Securities Law Commons^™

The Esg Information System, Stavros Gadinis, Amelia Miazad

Seattle University Law Review

The mounting focus on ESG has forced internal corporate decision-making into the spotlight. Investors are eager to support companies in innovative “green” technologies and scrutinize companies’ transition plans. Activists are targeting boards whose decisions appear too timid or insufficiently explained. Consumers and employees are incorporating companies sustainability credentials in their purchasing and employment decisions. These actors are asking companies for better information, higher quality reports, and granular data. In response, companies are producing lengthy sustainability reports, adopting ambitious purpose statements, and touting their sustainability credentials. Understandably, concerns about greenwashing and accountability abound, and policymakers are preparing for action.

In this …

Table Of Contents, Seattle University Law Review

Seattle University Law Review

Table of Contents

The Marijuana Insurgency: Federalism And Social Reframing In Policy Reform, Matthew P. Cavedon

Seattle University Law Review

After fifty years of federal prohibition, marijuana reform efforts have won political and legal success. These victories hold lessons for anyone seeking to resist federal law without being able to directly affect it.

Victory can come from reframing an issue. For marijuana reform, social reframing—not formal legal analysis or material factors—provides the best explanation for how advocates achieved change. Their unconventional political tactics, akin to those used by insurgents in wartime, undercut federal prohibition by winning hearts and minds.

This is an analysis of the sociology of legal change. It is also the story of how ordinary Americans retook personal …

The Business Of Securities Class Action Lawyering, Stephen Choi, Jessica M. Erickson, Adam C. Pritchard

Indiana Law Journal

Plaintiffs’ lawyers in the United States play a key role in combating corporate fraud. Shareholders who lose money as a result of fraud can file securities class actions to recover their losses, but most shareholders do not have enough money at stake to justify overseeing the cases filed on their behalf. As a result, plaintiffs’ lawyers control these cases, deciding which cases to file and how to litigate them. Recognizing the agency costs inherent in this model, the legal system relies on lead plaintiffs and judges to monitor these lawyers and protect the best interests of absent class members. Yet …

The Delaware-Inspired Next Step Toward Brazil Becoming The South American Leader In Corporate Law: Making Public Company Arbitrations A Matter Of Public Record, Caio Machado Filho, Francisco Rüger Antunes Maciel Müssnich, Leo E. Strine Jr.

American University Business Law Review

Brazil is South America’s leading domicile for listed public companies and has enjoyed substantial economic growth in the last generation. But it remains a nation constrained by limited resources to address all of its challenges and opportunities. Because of this reality, Brazil has chosen to use arbitration as the method to resolve disputes between the stockholders of public companies about critical issues such as the fairness of interested transactions and other claims for breach of fiduciary duty or compliance with statutory law and securities laws.

Likewise, important commercial disputes involving public companies are also resolved in arbitration. This is problematic …

Discretionary Investing By 'Passive' S&P 500 Funds, Peter Molk, Adriana Z. Robertson

UF Law Faculty Publications

So-called passive index funds—investment funds that are designed to track a pre-specified underlying index—have become a dominant force in the investing landscape, collectively controlling over $12 trillion in assets. It is widely assumed that these funds are obligated to follow their underlying index, and that fund managers cannot, or do not, select portfolios that deviate from that of the index. As a result, various critics have attacked these funds, including raising concerns about their corporate governance incentives to fears about their influence on market efficiency.

We show that this assumption is overly simplistic both as a matter of law and …

Securities Law—The Issue With Designating Crypto Assets On The Secondary Market As Securities And Regulating Crypto Assets Appropriately, Bregje De Vet

University of Arkansas at Little Rock Law Review

No abstract provided.

