Securities Law Commons^™

The Sec's Shift To Administrative Proceedings: An Empirical Assessment, Stephen J. Choi, Adam C. Prichard

Articles

Congress has repeatedly expanded the authority of the SEC to pursue violations of securities laws in proceedings adjudicated by the SEC's own administrative law judges, most recently through the Dodd-Frank Act. We report the results from an empirical study of SEC enforcement actions against non-financial public companies to assess the impact of the Dodd-Frank Act on the balance between civil court and administrative enforcement actions. We show a general decline in the number of court actions and an increase in the number of administrative proceedings post-Dodd-Frank. At the same time, we show an increase in average civil penalties post-Dodd-Frank for …

A Legal Analysis On Enterprises Overseas Fundraising -- A Comparison Between The U.S. Market And The Taiwanese Market, Ke Ho

Maurer Theses and Dissertations

Since the 1990’s, Taiwan’s government has made efforts to upgrade economic development by attraction more foreign enterprises to enter the domestic capital market. However, in the early 2000s, statistics indicated that the number of such new enterprise listings in Taiwan actually decreased. Some believe a very important factor in the decrease to the number of new listings in Taiwan is the current regulatory framework’s lack of flexibility. It is assumed that the regulatory intensity for foreign enterprises is very high. In order to review this intensity on the foreign issuer, this dissertation presents research on the law regulating a foreign …

When Insider Trading And Market Manipulation Cross Jurisdictions: What Are The Challenges For Securities Regulators And How Can They Best Preserve The Integrity Of Markets?, Janet Elizabeth Austin

PhD Dissertations

Over the last few decades world securities markets have become significantly more sophisticated in terms of how securities are traded as well as the variety of securities traded. My hypothesis is that the ability of securities regulators to take enforcement action against market abuse has not kept pace with the level of sophistication of the markets and, in particular, the way in which trading can take place across borders and the manner in which market related information can spread rapidly across the world. I argue that that regulators need to do more to protect the integrity of the markets by …

Solving The Paradox Of Insider Trading Compliance, John P. Anderson

Journal Articles

Regulators demand the impossible when they require issuers to design and implement effective insider trading compliance programs because insider trading is a crime that neither Congress nor the Securities Exchange Commission has defined with any specificity. This problem of uncertainty is then compounded by the threat of heavy civil and criminal sanctions for violations. Placed between this rock and hard place, issuers tend to adopt overbroad insider trading compliance programs, which comes at a heavy price in terms of corporate culture, cost of compensation, share liquidity, and cost of capital. The irony is that, since all of these costs are …

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 …

Behind Enemy Phone Lines: Insider Trading, Parallel Enforcement, And Sharing The Fruits Of Wiretaps, Alexandra N. Mogul

Fordham Law Review

    Two key trends were present in the successful prosecution of Raj Rajaratnam and his coconspirators in one of the largest insider-trading conspiracies in history: the use of wiretaps to investigate and prosecute insider trading and a joint effort between the Department of Justice (DOJ) and the Securities & Exchange Commission (SEC) to conduct the investigation. Despite the close working relationship between the DOJ and the SEC, the DOJ never disclosed the fruits of the wiretaps to the SEC, presumably due to its belief that Title III of the Omnibus Crime Control and Safe Streets Act of 1968 (as amended, the …

Changing The Rules Of The Game: Beyond Disclosure Framework For Securities Regulation, Jena Martin

West Virginia Law Review

No abstract provided.

Qualification Of Securities In California: Hostile Territory For Foreign Issuers, James K. Roosa

Akron Law Review

The purpose of this article is to outline these policies and to discuss the threat which compliance poses to the issuer's shareholders as well as the corporation law of the issuer's home state. Although much of the discussion is couched in terms of Ohio law and Ohio issuers, it applies equally to other jurisdictions whose corporation laws are similar to Ohio's.

