Securities Law Commons^™

Framing Regulation Around The Potential Liabilities Of Parties In The Blockchain & Smart Contract Industry, Jeceaca An

Fordham Journal of Corporate & Financial Law

Blockchains, which have been most significantly utilized by the technology, media, and telecommunication industry (TMT) and the financial sector, amassed global attention in the 2010s. This surging popularity may, however, cause the public to overlook the core characteristics of blockchain technology, and to consequently be unaware of the inherent risks at play when engaging with blockchains. Simply put, blockchain technology is an information storing technology that can be utilized in various ways, such as services to facilitate cryptocurrency exchanges and smart contracts. The recent widespread use of blockchain technology by unique parties has raised questions of how to deal with …

Global Investor Protection: Securities Law Enforcement Around The World, Matthew Diller, Martin Gelter, Eugenio J. Cardenas, Merritt B. Fox, Geoffrey Jarvis, Pierre-Henri Conac, Todd Cosenza, Jill Fisch, Yuliya Guseva, Elad Roisman, Sean Griffith

Fordham Journal of Corporate & Financial Law

No abstract provided.

Willfulness In A Post-Robare World: Evidence Of Subjective Intent, Not Negligence Conduct, Is Needed To Show Willful Violations Of Securities Laws, Kevin Aguirre

Fordham Journal of Corporate & Financial Law

The D.C. Circuit's holding in Robare Group, Ltd., v. SEC, potentially marks the end of at least twenty years of permissive judicial interpretation of the term "willful," as found in various provisions of securities laws-including the Investment Advisers Act of 1940. Traditionally, willful violations of securities laws only required evidence that defendants were aware of their conduct, not that they knew that their conduct was unlawful. This low burden of proof operates in practice as a negligence standard. However, Robare makes a key distinction between evidence of negligent conduct and "subjectively intentional" violations under section 207 of the Advisers Act …

Are Securities Laws Effective Against Climate Change? A Proposal For Targeted Climate Related Disclosure And Ghg Reduction, Nate Chumley

Fordham Journal of Corporate & Financial Law

The New York Attorney General filed a lawsuit against Exxon Mobil on October 24, 2018, claiming the company committed securities fraud in order to prop up the value of the company by publicly disclosing a higher proxy cost—or projected future cost—of climate change regulation than the internal cost used. Following this lawsuit, a federal class action was filed utilizing the same legal theory on the same facts. These lawsuits should be viewed as part of the larger history of lawsuits against large fossil fuel companies for climate change-related harms. Public nuisance theory largely captured a set of lawsuits against these …

The Fate Of State Investor Protection, Benjamin P. Edwards

Scholarly Works

In June 2019, the Securities & Exchange Commission made significant changes to the regulation of investment advice, issuing regulations and new interpretations of the Investment Advisers Act of 1940. Industry advocates have argued that states lack power to enact their own regulations on the theory that various federal statutes and regulations combine to preempt and sharply limit state authority. This article examines the current state of reforms around the country and the policy and legal arguments for and against limiting state efforts to raise the standards for investment advice.

Adversarial Failure, Benjamin P. Edwards

Scholarly Works

Investors, industry firms, and regulators all rely on vital public records to assess risk and evaluate securities industry personnel. Despite the information's importance, an arbitration-facilitated expungement process now regularly deletes these public records. Often, these arbitrations recommend that public information be deleted without any true adversary ever providing any critical scrutiny to the requests. In essence, poorly informed arbitrators facilitate removing public information out of public databases. Interventions aimed at surfacing information may yield better informed decisions. Although similar problems have emerged in other contexts when adversarial systems break down, the expungement process to purge information about financial professionals provides …

Working Hard Or Making Work? Plaintiffs’ Attorney Fees In Securities Fraud Class Actions, Jessica M. Erickson

Law Faculty Publications

In this paper, we study attorneys’ fees awarded in the largest securities class actions: “mega-settlements.” Consistent with prior work, we find larger fee awards but lower percentages in these cases. We also find that courts are more likely to reject or modify fee requests made in connection with the largest settlements. We conjecture that this scrutiny provides an incentive for law firms to bill more hours, not to advance the case, to help justify large fee awards – “make work.” The results of our empirical tests are consistent with plaintiffs’ attorneys investing more time in litigation against larger companies, particularly …

Pushing The Envelope: Salzberg V. Sciabacucchi And Delaware's Evolving View Of The Internal Affairs Doctrine, Mark J. Loewenstein