Shareholder Primacy Versus Shareholder Accountability, William W. Bratton

Seattle University Law Review

When corporations inflict injuries in the course of business, shareholders wielding environmental, social, and governance (“ESG”) principles can, and now sometimes do, intervene to correct the matter. In the emerging fact pattern, corporate social accountability expands out of its historic collectivized frame to become an internal subject matter—a corporate governance topic. As a result, shareholder accountability surfaces as a policy question for the first time. The Big Three index fund managers, BlackRock, Vanguard, and State Street, responded to the accountability question with ESG activism. In so doing, they defected against corporate legal theory’s central tenet, shareholder primacy. Shareholder primacy builds …

Verses Turned To Verdicts: Ysl Rico Case Sets A High-Watermark For The Legal Pseudo-Censorship Of Rap Music, Nabil Yousfi

Seattle University Law Review

Whichever way you spin the record, rap music and courtrooms don’t mix. On one side, rap records are well known for their unapologetic lyrical composition, often expressing a blatant disregard for legal institutions and authorities. On the other, court records reflect a Van Gogh’s ear for rap music, frequently allowing rap lyrics—but not similar lyrics from other genres—to be used as criminal evidence against the defendants who authored them. Over the last thirty years, this immiscibility has engendered a legal landscape where prosecutors wield rap lyrics as potent instruments for criminal prosecution. In such cases, color-blind courts neglect that rap …

Making Money Green: A Proposal For A Sustainable Stock Exchange, Mary Grace Thurman

William & Mary Environmental Law and Policy Review

Investors crave sustainable business data as a lucrative indicator of long-term business success, yet this demand is not being met by current environmental, social, and corporate governance (“ESG”) investment portfolios, voluntary business disclosure reports, or the Securities and Exchange Commission’s (“SEC”) climate-related rule proposal. Instead, an alternative, voluntary stock exchange premising entry upon satisfaction of industry-specific ESG prerequisites, would directly connect investors with the sustainable investments they desire without requiring them to interpret dense scientific data and decipher which companies exercise positive business practices.

This Article demonstrates that creating an alternative stock exchange for trading solely sustainable businesses would provide …

The Efficacy Of Insider Trading Regulation: An Analysis Of The 1942 Introduction Of Sec Rule 10b-5, Kamila Melikova, Eric Hughson

CMC Senior Theses

Existing research has thoroughly examined the impact of insider trading regulations, finding mixed results regarding the effectiveness of new law introductions. Although this topic has received considerable attention, there is still a notable lack of research on the first regulation of insider trading: the 1942 introduction of Section 10(b), an amendment to the Securities Exchange Act of 1934. This paper uses a newly compiled dataset of earnings announcements from large public companies between 1937 and 1946, combined with event study methodology, to investigate the effectiveness of the very first ban on insider trading. Through the application of t-tests and regression …

Manipulating Citadel: Profiting At The Expense Of Retail Stock Traders' Market Makers, Merritt B. Fox, Lawrence R. Glosten, Sue S. Guan

Faculty Scholarship

This Article considers whether securities market strategies designed to profit at the expense of so-called “internalizers” should properly be considered illegal manipulation. An internalizer acquires from a brokerage firm the right to be the market maker for the broker’s full order flow from its retail customers, promising in return to execute each order at a price slightly better than the best price available on any exchange (“price improvement”) as well as to pay the broker a fee for each executed order (“payment for order flow”). Almost all retail trading — about 29% of the country’s total share volume — is …

Human Capital Disclosure & Corporate Governance: The New Evidence, George S. Georgiev

Faculty Articles

This Article explores the evolution of human capital disclosure—firm-supplied information about various workforce-related matters—as a factor in contemporary corporate governance. Regulatory and nonregulatory developments from recent years have upended longstanding practices and generated extensive new evidence. Most notably, the Securities and Exchange Commission (SEC) adopted a human capital management (“HCM”) disclosure mandate in 2020, which, though long overdue, was criticized from the outset for its modest scope and lax design. In the meantime, courts have taken a renewed interest in board of directors’ oversight responsibilities in a number of areas, including HCM, while labor’s power has unexpectedly increased in some …

Criminal Subsidiaries, Andrew K. Jennings

Faculty Articles

Corporate groups comprise parent companies and one or more subsidiaries, which parents use to manage liabilities, transactions, operations, and regulation. Those subsidiaries can also be used to manage criminal accountability when multiple entities within a corporate group share responsibility for a common offense. A parent, for instance, might reach a settlement with prosecutors that requires its subsidiary to plead guilty to a crime, without conviction of the parent itself—a subsidiary-only conviction (SOC). The parent will thus avoid bearing collateral consequences—such as contracting or industry bars—that would follow its own conviction. For the prosecutor, such settlements can respond to criminal law’s …