Investing And Pretending, Anita Krug

All Faculty Scholarship

One of the more prominent components of Dodd–Frank’s regulatory changes was Title VII, providing for the regulation of the over-the-counter derivatives known as “swaps.” A swap is a financial instrument whose value is based on an asset—the “reference asset”—that is wholly unrelated to the swap itself. Although there was much ado about swap regulation immediately after Dodd–Frank’s enactment, the same cannot be said of the many rules that the Commodity Futures Trading Commission (“CFTC”) has subsequently adopted pursuant to its authority under Title VII. This Article critically evaluates the CFTC’s “swap rules” and identifies the regulatory vision that they reflect. …

Admit Or Deny: A Call For Reform Of The Sec's "Neither-Admit-Nor-Deny" Policy, Priyah Kaul

University of Michigan Journal of Law Reform

For four decades, the SEC’s often-invoked policy of settling cases without requiring admissions of wrongdoing, referred to as the “neither-admit-nor-deny” policy, went unchallenged by the courts, the legislature, and the public. Then in 2011, a harshly critical opinion from Judge Jed Rakoff in SEC v. Citigroup incited demands for reform of this policy. In response to Judge Rakoff’s opinion, the SEC announced a modified approach to settlements. Under the modified approach, the Commission may require an admission of wrongdoing if a defendant’s misconduct was egregious or if the public markets would benefit from an admission. Many supporters of the neither-admit-nor-deny …

Anticipating A Sea Change For Insider Trading Law: From Trading Plan Crisis To Rational Reform, John P. Anderson

Journal Articles

The Securities and Exchange Commission is poised to take action in the face of compelling evidence that corporate insiders are availing themselves of rule-sanctioned Trading Plans to beat the market. These Trading Plans allow insiders to trade while aware of material nonpublic information. Since the market advantage insiders have enjoyed from Plan trading can be traced to loopholes in the current regulatory scheme, increased enforcement of the existing rules cannot address the issue. But, simply tweaking the existing rule structure to close these loopholes would not work either. This is because the SEC adopted the current rule as a part …

What’S The Harm In Issuer-Licensed Insider Trading?, John P. Anderson

Journal Articles

There is growing support for the claim that issuer-licensed insider trading (when the insider’s firm approves the trade in advance and has disclosed that it permits such trading pursuant to published guidelines) is economically efficient and morally harmless. But for the last thirty-five years, many scholars and the U.S. Supreme Court have relied on Professor William Wang’s “Law of Conservation of Securities” to rebut claims that insider trading can be victimless. This law is purported to show that every act of insider trading, even those licensed by the issuer, causes an identifiable harm to someone. This article argues that the …

Shareholder Litigation Without Class Actions, David H. Webber

Faculty Scholarship

In this Article, I imagine a post-class action landscape for shareholder litigation. Assuming, for the sake of this exercise, an environment in which both securities-fraud and transactional class actions are hobbled by procedural or substantive reforms — most likely through the adoption of mandatory-arbitration provisions or fee-shifting provisions — I assess what shareholder litigation would disappear, what would remain, and what a post-class action landscape would look like. I argue that loss of the class action would remove a layer of legal insulation that prevents institutional investors from having to pursue positive value claims against companies. Currently, the class action …

Private And Public Ordering In Safe Asset Markets, Anna Gelpern, Erik F. Gerding

Publications

An influential literature in economics explores the phenomenon of “safe assets” – when participants across financial markets act “as if” certain debt is risk free – as well as its role in the global financial crisis and its implications for post-crisis reform.

We highlight the role of private ordering in constructing safe assets. Private ordering, including contractual devices and transaction structures, contributes to the creation of these debt contracts, to their collective treatment in financial markets as low risk investments, and to the making of deep and liquid markets in them. These contracts and transaction structures also provide a template …

The Fragmented Regulation Of Investment Advice: A Call For Harmonization, Christine Lazaro, Benjamin P. Edwards

Michigan Business & Entrepreneurial Law Review

Decades of short-term thinking and regulatory fixes created the bewilderingly complex statutory and regulatory structures governing the giving of personalized investment advice to retail customers. Although deeply flawed, the current systems remain entrenched because of the difficulties inherent in making radical alterations. Importantly, the current patchwork systems do not seem to serve retail customers particularly well. Retail customers tend to make predictable and costly mistakes in allocating their assets. Some of this occurs because many investors lack basic financial literacy. A recent study released by the staff of the Securities and Exchange Commission (the “Commission”) on financial literacy among investors …

Safe At Any Speed: Robert Ahdieh’S Take On Cost-Benefit Analysis In Financial Markets, Jack M. Beermann

