Securities Law Commons^™

Private Equity Firms: Beyond Sec Registration As An Investment Adviser How To Build And Administer An Effective Compliance Program, Susan Mosher

Michigan Business & Entrepreneurial Law Review

The Securities and Exchange Commission (the “SEC” or the “Commission”) recently adopted new rules and rule amendments under the Investment Advisers Act of 1940 (the “Advisers Act”) that serve to implement provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”).1 The new rules and rule amendments under the Advisers Act relate to provisions of Title IV of the Dodd-Frank Act (the Private Fund Investment Advisers Registration Act of 2010) that, among other things, require certain private fund advisers and private equity firms to register with the Commission.2 This article is intended to assist firms that …

A Very Quiet Revolution: A Primer On Securities Crowdfunding And Title Iii Of The Jobs Act, Thaya Brook Knight, Huiwen Leo, Adrian A. Ohmer

Michigan Business & Entrepreneurial Law Review

This essay introduces the complex regulatory regime that governs the public sale of all securities, no matter how small the offeror. It is intended as a rudimentary roadmap for the start-up or its counsel and will, hopefully, help to illuminate the traps for the unwary while providing an overview of the regulatory universe in which securities crowdfunding will operate.

The Emperor Has No Clothes: Confronting The Dc Circuit’S Usurpation Of Sec Rulemaking Authority, James D. Cox, Benjamin J.C. Baucom

Faculty Scholarship

In The Emperor Has No Clothes: Confronting the D.C. Circuit’s Usurpation of SEC Rulemaking Authority, Professor James D. Cox of Duke University School of Law & Benjamin J.C. Baucom, recent law clerk to Justice Don R. Willett of the Supreme Court of Texas, argue “that the level of review invoked by the D.C. Circuit in Business Roundtable and its earlier decisions is dramatically inconsistent with the standard enacted by Congress.” They conclude “that the D.C. Circuit has assumed for itself a role opposed to the one Congress prescribed for courts reviewing SEC rules.”

Lessons From The Flash Crash For The Regulation Of High-Frequency Traders, Edgar Ortega Barrales

Fordham Journal of Corporate & Financial Law

Are equity markets vulnerable to a sudden collapse if the traders who account for about half of the volume have no regulatory obligations to stabilize prices? After the “Flash Crash” of May 6, 2010, policymakers have resoundingly answered this question in the affirmative. During the worst of the crash, some of the so-called high-frequency trading firms that dominate equity markets stopped trading and prices collapsed, momentarily wiping out almost $1 trillion in market value. In response, the U.S. Securities and Exchange Commission is considering whether high-frequency trading firms should be required to act as the traders of last resort. This …

Regulation A And The Jobs Act: A Failure To Resuscitate, Rutheford B. Campbell Jr.

Law Faculty Scholarly Articles

Regulation A offers small businesses an exemption from the registration requirements of the Securities Act of 1933. The exemption is generally consistent with the obligation of the Securities and Exchange Commission to fashion exemptions that balance investor protection and capital formation. From the perspective of small businesses, the exemption may appear to provide an efficient access to external capital.

Regulation A, however, has fallen into nearly complete disuse. The millions of small businesses in this country, all of which at some point need external capital to survive and grow, simply do not use Regulation A.

Two reasons account for small …

Regulation Llc, Raymond P. Girnys

NYLS Law Review

No abstract provided.

Bien Venue: Sec V. Johnson And The Policy For Broad Procedural Requirements In Public Securities Actions, Kelly Kylis

Catholic University Law Review

No abstract provided.

Facebook, The Jobs Act, And Abolishing Ipos, Adam C. Pritchard

Articles

Initial public offerings (IPOs)-the first sale of private firms' stock to the public-are a bellwether of investor sentiment. Investors must be bullish if they are putting their money into untested start-ups. IPOs are frequently cited in the business press as a key barometer of the health of financial markets. Politicians, too, see a steady flow of IPOs as an indicator that capital is fueling the entrepreneurial initiative that sustains the growth of new businesses. Growing businesses create jobs, so Republicans and Democrats can find common ground on the importance of promoting IPOs. That bipartisan consensus was on display this spring …

The Wreck Of Regulation D: The Unintended (And Bad) Outcomes For The Sec’S Crown Jewel Exemptions, Rutheford B. Campbell Jr.

