Securities Law Commons^™

Keynote Address By Cftc Commissioner Kristin Johnson, Kristin N. Johnson

Arkansas Law Review

Today, our markets are witnessing a transformative moment marked by exceptional, rapidly evolving innovation. To better understand this transformation, we might inquire about the nature of these novel financial instruments, intermediaries, and the underlying technologies that fuel an ever-expanding adoption. Thinking critically about these issues may inform our understanding of the intermediaries or lack thereof, and financial products that characterize this moment in the history and evolution of financial markets.

No Peeking: Addressing Pretextual Inspection Demands By Competitor-Affiliated Shareholders, Lin (Lynn) Bai, Sean Meyer

Faculty Articles and Other Publications

This article exposes how Delaware private companies are vulnerable to pretextual inspections under the guise of valuation by shareholders who are affiliated with competitors of the companies. The Delaware Court of Chancery’s 2020 decision in Woods v. Sahara Enterprises, Inc., which deviated from established law by switching the initial burden of proof of the shareholder’s motive to the target company, exacerbated this vulnerability. This article argues for reversing that decision and proposes changes in multiple areas of law to help companies fend off prying competitors who abuse statutory shareholder inspection rights for unfair advantages in competition.

The Sec's (Ill-Fated) Stock Repurchase Transparency Reform: For Investor Protection, Lin (Lynn) Bai

Faculty Articles and Other Publications

In May 2023, the SEC adopted new transparency measures designed to improve oversight of corporate stock buybacks. However, the new regulation faced immediate and successful challenges in court, prompting the agency to suspend its implementation in November 2023 for further cost-benefit analysis. Critics contended that the new regulation would offer minimal additional benefit to investors given the current regulatory framework. Despite this legal setback, advocates for the re-proposal of the regulation persist. This article shows that the new regulation would open new avenues of legal recourse for investors, fortify their claims that might otherwise be dismissed, and unlock corporate records …

Brief Of Law And Business Professors As Amici Curiae In Support Of Respondents, Macquarie Infrastructure V. Moab Partners, No. 22-1165, Dec. 20, 2023, Joan Macleod Heminway, J. Robert Brown, James D. Cox, Sarah C. Haan, Faith Stevelman

Scholarly Works

Omissions of disclosure required by the Securities and Exchange Commission (SEC or Commission) in Item 303 of Regulation S-K can be a basis for an action under Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act). Disclosures mandated by the SEC in periodic reports are not optional. That these obligations can create a “duty” to disclose under Rule 10b-5(b) is consistent with congressional intent, state court opinions, the common law, and with the longstanding understanding of the federal securities laws (including those of legal scholars and the SEC). This case does not, therefore, seek to “impermissibly expand” the …

Shareholder Primacy Versus Shareholder Accountability, William Wilson Bratton

Articles

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 …

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

Utah Law Student Scholarship

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 …

Henderson And The Objective Observer Standard: The Future Of Race-Conscious Standards Post-Students For Fair Admissions, Gabriela Dionisio

Seattle University Law Review

On June 29, 2023, the Supreme Court of the United States decided Students for Fair Admissions v. President & Fellows of Harvard College, which struck down race-conscious admissions policies. Within just a year after its ruling, Students for Fair Admissions has already had a sweeping impact, reaching beyond higher education. Although the Supreme Court did not indicate whether Students for Fair Admissions applies to sectors beyond higher education, law firms, and other employers have already modified their diversity policies and initiatives, erasing race and company diversity considerations. Given those dramatic changes, there is growing fear that Students for Fair Admissions …

Same Crime, Different Time: Sentencing Disparities In The Deep South & A Path Forward Under The Fourteenth Amendment, Hailey M. Donovan

