As Amici Curiae In Support Of Respondents, Samuel W. Buell, Deborah A. Demott, James D. Cox, Ernest A. Young, Ann Lipton

Faculty Scholarship

No abstract provided.

Setting Attorneys' Fees In Securities Class Actions: An Empirical As, Lynn A. Baker, Michael A. Perino, Charles Silver

Vanderbilt Law Review

n 1995, Congress overrode President Bill Clinton's veto and enacted the Private Securities Litigation Reform Act ("PSLRA"), a key purpose of which was to put securities class actions under the control of institutional investors with large financial stakes in the outcome of the litigation.' The theory behind this policy, set out in a famous article by Professors Elliot Weiss and John Beckerman, was simple: self-interest should encourage investors with large stakes to run class actions in ways that maximize recoveries for all investors. These investors should naturally want to hire good lawyers, incentivize them properly, monitor their actions, and reject …

The Future Of Securities Class Actions Against Foreign Companies: China And Comity Concerns, Dana M. Muir, Junhai Liu, Haiyan Xu

University of Michigan Journal of Law Reform

In Morrison v. National Australia Bank Ltd., the U.S. Supreme Court limited the application of U.S. securities fraud law in transnational situations. The Supreme Court noted that its decision was influenced by international comity considerations. In this Article, we evaluate the availability of class actions in China in cases involving alleged securities fraud. Because we find that the availability of those actions is too limited to fully protect U.S. shareholders, we argue that U.S. investors should be permitted to bring securities fraud class actions against non-U.S. companies whose securities are traded on a U.S. exchange regardless of where those investors …

Securities Violations In 140 Characters Or Less: Social Media And Its Growing Impact On The Securities Industry, Kevin Etzel

Touro Law Review

As social media continues its rapid ascent, the law must be able to keep pace. The securities industry is where one area that must keep pace. This Comment demonstrates the drastic effects, both positive and negative, that social media has on securities regulation.

State Enforcement Of National Policy: A Contextual Approach (With Evidence From The Securities Realm), Amanda M. Rose

Vanderbilt Law School Faculty Publications

This Article addresses a topic of contemporary public policy significance: the optimal allocation of law enforcement authority in our federalist system. Proponents of competitive federalism have long argued that assigning concurrent enforcement authority to states and the federal government can lead to redundant expense, policy distortion, and a loss of democratic accountability. A growing literature responds to these claims, trumpeting the benefits of concurrent state-federal enforcement - most notably the potential for state regulators to remedy under-enforcement by captured federal agencies. Both bodies of scholarship are right, but also incomplete. What is missing from this rather polarized debate is a …

Revisiting “Truth In Securities” Revisited: Abolishing Ipos And Harnessing Private Markets In The Public Good, A. C. Pritchard

Seattle University Law Review

This article's focus is the idea that the transition between private- and public company status could be less bumpy if we unify the public–private dividing line under the Securities Act and Exchange Act. Part II of this article outlines the current public–private dividing lines under the Securities Act and the Exchange Act. This part also explores Facebook’s recent transition from private to public status under that framework, as well as Congress’s recent intervention in the field with the JOBS Act. Part III explores the problems of making the transition from private to public, focusing on IPOs and their role in …

Advising The Individual Investor: Comparing The Federal Regulation Of Investment Advisers, Banks, And Broker-Dealers, Alan M. Ahart

Pepperdine Law Review

No abstract provided.

Transamerica Mortgage Advisors, Inc. V. Lewis: An Analysis Of The Supreme Court's Definition Of An Implied Right Of Action , Nancy E. Underwood

Pepperdine Law Review

No abstract provided.

Disclosure Of Payment Under The U.S. Dodd-Frank Act: The ‘Resource Extraction Rule”, Celia R. Taylor

Sturm College of Law: Faculty Scholarship

Tucked into the Dodd-Frank Wall Street Reform and Consumer Protection Act are several provisions having nothing to do with financial regulation. One of these 'miscellaneous' provisions required the US Securities and Exchange Commission (SEC) to implement rules requiring publicly traded resource extractive industry companies to disclose payments made to foreign governments. In August 201Z the SEC adopted final rules to achieve that purpose. InOctober 2012, the US Chamber of Commerce, as part ofa coalition of business and other interests, filed suit to block the implementation of the rules. This article explains the contents of the resource extraction rule and the …

Securities Class Actions And Bankrupt Companies, James J. Park

Michigan Law Review

Securities class actions are often criticized as wasteful strike suits that target temporary fluctuations in the stock prices of otherwise healthy companies. The securities class actions brought by investors of Enron and WorldCom, companies that fell into bankruptcy in the wake of fraud, resulted in the recovery of billions of dollars in permanent shareholder losses and provide a powerful counterexample to this critique. An issuer's bankruptcy may affect how judges and parties perceive securities class actions and their merits, yet little is known about the subset of cases where the company is bankrupt. This is the first extensive empirical study …

Corporation Code Sections 309 And 1203: California Redefines Directors' Duties Towards Shareholders, Ernest F. Batenga, Mark Willis

Pepperdine Law Review

No abstract provided.