Bank Runs During Crypto Winter, Gary B. Gorton, Jeffery Yufeng Zhang

Articles

“Crypto Winter” refers to a systemic event that occurred in the cryptocurrency ecosystem—what we call “crypto space”—in 2022. Crypto space was wracked by plummeting crypto prices, the troubles of a large crypto hedge fund, and runs on many crypto lending platforms. Several large crypto firms went bankrupt. Collectively, everyday people lost billions of dollars. And crypto investors are still feeling the aftershocks.

We begin with two observations: First, despite mass marketing campaigns to the contrary, crypto lending platforms recreated and replicated traditional banking. They were vulnerable to runs because, like all banks, they borrowed short and lent long. This is …

A Major Question For The Sec: Analyzing Constitutional Limits On Regulatory Authority, Matthew Diller, Meredith Berger, Samuel W. Buell, John M. Golden, Suzanne Ashley, Coy Garrison, Aaron Saiger, Suman Naishadham, Mary Jo White

Fordham Journal of Corporate & Financial Law

No abstract provided.

Another Major Question: The Department Of Labor Should Retire The Tiebreaker Rule And Reemploy Pecuniary Language In Erisa, Brandon Chesner

Fordham Journal of Corporate & Financial Law

The Employee Retirement Income Security Act of 1974 (“ERISA”) soon turns 50. Instead of celebrating with cake, retirees and future retirees alike get to witness a new chapter in the debate over the consideration of Environmental, Social, or Governance (“ESG”) factors in investing with plan assets. As employees cross the bridge into retirement, they look to their 401(k)s and pension plans for peace of mind, for it is ERISA that has been working silently in the background establishing minimum standards, practices, and fiduciary duties to protect participants. In recent years, the U.S. Department of Labor (“DOL”) has passed three regulations—two …

Speech Without Speakers: Eliminating Artificial Barriers To Pleading Corporate Scienter In Securities Fraud Claims, Jennifer Ligansky

Fordham Journal of Corporate & Financial Law

To successfully plead securities fraud claims under Rule 10b–5, the Private Securities Litigation Reform Act (“PSLRA”) requires that plaintiff-investors raise a “strong inference” that the defendant acted with scienter when issuing a false statement. But pleading scienter presents a challenging issue when the defendant is not a person, but an entity. When the defendant is a corporation, U.S. Circuit Courts of Appeals have adopted different approaches for determining whether the plaintiff has pleaded a strong inference of scienter. Some circuits hold that plaintiffs can raise a strong inference of corporate scienter only if the complaint identifies a speaker who knew …

The Ftc & Doj’S New Merger Guidelines: A New Path Or More Of The Same?, Meredith Mommers, Angela Landry

Emory Business Law Review

No abstract provided.

Challenges And Recent Developments In Establishing Civil Aiding And Abetting Liability Under The Anti-Terrorism Act, Amanda Fox Perry

Emory Business Law Review

No abstract provided.

Investment Daos And Crowdfunding: A Solution To Securities Law Challenges, Katherine Stromin

University of San Francisco Law Review

No abstract provided.

We Shall Overcome: The Evolution Of Quotas In The Land Of The Free And The Home Of Samba, Stella Emery Santana

Seattle University Law Review

When were voices given to the voiceless? When will education be permitted to all? When will we need to protest no more? It’s the twenty-first century, and the fight for equity in higher education remains a challenge to peoples all over the world. While students in the United States must deal with the increase in loans, in Brazil, only around 20% of youth between the ages of twenty-five and thirty-four have a higher education degree.