Seattle University Law Review

The United States has the highest incarceration rate of any country in the world. The American obsession with crime and punishment can be tracked over the last half-century, as the nation’s incarceration rate has risen astronomically. Since 1970, the number of incarcerated people in the United States has increased more than sevenfold to over 2.3 million, outpacing both crime and population growth considerably. While the rise itself is undoubtedly bleak, a more troubling truth lies just below the surface. Not all states contribute equally to American mass incarceration. Rather, states have vastly different incarceration rates. Unlike at the federal level, …

A New Era Of Accountability? The Holding Foreign Companies Accountable Act’S Pursuit Of Regulatory Equality, Robert Ruelas

Northwestern Journal of International Law & Business

This paper discusses the Holding Foreign Companies Accountable Act (HFCAA) as a response to the long-standing regulatory disparities between U.S. and foreign firms listed on U.S. stock exchanges, with particular regard to foreign firms from China. The HFCAA requires that any firms listed on U.S. stock exchanges be subject to inspections by the Public Company Accounting Oversight Board (PCAOB) or face delisting, aiming to eliminate historic regulatory disparities. The paper begins by highlighting the historic regulatory gap in oversight resulting from China’s lack of cooperation with U.S. regulators and continues by discussing the investor harm from various scandals that could …

Confronting Ai-Induced Power Disparity And Emotional Disruption: Expansive Duties Of Broker-Dealers And Investment Advisers, Shuping Li, Wei Shen

Northwestern Journal of International Law & Business

The increasing use of AI models in investment services has raised concerns about ineffective responses, power disparity, and investor harm caused by emotional disruption. Generative AI-driven investment service providers often fail to address consumer issues quickly, guiding customers through superfluous and meaningless verbiage or professional terminology in infinite loops without providing an option to talk with a human customer service staff. Customers who are “stuck” in ineffective or inaccurate responses from AI agents may waste time for investors, make poor investment or trading decisions, and the platform may profit from investor rational decision-making owing to investors’ emotional disruption.

This article …

An Analytical Examination Of The Inefficacy Of China’S Independent Director System: A Comparative Perspective, Nanzhu Wang

Northwestern Journal of International Law & Business

This paper analyzes the effectiveness of China’s independent director (ID) system in listed companies following the 2023 regulatory reforms enacted by the China Securities Regulatory Commission (CSRC). These reforms raised the independence standards for IDs by broadening disqualification criteria and modifying the appointment mechanisms. Despite the establishment of an ID system this century and the recent enhanced standards, empirical evidence indicates persistent shortcomings in China’s ID mechanism. Many of the positive outcomes initially attributed to IDs—such as improved internal control or better firm performance—cannot conclusively isolate IDs’ independence or expertise as the true cause. In contrast, negative evidence, which specifically …

Multinational Asset Management Firms & Esg Disclosure Management, Maggie Pahl, Michael Hamersky, Jason J. Czarnezki

Elisabeth Haub School of Law Faculty Publications

In recent years, the United States, European Union, and United Kingdom have introduced “Environmental, Social, and Governance” disclosure regulations. Multinational Asset Management Firms must now navigate the evolving and varied disclosure and labeling requirements they are subjected to across multiple jurisdictions. This Article provides a brief history of ESG disclosure regulation and provides a summary of the enacted and proposed regulations and identifies the biggest points of contention between the regulations and provides suggestions for a more comprehensive standardized regulatory framework.

Full Moon Or Full Fraud? A Proposed Method For Interpreting Emojis Under Rule 10b-5, Sophie Abrams

Brooklyn Law Review

In the wake of the COVID-19 pandemic, many Americans who were stuck at home turned to social media forums in search of community and investing advice. Fifteen million (and counting) of them found community in r/wallstreetbets, a group on Reddit that banded together to drive up the prices of “meme stocks.” Bed Bath and Beyond was one stock that piqued retail investors’ interest after seeing billionaire investor Ryan Cohen take a 10 percent stake and activist role in the company. However, Cohen ended up being a large disappointment to his retail investor fans, as he subsequently sold off his stake …

