Securities Law Commons^™

Governing Land Investments: Do Governments Have Legal Support Gaps?, Sam Szoke-Burke, Kaitlin Y. Cordes

Columbia Center on Sustainable Investment Staff Publications

In the wave of efforts to encourage and support more “responsible” land investments, one aspect has been largely overlooked: are governments equipped with the legal and technical support needed to effectively negotiate and conclude investment contracts that lead to responsible outcomes?

CCSI researched how host governments access legal support in the planning, negotiation, and monitoring of land investments, with a view to better understanding where legal support gaps for governments exist, and how these can be addressed by governments themselves, as well as by donors, support providers and investors.

By scrutinizing “legal support gaps,” CCSI sought to identify possible weak …

Costs And Benefits Of Investment Treaties: Practical Considerations For States, Lise Johnson, Jesse Coleman, Brooke Guven, Lisa E. Sachs

Columbia Center on Sustainable Investment Staff Publications

This paper analyzes the expected benefits of investment treaties, including: increased inward investment, increased outward investment, and depoliticization of investment disputes. It then considers evidence of the costs of investment treaties, including: litigation, liability, reputational cost, reduced policy space, distorted power dynamics, reduced role for domestic law-making, and uncertainty in the law. The authors set forth practical steps that states can take relating to both existing treaties as well as future treaties with an objective of increasing desired benefits and decreasing unexpected and high costs of investment treaties.

The Shifting Tides Of Merger Litigation, Randall Thomas, Matthew D. Cain, Jill Fisch, Steven D. Solomon

Vanderbilt Law School Faculty Publications

In 2015, Delaware made several important changes to its laws concerning merger litigation. These changes, which were made in response to a perception that levels of merger litigation were too high and that a substantial proportion of merger cases were not providing value, raised the bar, making it more difficult for plaintiffs to win a lawsuit challenging a merger and more difficult for plaintiffs’ counsel to collect a fee award. We study what has happened in the courts in response to these changes. We find that the initial effect of the changes has been to decrease the volume of merger …

Unicorns, Guardians, And The Concentration Of The U.S. Equity Markets, Amy Deen Westbrook, David A. Westbrook

Journal Articles

No abstract provided.

Public And Private Enforcement Of Corporate And Securities Laws: An Empirical Comparison Of Hong Kong And Singapore, Wai Yee Wan, Christopher C. H. Chen, Say Hak Goo

Research Collection Yong Pung How School Of Law

No abstract provided.

Selective Disclosure And Insider Trading, Michael D. Guttentag

Florida Law Review

Determining when the selective disclosure of material nonpublic information should trigger insider trading liability is a deeply problematic aspect of insider trading doctrine.

The current rule is that a selective disclosure can only trigger insider trading liability if “the insider [making the selective disclosure] personally will benefit, directly or indirectly, from his disclosure.” Dirks v. SEC introduced this “personal benefit” test in 1983 to balance four competing rationales for determining when a tip should trigger insider trading liability. Two developments since Dirks have made problems with this personal benefit test insurmountable. First, the SEC’s enactment of Regulation Fair Disclosure in …

High‐Frequency Trading And The New Stock Market: Sense And Nonsense, Merritt B. Fox, Lawrence R. Glosten, Gabriel V. Rauterberg

Articles

The stock market has been transformed during the last 25 years. Human suppliers of liquidity like the NASDAQ dealers and NYSE specialists have been replaced by algorithmic market making; stocks that once traded on a single venue now trade across twelve exchanges and a multitude of alternative trading systems. New venues like dark pools, and new participants like high‐frequency traders, have emerged to take on prominent roles. This new market has had more than its share of controversy and regulatory scrutiny, particularly in the wake of Michael Lewis’s bestseller Flash Boys. In this article, the authors analyze five of the …

Resourcing Green Technologies Through Smart Mineral Enterprise Development: A Case Analysis Of Cobalt, Saleem Ali, Perrine Toledano, Nicolas Maennling, Nathaniel Hoffman, Lola Aganga

Columbia Center on Sustainable Investment Staff Publications

Achieving the goals of the Paris Agreement requires the world to adopt ‘green technologies’ such as renewable energies and electric transportation at an unprecedented scale. While many countries have implemented policies to spur the adoption of such technologies, a lack of focus has been placed on the sourcing of minerals that are required as inputs. As a result, there is likely to be a significant deficit that may constrain the adoption of green technologies.