Shorter Faculty Works

When I saw the title of Robert Ahdieh’s recent article, Reanalyzing Cost-Benefit Analysis: Toward a Framework of Function(s) and Form(s), I thought, “oh no, not another article about CBA.” Knowing Professor Adhieh’s work, I took a flyer and read it anyway, and boy was I happy with my decision. This is a great article which should be of interest to anyone involved in administrative law, securities regulation and policy analysis more generally. Cost-benefit analysis has become an important regulatory tool, and Professor Adhieh’s article makes a valuable contribution to the literature on the special analysis required under Section 106 …

The Jobs Act: Encouraging Capital Formation But Not Ipos, Jesse Scott

The Journal of Business, Entrepreneurship & the Law

This note will analyze several of the key provisions of the JOBS Act and their effect on raising capital for small growth companies. The scope of this note will exclude the Title III crowdfunding provisions, as there is already substantial discussion about the topic in the legal and business communities. Part II discusses the IPO registration process. Part III explores the JOBS Act and its effect on securities regulation. Specifically, this note will cover the Title I IPO on-ramp, the Title II changes to Regulation D, the Title IV changes to Regulation A and 144A, and finally the Title V …

A Blended Approach To Reducing The Costs Of Shareholder Litigation, Valian A. Afshar

Michigan Law Review

Multiforum litigation and federal securities law class actions impose heavy costs on corporations and their shareholders without producing proportionate benefits. Both are largely the result of the agency problem between shareholders and their attorneys, driven more by the attorneys’ interests in generating fees than by the interests of their clients. In response to each of these problems, commentators have recommended a number of solutions. Chief among them are forum selection and mandatory arbitration provisions in a corporation’s charter or bylaws. This Note recommends that corporations unilaterally adopt both forum selection and mandatory arbitration bylaws to address shareholder lawsuits under state …

Downstream Securities Regulation, Anita Krug

All Faculty Scholarship

Securities regulation wears two hats. Its “upstream” side governs firms in connection with their obtaining financing in the securities markets. That is, it regulates firms’ and issuers’ offers and sales of securities, whether in public offerings to retail investors or in private offerings to institutional investors. Its “downstream” side, by contrast, governs financial services providers, who assist with investors’ activities in those markets. Their services include providing advice regarding securities investments, as investment advisers do; aggregating investors’ assets for purposes of enabling those investors to invest their assets collectively, as mutual funds do; and acting as “middlemen” between buyers and …

Mad Money: Rethinking Private Placements, Abraham J.B. Cable

Washington and Lee Law Review

Currently, regulations try to limit unregistered sales of stock (private placements) to the “smart money,” either by informing investors through disclosure or excluding unsophisticated investors from the market. In theory, these smart-money approaches promote the dual goals of capital formation and investor protection. But in practice, regulators have struggled to craft effective disclosure or screening mechanisms. In light of these failures, this Article advocates for a new approach—investment caps that allow every investor a limited amount of “mad money” to invest in risky private placements. This mad-money approach can protect investors by encouraging basic diversification and liquidity, while advancing capital …

Enforcement Of The Duties Of Directors By The Securities And Futures Investors Protection Center In Taiwan, Christopher C. H. Chen

Research Collection Yong Pung How School Of Law

The purpose of this article is to examine the role of the Securities and Futures Investors Protection Center (SFIPC) in Taiwan in enforcing the duties of directors. To help shareholders or investors pursue a director for breach of company law or securities regulations, Taiwan created the SFIPC, a charity sanctioned by statutes, to bring class action or direct legal action on behalf of minority shareholders or individual investors. By conducting an empirical survey of judgments from lawsuits involving the SFIPC since its creation, we found that the SFIPC is generally very active in enforcing securities regulations but far less active …

Securities Regulation Of Alternative Litigation Finance, Wendy Gerwick Couture

Articles

No abstract provided.