Public Primacy In Corporate Law, Dorothy S. Lund

Seattle University Law Review

This Article explores the malleability of agency theory by showing that it could be used to justify a “public primacy” standard for corporate law that would direct fiduciaries to promote the value of the corporation for the benefit of the public. Employing agency theory to describe the relationship between corporate management and the broader public sheds light on aspects of firm behavior, as well as the nature of state contracting with corporations. It also provides a lodestar for a possible future evolution of corporate law and governance: minimize the agency costs created by the divergence of interests between management and …

Robo-Voting: Does Delegated Proxy Voting Pose A Challenge For Shareholder Democracy?, John Matsusaka, Chong Shu

Seattle University Law Review

Robo-voting is the practice by an investment fund of mechanically voting in corporate elections according to the advice of its proxy advisor— in effect fully delegating its voting decision to its advisor. We examined over 65 million votes cast during the period 2008–2021 by 14,582 mutual funds to describe and quantify the prevalence of robo-voting. Overall, 33% of mutual funds robo-voted in 2021: 22% with ISS, 4% with Glass Lewis, and six percent with the recommendations of the issuer’s management. The fraction of funds that robo-voted increased until around 2013 and then stabilized at the current level. Despite the sizable …

The Limits Of Corporate Governance, Cathy Hwang, Emily Winston

Seattle University Law Review

What is the purpose of the corporation? For decades, the answer was clear: to put shareholders’ interests first. In many cases, this theory of shareholder primacy also became synonymous with the imperative to maximize shareholder wealth. In the world where shareholder primacy was a north star, courts, scholars, and policymakers had relatively little to fight about: most debates were minor skirmishes about exactly how to maximize shareholder wealth.

Part I of this Essay discusses the shortcomings of shareholder primacy and stakeholder governance, arguing that neither of these modes of governance provides an adequate framework for incentivizing corporations to do good. …

The Pioneers, Waves, And Random Walks Of Securities Law In The Supreme Court, Elizabeth Pollman

Seattle University Law Review

After the pioneers, waves, and random walks that have animated the history of securities laws in the U.S. Supreme Court, we might now be on the precipice of a new chapter. Pritchard and Thompson’s superb book, A History of Securities Law in the Supreme Court, illuminates with rich archival detail how the Court’s view of the securities laws and the SEC have changed over time and how individuals have influenced this history. The book provides an invaluable resource for understanding nearly a century’s worth of Supreme Court jurisprudence in the area of securities law and much needed context for …

Three Stories: A Comment On Pritchard & Thompson’S A History Of Securities Laws In The Supreme Court, Harwell Wells

Seattle University Law Review

Adam Pritchard and Robert Thompson’s A History of Securities Laws in the Supreme Court should stand for decades as the definitive work on the Federal securities laws’ career in the Supreme Court across the twentieth century.1 Like all good histories, it both tells a story and makes an argument. The story recounts how the Court dealt with the major securities laws, as well the agency charged with enforcing them, the Securities and Exchange Commission (SEC), and the rules it promulgated, from the 1930s into the twenty-first century. But the book does not just string together a series of events, “one …

On The Value Of History: A Review Of A.C. Pritchard & Robert B. Thompson’S A History Of Securities Law In The Supreme Court, Joel Seligman

Seattle University Law Review

A.C. Pritchard and Bob Thompson have written a splendid history of securities law decisions in the Supreme Court. Their book is exemplary because of its detailed use of the long unpublished papers of Supreme Court justices, including those of Harry Blackmun, William O. Douglas, Felix Frankfurter and Lewis F. Powell, primary sources which included correspondence with other Justices and law clerks as well as interviews with law clerks. The use of these primary sources recounted throughout the text and 67 pages of End Notes deepens our understanding of the intentions of the Justices and sharpens our understanding of the conflicts …

Table Of Contents, Seattle University Law Review

Seattle University Law Review

Table of Contents