In this report, we argue that a neglected area in addressing the mineral scarcity challenge is the private sector’s current trajectory for geological mineral exploration and …

Insider Tainting: Strategic Tipping Of Material Nonpublic Information, Andrew Verstein

Northwestern University Law Review

Insider trading law is meant to be a shield, protecting the market and investors from unscrupulous traders, but it can also be a sword. Insofar as we penalize trading on the basis of material, nonpublic information, it becomes possible to share information strategically in order to disable or constrain innocent investors. A hostile takeover can be averted, or a bidding war curtailed, because recipients of such information must then refrain from trading. This Article offers the first general account of “insider tainting,” an increasingly pervasive phenomenon of weaponizing insider trading law.

The Risk Of Regulatory Arbitrage: A Response To Securities Regulation In Virtual Space, Wendy Gerwick Couture

Washington and Lee Law Review Online

In Securities Regulation in Virtual Space, Eric. C. Chaffee explores the potential applicability of the securities laws to virtual transactions based on virtual activity and argues that, although many of these transactions likely qualify as “investment contracts” under S.E.C. v. W.J. Howey Co., they should be excluded under the context clause because, among other reasons, application of the securities laws would stifle creativity within this innovative space. This Response proposes a reframing of the Howey test as a response to the risk of regulatory arbitrage, argues that the context clause should only exclude transactions that do not pose …

Optimal Issuer Disclosure Of Opinions, Wendy Gerwick Couture

Articles

This Article adds to the scholarly literature about the optimal level of disclosure by issuers of securities by proposing a new theoretical framework that encompasses not only the choice between silence and disclosure, which has been widely discussed, but also the subsidiary decision between disclosure as an opinion and as a statement of fact, which has been ignored. This framework informs the Securities and Exchange Commission’s ongoing review of mandatory disclosure rules and contextualizes the potential impacts of the Supreme Court’s recent decision in Omnicare, Inc. v. Laborers District Council Construction Industry Pension Fund,1 which clarified that differential liability standards …

Reading Reflection Privacy And Security, Paul Sujith Rayi

School of Information Studies - Post-doc and Student Scholarship

No abstract provided.

Texas Gulf Sulphur: A Case Study On Responding To Market Rumors, Wendy Gerwick Couture

Articles

This essay uses Texas Gulf Sulphur as a case study on an issue that companies continue to face today: whether, and how, to respond to market rumors. This essay analyzes the countervailing incentives that influence whether companies respond to market rumors, applies those pressures to the facts of Texas Gulf Sulphur, and concludes that counsel today would likely advise similarly situated companies to remain silent rather than respond to market rumors. Drawing therefrom, this essay argues that silence is not the socially optimal response and that the dueling pressures on companies should be adjusted to incentivize companies to respond to …

The Case For Investor Ordering, Scott Hirst

Faculty Scholarship

Whether corporate arrangements should be mandated by public law or “privately ordered” by corporations themselves has been a foundational question in corporate law scholarship. State corporation laws are generally privately ordered. But a significant and growing number of arrangements are governed by “corporate regulations” created by the U.S. Securities and Exchange Commission (SEC). SEC corporate regulations are invariably mandatory. Whether they should be is the focus of this Article.
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/="/">This Article contributes to the ongoing debate by showing that whether mandatory or privately-ordered rules are optimal depends on the nature of investors, and their incentives in choosing corporate …

Regulating The “Too Big To Jail” Financial Institutions, Jerry W. Markham

Brooklyn Law Review

This article addresses the “too big to jail” regulatory model in which large banks pay hundreds of billions of dollars to settle multiple and duplicative regulatory charges brought by a horde of state, federal, and even foreign regulators. The banks pay those massive settlements in order to keep their banking charters and to obtain immunity from prosecution for senior executives. In turn, regulators benefit from the headlines these fines generate. Much criticism has been directed at these settlements because the banks are allowed to continue business as usual and no senior executives are jailed. Other critics contend that these settlements …

Opacity, Fragility, & Power: Lessons From The Law Enforcement Response To The Financial Crisis, Gregory M. Gilchrist

Brooklyn Law Review

Review of Mary Kreiner Ramirez and Steven A. Ramirez, THE CARE FOR THE CORPORATE DEATH PENALTY: RESTORING LAW AND ORDER ON WALL STREET (New York 2017) The Case for the Corporate Death Penalty, by Mary Kreiner Ramirez and Steven A. Ramirez, argues that the limited law enforcement response to the 2008 financial crisis represented an unprecedented failure of the rule of law. It further maintains that the weak response by law enforcement was caused by the economic and political power of the largest financial institutions and those who run them. It concludes that the failure to vigorously prosecute the people …

Foreign Initial Coin Offering Issuers Beware: The Securities And Exchange Commission Is Watching, Julianna Debler

Cornell International Law Journal

No abstract provided.

