Securities Law Commons^™

The 2011 Diane Sanger Memorial Lecture Protecting Investors In Securitization Transactions: Does Dodd–Frank Help, Or Hurt?, Steven L. Schwarcz

Faculty Scholarship

Securitization has been called into question because of its role in the recent financial crisis. Schwarcz examines the potential flaws in the securitization process and compare how the Dodd–Frank Act treats them. Although Dodd–Frank addresses one of the flaws, it underregulates or fails to regulate other flaws. It also overregulates by addressing aspects of securitization that are not flawed.

Cds Zombies, Anna Gelpern, Mitu Gulati

Faculty Scholarship

This paper examines the contract interpretation strategies adopted by the International Swaps and Derivatives Association (ISDA) for its credit derivatives contracts in the Greek sovereign debt crisis. The authors argue that the economic function of sovereign credit default swaps (CDS) after Greece is limited and uncertain, partly thanks to ISDA’s insistence on textualist interpretation. Contract theory explanations for textualist preferences emphasise either transactional efficiency or relational factors, which do not fit ISDA or the derivatives market. The authors pose an alternative explanation: the embrace of textualism in this case may be a means for ISDA to reconcile the competing political …

The Eurozone Debt Crisis: The Options Now, Mitu Gulati, Lee C. Bechheit

Faculty Scholarship

The Eurozone debt crisis is entering its third year. The original objective of the official sector’s response to the crisis -- containment -- has failed. All of the countries of peripheral Europe are now in play; three of them (Greece, Ireland and Portugal) operate under full official sector bailout programs.

The prospect of the crisis engulfing the larger peripheral countries, Spain and Italy, has sparked a new round of official sector containment measures. These will involve active intervention by official sector players such as the European Central Bank in order to preserve market access for the affected countries.

This article …

Mutual Fund Performance Advertising: Inherently And Materially Misleading?, Alan R. Palmiter, Ahmed E. Taha

Georgia Law Review

Mutual fund companies routinely advertise the past
returns of their strong-performing, actively-managed
equity funds. These performance advertisements imply
that the advertised high past returns are likely to
continue. Indeed, investors flock to these funds despite
high past returns being a poor predictor of high future
returns. Thus, fund performance advertising is inherently
and materially misleading and violates federal securities
antifraud standards. In addition, the SEC-mandated
warning in these advertisements that "past performance
does not guarantee future results"fails to temper investors'
focus on past returns.
The SEC should do more to prevent investors from being
misled by fund performance advertisements. It …

Skimming From The 2%: The Status Of Georgia's Restrictions On Shareholder Access To Corporate Information, Ruari J. O'Sullivan

Georgia Law Review

The Georgia Court of Appeals, in Mannato v. SunTrust
Banks, Inc., held that O.C.G.A. § 14-2-1602 abrogated all
common law rights to inspect corporate records. As a
result, shareholders in Georgia owning less than 2% of a
corporation'soutstandingshares suddenly lost the right to
petition a court to grant access to a corporation's books
and records. This Note argues that the Mannato decision
was incorrect. The Georgia Court of Appeals failed to
notice the significant procedural differences that existed
between the statutory and common law right of inspection
and erroneously applied Georgia's established law of
statutory abrogation. The court also brushed …

How Collective Settlements Camouflage The Costs Of Shareholder Lawsuits, Richard Squire

Faculty Scholarship

Corporations insure against liability in shareholder lawsuits by buying tiered coverage from multiple insurers who each cover a distinct segment of the potential damages range. Rather than negotiating to settle individually with the plaintiff, the insurers seek to reach a single, collectively binding settlement agreement. This combination of segmented coverage and collective settlements produces a conflict of interests: the corporation’s managers and some insurers are better off if the case settles pre-trial for the expected damages, while other insurers are better off going to trial. To force reluctant insurers to settle, courts have created a duty that can require an …

The Perpetual Corporation, Andrew A. Schwartz

Publications

Courts and commentators take for granted that the ultimate objective of a business corporation is long-run profitability, not immediate profits. But a corporation is a creature of statute, so a statutory source for this rule must be found--or it is not really a rule. Yet prior literature has not identified any such legal basis, leaving a gap in corporate theory. This Article fills that gap by showing that the modern corporation is obliged to act with a long-term view because it has "perpetual existence" under the law. This Article then explains that because they must plan for a perpetual future, …

Coco Rising: Can The Emergence Of Novel Hybrid Securities Protect From Future Liquidity Crises?, Eric S. Halperin

Brigham Young University International Law & Management Review

No abstract provided.

Institutionalization, Investment Adviser Regulation, And The Hedge Fund Problem, Anita Krug

All Faculty Scholarship

This Article contends that more effective regulation of investment advisers could be achieved by recognizing that the growth of hedge funds, private equity funds, and other private funds in recent decades is a manifestation of institutionalization in the investment advisory context. That is, investment advisers today commonly advise these “institutions,” which have supplanted other, smaller investors as advisory clients. However, the federal securities statute governing investment advisers, the Investment Advisers Act of 1940, does not address the role of private funds as institutions that now intermediate those smaller investors’ relationships to investment advisers. Consistent with that failure, investment adviser regulation …

Memo To The Sec On The Proposed Rule On Disclosure Of Payments By Resource Extraction Issuers, Perrine Toledano

Columbia Center on Sustainable Investment Staff Publications

CCSI strongly supports the transparency of contracts and tax flows. CCSI shares the belief of many stakeholders that transparency is essential to leverage extractive industries for sustainable development and is in the mutual interest of all stakeholders. However, some industry players continue to voice the concern that increased transparency would be harmful for their business. Therefore, CCSI is working to also establish the business case for transparency.