Why Legalized Insider Trading Would Be A Disaster, George W. Dent

Faculty Publications

Although insider trading is illegal, a stubborn minority still defends it as an efficient means of compensating executives and spurring innovation. However, this minority assumes that legal insider trading would be constrained by the personal wealth of the insiders so that the scope of insider trading would rarely or never be so large as to cause outsiders to stop trading in affected stocks. This Note argues that there would be no such constraint because insiders could obtain outside financing to fully exploit their informational advantage. Outsiders would flee the public stock markets, which would drastically shrink or disappear. The prospect …

Resurrecting Court Deference To The Securities And Exchange Commission: Definition Of “Security”, Steven J. Cleveland

Catholic University Law Review

No abstract provided.

Rural Crowdfunding, Andrew A. Schwartz

Publications

One reason that economic development in rural America lags behind its urban counterpart is the persistent lack of venture capital for rural entrepreneurs. Geography deserves much of the blame, as angel investors and venture capitalists tend to live and work in metropolitan areas on the coasts, in places like Silicon Valley and Boston. Many rural areas are literally thousands of miles away, with the result that venture capital has rarely found its way to rural regions.

Recent federal legislation, however, has the potential to change this dynamic. The JOBS Act authorizes the sale of securities over the Internet to large …

Crowdfunding Securities, Andrew A. Schwartz

Publications

A new federal statute authorizes the online "crowdfunding" of securities, a new idea based on the concept of "reward" crowdfunding practiced on Kickstarter and other websites. This method of selling securities had previously been banned by federal securities law but the new CROWDFUND Act overturns that prohibition.

This Article introduces the CROWDFUND Act and explains that it can be expected to have two primary effects on securities law and capital markets. First, it will liberate startup companies to use peer networks and the Internet to obtain modest amounts of capital at low cost. Second, it will help democratize the market …

Segmented Settlements Are Not The Answer: A Response To Professor Squire’S Article, How Collective Settlements Camouflage The Costs Of Shareholder Lawsuits, Christopher C. French

Faculty Scholarship

In his recent article, Professor Richard Squire offers a provocative theory in which he claims the underlying claimants in shareholder litigation against corporate policyholders are overcompensated due to what he describes as “cramdown” settlements, under which insurers are forced to settle due to the “duty to contribute” that arises under multi-layered directors and officers (“D&O”) insurance programs. He also offers a novel idea regarding how this problem could be fixed by what he refers to as “segmented” settlements in which each insurer and the policyholder would be allowed to settle separately and consider only its own interests in doing so. …

Keep It Light, Chairman White: Sec Rulemaking Under The Crowdfund Act, Andrew A. Schwartz

Publications

Title III of the JOBS Act, known as the CROWDFUND Act, authorizes the “crowdfunding” of securities, defined as raising capital online from many investors, each of whom contributes only a small amount. The Act was signed into law in April 2012, and will go into effect once the Securities and Exchange Commission (“SEC”) promulgates rules and regulations to govern the new marketplace for crowdfunded securities. This Essay offers friendly advice to the SEC as to how to exercise its rulemaking authority in a manner that will enable the Act to achieve its goals of creating an ultralow-cost method for raising …

When The Government Attempts To Change The Board, Investors Should Know, William O. Fisher

Law Faculty Publications

In 2008 and 2009, the federal government effectively hired and fired directors at American International Group and Bank of America. At AIG, the government exercised its power through the ownership of voting stock, which meant that the company’s public securities filings revealed the government influence, though at times slowly and at times only by inference. At BofA, by contrast, the government imposed its will through an unpublished bank regulatory action, and no securities filing provided even a hint of the federal role. The fact that current law allows the government to secretly reconstitute the governing bodies of multi-billion-dollar, publicly traded …

Lies Without Liars? Janus Capital And Conservative Securities Jurisprudence, Donald C. Langevoort

Georgetown Law Faculty Publications and Other Works

The Supreme Court’s recent Janus Capital case offers a reading of the word “make” in Rule 10b-5 that speaks to ultimate legal authority over the communication in question. This creates the real possibility that we can have lies without liars, an entirely perplexing result in terms of any purposive meaning of the rule. In so holding, Justice Thomas joined a seemingly short list of judges who suggest that legal formalism is a particularly good weapon with which to fight securities fraud. This paper exploresJanus through the lens of conservative textualism, which takes us through a much longer intellectual history …

Reves Revisited, Janet Kerr, Karen M. Eisenhauer

Pepperdine Law Review

No abstract provided.

The Limited Liability Company As A Security, Mark I. Steinberg, Karen L. Conway

Pepperdine Law Review

No abstract provided.