Investors' Paradox, Anita K. Krug

Articles

For the first time in an era, new investment products for smaller ("retail ") investors are emerging. These products are mutual funds that engage in the types of trading and investment activities that have long been the province of sophisticated investors. Accordingly, the new funds (called "alternative funds") promise to reduce the gulf between retail investors and their sophisticated counterparts, in terms of portfolio diversification and investment results.

This Article describes the complex mix of factors that spawned alternative funds and critically evaluates the funds' potential, the first scholarly work to do so. It additionally unearths the paradox that impedes …

Sexual Harassment And Corporate Law, Daniel Hemel, Dorothy S. Lund

Faculty Scholarship

The #MeToo movement has shaken corporate America in recent months, leading to the departures of several high-profile executives as well as sharp stock price declines at a number of firms. Investors have taken notice and taken action: Shareholders at more than a half dozen publicly traded companies have filed lawsuits since the start of 2017 alleging that corporate fiduciaries breached state law duties or violated federal securities laws in connection with sexual harassment scandals. Additional suits are likely in the coming months.

This Article examines the role of corporate and securities law in regulating and remedying workplace sexual misconduct. We …

Informed Trading And Its Regulation, Merritt B. Fox, Lawrence R. Glosten, Gabriel Rauterberg

Faculty Scholarship

Informed trading – trading on information not yet reflected in a stock’s price – drives the stock market. Such informational advantages can arise from astute analysis of varied pieces of public news, from just released public information, or from confidential information from inside a firm. We argue that these disparate types of trading are all better regulated as part of the broader phenomenon of informed trading. Informed trading makes share prices more accurate, enhancing the allocation of capital, but also makes markets less liquid, which is costly to the efficiency of trade. Informed trading thus poses a fundamental trade-off in …

How Investors Can (And Can't) Create Social Value, Paul Brest, Ronald J. Gilson, Mark A. Wolfson

Faculty Scholarship

Most investors throughout the world have a single goal: to earn the highest risk- adjusted financial returns. They would not accept a lower financial return from an investment that also produced social benefits.

More recently, an increasing number of socially-motivated investors have goals beyond maximizing returns. They also seek to align their investments with their social values (value alignment), and some also seek to cause the companies in which they invest to create more social value as a result of their investment (social value creation). We show in this essay that while it is relatively easy to achieve value alignment, …

Insider Trading And The Myth Of Market Confidence, John P. Anderson

Journal Articles

This Article challenges the validity of the market-confidence claim as a justification for the regulation of insider trading on two grounds. First, insofar as it relies on a sociopsychological claim-that most investors perceive insider trading as economically harmful or morally wrong-it is subject to the problem of false consciousness (i.e., the psychological claim could be true though the shared belief is demonstrably false). Second, even if the problem of false consciousness is set aside, the market-confidence argument's empirical claims of a chilling effect among potential investors must be proven, not simply assumed.

The Regulation Of Trading Markets: A Survey And Evaluation, Paul G. Mahoney, Gabriel V. Rauterberg

Book Chapters

This chapter was prepared for a conference exploring the desirability and structure of a new special study of the securities markets. Our objective is not to resolve all of the questions that commentators have raised about the new equity markets, but to lay the groundwork for a new special study by surveying the state of market regulation, identifying issues, and offering preliminary evaluations.

Sunrise, Sunset: An Empirical And Theoretical Assessment Of Dual-Class Stock Structures, Andrew William Winden

UF Law Faculty Publications

A battle is brewing for control of America’s most dynamic companies. Entrepreneurs are increasingly seeking protection from interference or dismissal by public investors through the adoption of dual-class stock structures in initial public offerings. Institutional investors are pushing back, demanding that sucks structures be abandoned or strictly limited through subset provisions. The actual terms of dual-class stock structures, however, have been remarkably understudied, so the debate between proponents of prohibition and private ordering is ill-informed. This paper presents the first empirical analysis of the initial, or sunrise, and terminal, or sunset, provisions found in the charters of dual-class companies, with …

Are Charter Schools The Second Coming Of Enron?: An Examination Of The Gatekeepers That Protect Against Dangerous Related-Party Transactions In The Charter School Sectors, Preston C. Green Iii, Bruce D. Baker, Joseph O. Oluwole