In one such case, some industry players have been lobbying against the regulations developed by the Security and Exchange Commission to implement the mandatory disclosure provisions of the Dodd Frank Wall Street Reform …

Transnational Class Actions And The Illusory Search For Res Judicata, Tanya Monestier

Law Faculty Scholarship

The transnational class action-a class action in which a portion of the class consists of non-US claimants-is here to stay Defendants typically resist the certification of transnational class actions on the basis that such actions provide no assurance of finality for a defendant, as it will always be possible for a non-U.S. class member to initiate subsequent proceedings in a foreign court. In response to this concern, many U.S. courts will analyze whether the "home" courts of the foreign class members would accord res judicata effect to an eventual U.S. judgment prior to certifying a U.S. class action containing foreign …

Dodd-Frank, Compensation Ratios, And The Expanding Role Of Shareholders In The Governance Process, J. Robert Brown Jr.

Sturm College of Law: Faculty Scholarship

The Dodd-Frank Act included a number of provisions designed to reform the executive compensation process. One of the provisions, Section 953(b), requires disclosure of a ratio that compares CEO compensation with the median income of employees. Although hardly noticed at the time of adoption, the provision has since generated opposition, with many of the concerns involving the logistics associated with implementation. Efforts to repeal Section 953(b) have surfaced in Congress.

Derivatives: A Twenty-First Century Understanding, Timothy E. Lynch

Faculty Works

Derivatives are commonly defined as some variation of the following: a financial instrument whose value is derived from the performance of a secondary source such as an underlying bond, commodity or index. But this definition is both over-inclusive and under-inclusive. Thus, not surprisingly, derivatives are largely misunderstood, including by many policy makers, regulators and legal analysts. It is important for interested parties such as policy makers to understand derivatives, because the types and uses of derivatives have exploded in the last few decades, and because these financial instruments can provide both social benefits and cause social harms. This Article presents …

Gambling By Another Name; The Challenge Of Purely Speculative Derivatives, Timothy E. Lynch

Faculty Works

Derivatives contracts can be used to hedge pre-existing risks, but they can also be used to speculate. This Article focuses on derivatives contracts in which both counterparties are speculators. These “purely speculative derivatives (PSD) contracts” have become increasingly common over the last several years and have notably resulted in the transfer of many tens of billions of dollars from institutions that had invested in the US subprime housing market to a handful of speculators who foresaw the market’s collapse, as well as many billions of dollars in fees to PSD brokers.

PSD contracts are problematic. PSD contracts are less-than-zero-sum transactions …

Intraportfolio Litigation, Amanda Rose, Richard Squire

Vanderbilt Law School Faculty Publications

The modern trend is for investors to diversify. Shareholders who own one S&P 500 firm tend to own many of the others as well. This trend casts doubt on the traditional compensation and deterrence rationales for legal rules that hold corporations liable for the acts of their agents. Today, when A Corp sues B Corp (for breach of contract, theft of trade secrets, or any other legal wrong), many of the same shareholders own both the plaintiff and the defendant. For these shareholders, damages just shift money from one pocket to another, minus of course lawyer fees. We offer here …

Warning: Your Lcc Interest Might Be A Security, Wendy Gerwick Couture

Articles

No abstract provided.

"Patient Capital": Can Delaware Corporate Law Help Revive It?, Jack B. Jacobs

Washington and Lee Law Review

No abstract provided.

Wider Role For Our Miners In Africa, Lisa E. Sachs, Joel Negin, Glenn Denning

Columbia Center on Sustainable Investment Staff Publications

The Australian government is rapidly increasing aid to Africa. But the real story about the country's engagement in Africa is the massive investment by Australian companies in extractive industries.

More than 150 Australian resource companies are active in more than 40 African countries with a total investment greater than $20 billion, including in coal in Mozambique, copper and uranium in Zambia, gold in Eritrea and uranium in Malawi.

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 …

The Federal Trade Commission And Privacy: Defining Enforcement And Encouraging The Adoption Of Best Practices, Andrew Serwin

San Diego Law Review

This Article examines the history of privacy enforcement by the Federal Trade Commission (FTC), including the FTC’s jurisdiction under section 5, and its privacy enforcement matters, as well as the FTC’s recently issued report, Protecting Consumer Privacy in an Era of Rapid Change: A Proposed Framework for Businesses and Policymakers, in which the FTC examines past enforcement models, noting their failings. In light of the FTC’s examination of past enforcement models, this Article then analyzes these models, including the accountability-centric model that has previously been utilized in the United States, as well as the FTC’s proposed solution to the privacy …