Law Faculty Scholarly Articles

Regulation D is—or at least should be—the crown jewel of the Securities and Exchange Commission's regulatory exemptions from the registration requirements of the Securities Act of 1933. It offers businesses—especially businesses with relatively small capital requirements—fair and efficient access to vital, external capital.

In this article, I present data derived from deep samples of recent Form Ds filed with the Commission. The data show that Regulation D is not working in the way the Commission intended or in a way that benefits society The data reveal that companies attempting to raise relatively small amounts of capital under Regulation D overwhelmingly …

Securities Class Actions As Public Law, James D. Cox

Faculty Scholarship

The Political Economy of Fraud on the Market provides a wide-ranging criticism of and thoughtful reforms for securities class actions....However, both their critique of contemporary class actions and their model of the reforms they propose leave unexamined a good many matters relevant to both the criticism and reform of securities class actions....Bratton and Wachter earn high marks for being less passionate and much more thoughtful than others in the chorus calling for reform; indeed, their observations are among the most thoughtful to be found in this area. Nonetheless, their analysis is incomplete in many important areas, and in addition to …

Securities Law In The Roberts Court: Agenda Or Indifference?, Adam C. Pritchard

Articles

To outsiders, securities law is not all that interesting. The body of the law consists of an interconnecting web of statutes and regulations that fit together in ways that are decidedly counter-intuitive. Securities law rivals tax law in its reputation for complexity and dreariness. Worse yet, the subject regulated-capital markets-can be mystifying to those uninitiated in modem finance. Moreover, those markets rapidly evolve, continually increasing their complexity. If you do not understand how the financial markets work, it is hard to understand how securities law affects those markets.

Clearing And Trade Execution Requirements For Otc Derivatives Swaps Under The Frank-Dodd Wall Street Reform And Consumer Protection Act, Willa E. Gibson

Akron Law Faculty Publications

This paper examines Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act entitled the “Wall Street Transparency and Accountability Act of 2010” (the “Act”). The Act provides a comprehensive regulatory framework for swap transactions that designates the Commodities Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) as the primary regulators of the OTC derivatives swap market. The Act provides a very broad definition of swaps to include most OTC derivatives transactions, and it grants the CFTC regulatory jurisdiction over them with the exception of security-based swaps to which the SEC is granted regulatory jurisdiction. …

The Unjustified Judicial Creation Of Class Certification Merits Trials In Securities, Michael J. Kaufman, John M. Wunderlich

University of Michigan Journal of Law Reform

The class action device is vital to deterring securities fraud and remedying its victims, who almost never suffer losses sufficient to justify an individual suit. Nonetheless, the federal courts have begun to convert the class certification process into a premature trial on the merits, thereby precluding victims of securities fraud from pursuing otherwise valid claims of financial wrongdoing. In particular, in a series of important decisions, the federal courts have required plaintiffs to prove the essential elements of their securities fraud claims at the preliminary class certification stage.

This Article demonstrates why this trend should end. The judicial creation of …

The Lion Awakens: The Foreign Corrupt Practices Act - 1977 To 2010, Michael B. Bixby

San Diego International Law Journal

This Article discusses the history, purposes and provisions of the Foreign Corrupt Practices Act, and traces its use and enforcement activity from 1977 to the present. This once little-used law has in recent years become the focus of aggressive activity by both the U.S. Department of Justice and the Securities and Exchange Commission. The manuscript also includes numerous charts reporting on key cases and enforcement activities over the last thirty-three years by the DOJ and SEC, as well as other information and statistics regarding the Foreign Corrupt Practices Act.

Evolutionary Enforcement At The Securities And Exchange Commission, Jayne W. Barnard

Faculty Publications

Hundreds of critics in the past eighteen months have heaped abuse on the SEC Enforcement Division. How could the Division have missed so much misbehavior on Wall Street? How could the Division's young lawyers have been charmed by Bernie Madoff and thwarted from discovering his terrible crimes? Most critics seem to agree that the Division's most urgent needs include developing substantially more financial sophistication among Division lawyers and investigators; better communications within the Commission and with other federal agencies; and a meaningful system for handling tips and processing information. The SEC's response to its critics has been remarkable. The Commission …