Indiana Law Journal

INTRODUCTION

OVERVIEW OF ENRON

A. ENRON AND DEREGULATION

B. THE LJM SPES

C. ENRON’S COLLAPSE

II: ENRON’S GATEKEEPER PROBLEMS

A. ARTHUR ANDERSEN

B. INDEPENDENT ANALYSTS

C. CREDIT RATING AGENCIES

D. ENRON’S BOARD OF DIRECTORS

E. SECURITIES AND EXCHANGE COMMISSION (SEC)

III: CHARTER SCHOOLS AND RELATED-PARTY TRANSACTIONS

A. CHARTER SCHOOL DEREGULATION AND PRIVATE INVESTORS

B. EXAMPLES OF ENRON-LIKE RELATED-PARTY TRANSACTIONS

1. IMAGINE SCHOOLS

2. IVY ACADEMIA CHARTER SCHOOL

3. AMERICAN INDIAN MODEL CHARTER SCHOOLS

4. GRAND TRAVERSE ACADEMY

5. PENNSYLVANIA CYBER CHARTER SCHOOL

C. THE FEDERAL GOVERNMENT, RELATED-PARTY TRANSACTIONS, AND THE NEED FOR STRONG GATEKEEPING

IV: CHARTER SCHOOL GATEKEEPERS

A. AUDITORS …

The Icarus Syndrome: How Credit Rating Agencies Lost Their Quasi Immunity, Norbert Gaillard, Michael Waibel

SMU Law Review

Subsequent to the 2007–2008 subprime crisis, the SEC and the US Senate discovered that it was common practice for major credit rating agencies (CRAs) to produce inflated and inaccurate structured finance ratings. A host of explanations were posited on how this was able to happen from the “issuer pays” model of CRAs and conflicts of interest to underscoring the CRA’s regulatory license and their ensuing insulation from legal liability. Historically, credit ratings were akin to opinions. However, when courts started to consider structured finance ratings as commercial speech in the 2000s, CRAs became more vulnerable to litigation. This article studies …

Equal Access To Information: The Fraud At The Heart Of Texas Gulf Sulphur, Stephen M. Bainbridge

SMU Law Review

The Texas Gulf Sulphur decision was the seminal moment in the creation of the modern federal insider trading prohibition. In the half century since it was decided, however, courts and commentators have overlooked the glaring flaw in the court’s analysis.

In the key part of the opinion, in which the court laid out the equal access standard, the court grossly misrepresented the precedents on which it relied. The court cited two state law opinions that were wholly irrelevant to the problem at hand. It cited two law review articles, but those articles sim- ply do not say what the court …

Seeking An Objective For Regulating Insider Trading Through Texas Gulf Sulphur, James D. Cox

SMU Law Review

Data summarized in the opening of this article document shows that in- side trading is a growth industry. And, as deals get ever bigger, the growth curve becomes steeper as more the data confirms intuition that the more who know about a good thing the more who will seek to harvest its bene- fits. Even though insider trading appears to have thrived during the fifty years after Texas Gulf Sulphur, we gather in this symposium to celebrate the decision. But why? As developed below, the Second Circuit’s landmark decision gave way to the Supreme Court’s erection of a fiduciary frame- …

Texas Gulf Sulphur And Information Disclosure Policy, Onnig H. Dombalagian

SMU Law Review

Texas Gulf Sulphur’s bold ultimatum—"disclose or abstain”— enjoys an enduring place of prominence in discussions of insider trading law be- cause of the intuitive simplicity with which it asserts the expectations of investors in securities markets. As the law of information dissemination has developed into a distinct subset of federal securities law over the past fifty years, however, it is equally important to reflect on how the Texas Gulf Sulphur opinion has shaped the views of courts and regulators in crafting rules and guidelines for information disclosure. Indeed, Texas Gulf Sulphur anticipated—and continues to inform—contemporary debates relating to the dissemination …

Constructive Ambiguity And Judicial Development Of Insider Trading, Jill E. Fisch

SMU Law Review

The Texas Gulf Sulphur decision began what has become a fifty-year project of developing U.S. insider trading regulation through judicial law- making. During the course of that project, the courts developed a complex, fraud-based approach to determining the scope of liability. The approach has led, in many cases, to doctrinal uncertainty, a result that is reflected in the recent decisions in Newman, Salman, and Martoma.

In the face of this uncertainty, many commentators have called for a legislative solution. This article argues, however, that the true challenge of insider trading regulation is a lack of consensus about the appropriate scope …