Greed, Envy, And The Criminalization Of Insider Trading, John P. Anderson

Journal Articles

In October 2011, a U.S. district court sentenced Raj Rajaratnam to eleven years in federal prison for insider trading. This is the longest sentence for insider trading in U.S. history, but it is significantly less than the nineteen to twenty-four-year term requested by the government. Such harsh prison terms (equal in some cases to those meted out for murder or rape) require sound justification in a liberal society. Yet jurists, politicians, and scholars have failed to offer a clear articulation of either the economic harm or the moral wrong committed by the insider trader. This Article looks to fill this …

'Quack Corporate Governance' As Traditional Chinese Medicine – The Securities Regulation Cannibalization Of China's Corporate Law And A State Regulator's Battle Against Party State Political Economic Power, Nicholas C. Howson

Articles

From the start of the People’s Republic of China’s (PRC) “corporatization ” project in the late 1980s, a Chinese corporate governance regime subject to increasingly enabling legal norms has been determined by mandatory regulations imposed by the PRC securities regulator, the China Securities Regulatory Commission (CSRC). Indeed, the Chinese corporate law system has been cannibalized by all - encompassing securities regulation directed at corporate governance, at least for companies with listed stock. This Article traces the path of that sustained intervention and makes a case — wholly contrary to the “quack corporate governance” critique much aired in the United States …

Global Regulatory And Ethical Framework, Henry Ordower

All Faculty Scholarship

This chapter reviews statutory and court sanctioned private regulatory frameworks affecting the creation of private equity (PE) funds and their primary activity of acquiring corporate enterprises. The chapter reviews U.S. legislation regulating securities, investment companies, and tender offers, state antitakeover legislation, state court decisions on hostile corporate takeovers and “poison pill” defenses, as well as European Union directives on takeovers and alternative investment fund managers. It concludes that regulation in the United States has shifted the balance of power in corporate acquisitions to incumbent management. The chapter also examines the diametrically opposed ethical views of PE funds as investment entities …

A Canadian Model Of Corporate Governance: Where Do Shareholders Really Stand?, Carol Liao

All Faculty Publications

This feature article in the Director Journal summarizes the findings from the report, "A Canadian Model of Corporate Governance: Insights from Canada's Leading Legal Practitioners," produced for the Canadian Foundation for Governance Research and the Institute of Corporate Directors (also available on SSRN).

In the report, interviews were conducted with 32 leading senior legal practitioners across Canada to opine on the fundamental principles that are driving the development of Canadian corporate governance. The report found that Canadian common law has made the process of considering stakeholders in the "best interests of the corporation" more overt, well beyond what is assumed …

A Canadian Model Of Corporate Governance, Carol Liao

All Faculty Publications

What is Canada’s actual legal model to govern its corporations? Recent landmark judicial decisions indicate Canada is shifting away from an Anglo-American definition of shareholder primacy. Yet the Canadian securities commissions have become increasingly influential in the governance sphere, and by nature are shareholder-focused. Shareholders’ rights have increased well beyond what was ever contemplated by Canadian corporate laws, and the issue of greater shareholder vs. board control has now become the topic of live debate. The future of Canada's overall model seems to rest on what will be more compelling: the constancy of the corporate statutes and trajectory of the …

Escaping Entity-Centrism In Financial Services Regulation, Anita Krug

All Faculty Scholarship

In the ongoing discussions about financial services regulation, one critically important topic has not been recognized, let alone addressed. That topic is what this Article calls the “entity-centrism” of financial services regulation. Laws and rules are entity-centric when they assume that a financial services firm is a stand-alone entity, operating separately from and independently of any other entity. They are entitycentric, therefore, when the specific requirements and obligations they comprise are addressed only to an abstract and solitary “firm,” with little or no contemplation of affiliates, parent companies, subsidiaries, or multi-entity enterprises. Regulatory entity-centrism is not an isolated phenomenon, as …

Reanalyzing Cost-Benefit Analysis: Toward A Framework Of Function(S) And Form(S), Robert B. Ahdieh

Faculty Scholarship

The analysis herein arises from the collision course between the sweeping reforms mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and a single sentence of the U.S. Code, adopted nearly fifteen years earlier and largely forgotten ever since. Few were likely thinking of Section 106 of the National Securities Market Improvement Act when the Dodd-Frank Act was enacted on July 21, 2010. As applied by the D.C. Circuit less than a year later in Business Roundtable v. SEC, however, that provision’s peculiar requirement of cost-benefit analysis could prove the new legislation’s undoing.

To help navigate …

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.