The Implications Of Ifrs On The Functioning Of The Securities Antifraud Regime In The United States, Lance J. Phillips

Michigan Law Review

The United States is home to one of the most investor-friendly securities antifraud regimes in the world. Corporate misstatements that form the basis for a cause of action under one of the many antifraud provisions arise in a variety of contexts, an important one being as violations of U.S. generally accepted accounting principles ("GAAP"). For several years, the Securities and Exchange Commission has been considering changing the standardized accounting practice in the United States from GAAP to International Financial Reporting Standards ("IFRS") to promote comparability between global investment opportunities. IFRS is a principles-based system of accounting, while GAAP is rules …

Introduction: The Sec At 75, Barbara Black

Faculty Articles and Other Publications

This Introduction begins with a brief look back at the creation of the SEC and then examines the present-day agency's expression of its mission. It next reviews the Blueprint's assessment of the agency and its proposal for reform and then turns to the Obama Administration's Financial Regulatory Reform and its proposals relating to the SEC. Finally, this Introduction describes five issues to which the panelists paid particular attention: the SEC's mission, competition among financial markets, the proposal to merge the SEC and the Commodity Futures Trading Commission (CFTC), the role of financial market networks in systemic risk regulation, and the …

In Praise Of Process: Examining The Sec, Rule 14a-8(I)(8), And Afscme V. Aig, Jena Martin

Faculty Articles

Part one of this essay will discuss the rule, including a brief analysis of proxy access generally and the "election exclusion" specifically. Part two will examine the AFSCME v. AIG case and the SEC's response thereto in more detail-discussing the arguments posited both for and against increased shareholder access, as well as the aftermath of the SEC's decision. Part three will analyze how the SEC's failure to change Rule 14a-8(i)(8) to allow greater shareholder access specifically caused one thread in the financial crisis-as a direct result of a loss of shareholder empowerment. Finally, part four offers an epilogue-a discussion of …

Is The Pcaob A "Heavily Controlled Component" Of The Sec?: An Essential Question In The Constitutional Controversy, Donna M. Nagy

Articles by Maurer Faculty

The U.S. Supreme Court recently heard oral arguments in Free Enterprise Fund v. Public Company Accounting Oversight Board, described by D.C. Circuit Judge Brett Kavanaugh as “the most important separation-of-powers case regarding the President’s appointment and removal powers to reach the courts in the last 20 years.” Established by Congress as the cornerstone of the Sarbanes-Oxley Act of 2002, the PCAOB was structured as a strong, independent board in the private sector, to oversee the conduct of auditors of public companies.

This Article challenges the D.C. Circuit’s depiction of the PCAOB as “a heavily controlled component” of the SEC, and …

The Sec In Bankruptcy, G. Ray Warner, Keith Sharfman

Faculty Publications

(Excerpt)

Since its founding, the Securities and Exchange Commission ("SEC") has played an important role as both an advisor and regulator in bankruptcy cases, valuing debtor assets, opining on plans of reorganization, regulating the trading of claims and the disclosure of information, and much else. After a period of relative inactivity following the passage of the Bankruptcy Code (which has a less expansive view of the SEC's role than that of the former Chandler Act whose regime the Code replaced), the SEC's involvement in bankruptcy has intensified in recent years with the ascendancy of equity committees and with the increased …

Fiduciary Duty - Now And In The Future, Christine Lazaro

Faculty Publications

(Excerpt)

The celebrated jurist Benjamin Cardozo opined that the fiduciary duty is “the duty of finest loyalty”, and that a fiduciary “is held to something stricter than the morals of the market place. Not honesty alone, but the punctilio of an honor the most sensitive, is then the standard of behavior.” The question most customers have is whether their broker is subject to this duty of finest loyalty, or if they are bound merely by the morals of the marketplace. Currently this is a very difficult question to answer, and will depend on whether the customer is dealing with a …

Give Smaller Companies A Choice: Solving Sarbanes-Oxley Section 404 Inefficiency, Paul P. Arnold

University of Michigan Journal of Law Reform

This Note argues that smaller public companies should have the option to opt out of Section 404 of the Sarbanes-Oxley Act of 2002. Optional compliance is economically preferable to the current approach of mandatory compliance. Companies that choose to comply with Section 404 will send a signal to the financial markets that their internal controls meet the high standards Section 404 demands, and investors will reward such companies if they actually value the benefit of that company's additional controls. Similarly, companies that benefit less from additional internal accounting will be able to avoid Section 404's high costs. To clarify the …

Reinventing The Sec By Staring Into Its Past, James D. Cox

Faculty Scholarship

No abstract provided.