The primary objective of this Article is to conduct an in-depth comparative analysis of the development, implementation, and legal adjudication of educational quota systems within …

Pacific Islands And The U.S. Military: The Legal Borderlands Of The Environmental Movement, Sonia Lei

Seattle University Law Review

Climate change remains an urgent, ongoing global issue that requires critical examination of institutional polluters. This includes the world’s largest institutional consumer of petroleum: the United States military. The Department of Defense (DoD) is a massive institution with little oversight, a carbon footprint spanning the globe, a budget greater than the next ten largest nations combined, and overly generous exemptions to environmental regulations and carbon reduction targets. This Comment examines how this lack of accountability and oversight plays out in the context of three Pacific islands that have hosted U.S. military bases for decades. By considering the environmental impact of …

Of Chameleons And Esg, Ann Lipton

Publications

Ever since the rise of the great corporations in the late nineteenth and early twentieth centuries, commenters have debated whether firms should be run solely to benefit investors, or whether instead they should be run to benefit society as a whole. Both sides have claimed their preferred policies are necessary to maintain a capitalist system of private enterprise distinct from state institutions. What we can learn from the current iteration of the debate— now rebranded as "environmental, social, governance" or "ESG" investing— is that efforts to disentangle corporate governance from the regulatory state are futile; governmental regulation has an inevitable …

Do The Securities Laws Actually Protect Investors (And How)? Lessons From Spacs, Patrick M. Corrigan

Journal Articles

From the Article

This Article identifies transactional innovation in public offering markets as a case study of how going-public transactions would work if issuers could choose to relax some of the investor protections provided under the securities laws. In recent years, private companies that wanted to go public had a meaningful choice between a traditional initial public offering and a merger with a special purpose acquisition corporation (SPAC). Most of the direct and indirect investor protections that ordinarily apply in the initial public offering context are relaxed in the SPAC context.

The Article argues that outcomes in SPAC markets, where …

The Consumer’S Choice To Boycott, Agnes Bresee

Seattle University Law Review

In the wake of employees losing their jobs upon voicing their political opinions concerning Israel, Harvard and Columbia law students’ job offers being rescinded upon expressing support for Palestine, and the names and social media profiles of individuals who support Palestine being collected and listed on Canary Mission, such backlash may leave many Americans wondering what form of resistance to settler-colonialist apartheid is acceptable in the twenty-first century. Recently, the movement to collectively boycott brands like Starbucks, which sued its Worker’s Union for a tweet expressing support for Palestine; Disney, which donated money to Israel; and McDonald’s, where a location …

Unblocking The Chain: Leveraging Mediation And Negotiation In Crypto Exchange User Disputes, Jane Perov

Cardozo Journal of Conflict Resolution

No abstract provided.

A Different Approach To Agency Theory And Implications For Esg, Jonathan Bonham, Amoray Riggs-Cragun

Seattle University Law Review

In conventional agency theory, the agent is modeled as exerting unobservable “effort” that influences the distribution over outcomes the principal cares about. Recent papers instead allow the agent to choose the entire distribution, an assumption that better describes the extensive and flexible control that CEOs have over firm outcomes. Under this assumption, the optimal contract rewards the agent directly for outcomes the principal cares about, rather than for what those outcomes reveal about the agent’s effort. This article briefly summarizes this new agency model and discusses its implications for contracting on ESG activities.

Overseeing The Administrative State, Jill E. Fisch

Seattle University Law Review

In a series of recent cases, the Supreme Court has reduced the regulatory power of the Administrative State. Pending cases offer vehicles for the Court to go still further. Although the Court’s skepticism of administrative agencies may be rooted in Constitutional principles or political expediency, this Article explores another possible explanation—a shift in the nature of agencies and their regulatory role. As Pritchard and Thompson detail in their important book, A History of Securities Law in the Supreme Court, the Supreme Court was initially skeptical of agency power, jeopardizing Franklin Delano Roosevelt (FDR)’s ambitious New Deal plan. The Court’s acceptance …

The Sec, The Supreme Court, And The Administrative State, Paul G. Mahoney

Seattle University Law Review

Pritchard and Thompson have given those of us who study the SEC and the securities laws much food for thought. Their methodological focus is on the internal dynamics of the Court’s deliberations, on which they have done detailed and valuable work. The Court did not, however, operate in a vacuum. Intellectual trends in economics and law over the past century can also help us understand the SEC’s fortunes in the federal courts and make predictions about its future.