Proving Preemption By Proving Exemption: The Quandary Of The National Securities Market Improvement Act, Jeffrey D. Chadwick

University of Richmond Law Review

No abstract provided.

Securities Law And The New Deal Justices, Adam C. Pritchard, Robert B. Thompson

Articles

In this Article, we explore the role of the New Deal Justices in enacting, defending, and interpreting the federal securities laws. Although we canvass most of the Court's securities law decisions from 1935 to 1955, we focus in particular on PUHCA, an act now lost to history for securities practitioners and scholars. At the time of the New Deal, PUHCA was the key point of engagement for defining the judicial view toward New Deal securities legislation. Taming the power of Wall Street required not just the concurrence of the legislative branch, but also the Supreme Court, a body that the …

The Sec And The Madoff Scandal: Three Narratives In Search Of A Story, Donald C. Langevoort

Georgetown Law Faculty Publications and Other Works

This essay, part of a symposium on narrative in corporate law, considers various portrayals of the complicity of the SEC in the Bernard Madoff scandal--including the Commission's own Inspector General's report issued in September 2009. It considers possible explanations (revolving door problems, incompetence and sloth, etc.) but suggests that the story is deeper and more frustrating, arising out of the relative poverty in which the SEC operates, which in turn leads to habits of thought and action that leave too much unnoticed and undone. The interesting question, then: why the poverty? The essay concludes with a political explanation. While by …

A Requiem For The Retail Investor?, Alicia J. Davis

Articles

The American retail investor is dying. In 1950, retail investors owned over 90% of the stock of U.S. corporations. Today, retail investors own less than 30% and represent a very small percentage of U.S. trading volume. Data on the overall level of retail trading in U.S. equity markets are not available. But recent New York Stock Exchange ("NYSE") data reveal that trades by individual investors represent, on average, less than 2% of NYSE trading volume for NYSE-listed firms. There is no question that U.S. securities markets are now dominated by institutional investors. In his article, "The SEC, Retail Investors, and …

Gatekeeper Failures: Why Important, What To Do, Merritt B. Fox

Michigan Law Review

The United States was hit by a wave of corporate scandals that crested between late 2001 and the end of 2002. Some were traditional scandals involving insiders looting company assets - the most prominent being Tyco, HealthSouth, and Adelphia. But most were what might be called "financial scandals": attempts by an issuer to maximize the market price of its securities by creating misimpressions as to what its future cash flows were likely to be. Enron and WorldCom were the most spectacular examples of these financial scandals. In scores of additional cases, the companies involved and their executives were sued by …

Proxy Contests In An Era Of Increasing Shareholder Power: Forget Issuer Proxy Access And Focus On E-Proxy, Jeffrey N. Gordon

Vanderbilt Law Review

The current debate over shareholder access to the issuer's proxy statement for the purpose of making director nominations is both overstated in its importance and misses the serious issue in question. The Securities and Exchange Commission's ("SEC's") new e- proxy rules, which permit reliance on proxy materials posted on a website, should substantially reduce the production and distribution cost differences between a meaningful contest waged via the issuer's proxy and a freestanding proxy solicitation. No matter which avenue is used, however, the serious question relates to the appropriate disclosure required of a shareholder nominator. Should the nominator be subject to …

Sarbanes-Oxley Five Years Later: Will Criticism Of Sox Undermine Its Benefits?, Cheryl L. Wade

Faculty Publications

(Excerpt)

In 2002, the Sarbanes-Oxley Act1 ("SOX" or the "Act") not only changed the details relating to financial reporting, internal controls, and corporate governance in general, but also changed the discussion about corporate climates and cultures, at least temporarily. The political discourse leading up to SOX's enactment in the aftermath of the accounting debacles of 2001 and 2002 was replete with discussions about more ethical and responsible corporate governance. The Act's passage, accompanied by the get-tough-on-Corporate-America speeches made by President George W. Bush and others changed the way corporate actors discuss their ethical obligations. The Act's strict requirements regarding financial …