Publications

In January, 2020, the Delaware Supreme Court handed down its decision in Salzberg v. Sciabacucchi, upholding a provision in a certificate of incorporation that designated the federal courts as the exclusive jurisdiction for the litigation of claims under the federal Securities Act of 1933. The inclusion of these provisions in Delaware charters and bylaws – often referred to as “Federal Forum Provisions” or FFPs – raised important questions as to the reach of the internal affairs doctrine. This doctrine provides that the jurisdiction of incorporation regulates the internal affairs of its corporations: the relationship among and between the corporate …

Not Everything Is About Investors: The Case For Mandatory Stakeholder Disclosure, Ann Lipton

Publications

Corporations are required to disclose specific types of information to the public, but only the federal securities laws impose generalized disclosure obligations that produce a holistic overview of corporate operations. While these disclosures are intended to benefit investors, they are accessible to anyone, and thus have long been relied upon by regulators, competitors, employees, and local communities to provide a working portrait of the country’s economic life.

Today, that system is breaking down. Congress and the SEC have made it easier for companies to raise capital without triggering securities reporting obligations, allowing modern businesses to grow to enormous proportions while …

Credit Rating Agencies: Regulation And Liability, Colin Bradshaw

Lewis & Clark Law Review

In 2007, the economy crashed because of credit rating agency misconduct. Through the early 2000s, credit raters’ reckless pursuit of profits facilitated the enormous real estate and structured finance bubble that eventually burst in 2007. This Article examines the ratings industry and its institutions, their role in the crash, the regulation that led to their dominance in the markets, how that regulation changed in the wake of the economic crisis, and how they can be held liable today for present and future misconduct.

Section I describes what credit rating agencies (CRAs) are and what they do. Understanding the function of …

Addressing The Auditor Independence Puzzle: Regulatory Models And Proposal For Reform, Martin Gelter, Aurelio Gurrea-Martinez

Vanderbilt Journal of Transnational Law

Auditors play a major role in corporate governance and capital markets. Ex ante, auditors facilitate firms' access to finance by fostering trust among public investors. Ex post, auditors can prevent misbehavior and prevent financial fraud by corporate insiders. In order to fulfill these goals, however, in addition to having the adequate knowledge and expertise, auditors must perform their functions in an independent manner. Unfortunately, auditors are often subject to conflicts of interest, for example, resulting from the provision of nonaudit services but also because of the mere fact of being hired and paid by the audited company. Therefore, even if …

Real Insider Trading, Michael A. Perino

Faculty Publications

In popular rhetoric, insider trading cases are about leveling the playing field between elite market participants and ordinary investors. Academic critiques vary. Some depict an untethered insider trading doctrine that enforcers use to expand their power and enhance their discretion. Others see enforcers beset with agency cost problems who bring predominantly simple, easily resolved cases to create the veneer of vigorous enforcement. The debate has, to this point, been based mostly on anecdote and conjecture rather than empirical evidence. This Article addresses that gap by collecting extensive data on 465 individual defendants in civil, criminal, and administrative actions to assess …

Arbitration Law Update: 2019–2020 (July 2020), Scott Eichorn, Elissa Germaine

Faculty Publications

(Excerpt)

This article summarizes leading arbitration cases during the last year that are of particular relevance to the securities arbitration practitioner, as well as cases on the horizon for the coming year. The decided cases focus on class arbitration, arbitrability, customer identification, discovery abuse, grounds to modify arbitration awards, enforceability of arbitration agreements, and challenges to Regulation Best Interest. The upcoming cases focus on class arbitration and arbitrability.

A Tangled Web: Can Arbitration Be The Answer To Resolving Manufactured Credit Event Disputes?, Adam Eisenbud

Cardozo Journal of Conflict Resolution

Derivatives are financial contracts whose value is derived from, or reliant upon, another asset. Perhaps the most popular derivatives for retail investors are stock options, whose value is derived from the price of an underlying equity. In recent years, financial institutions have developed several innovative derivative products. These products are typically born out of an unmet need in the financial marketplace. Credit derivatives, for example, were created in order to let financial clients mitigate credit risk. A wellknown type of credit derivative is the credit default swap ("CDS"), a privately held, negotiable bilateral contract that allows a lender to transfer …

Inflated Private Offering: Regulating Corporate Insiders And Market Moving Disclosures On Social Media, Marisa Papenfuss

Vanderbilt Law Review

This Note will explore Regulation FD’s development, from its enactment in 2000 to its status in the age of social media. It will ultimately propose a safe harbor provision that clearly delineates when issuers and corporate insiders are not subject to the regulation’s requirements. Part I provides an overview of Regulation FD’s provisions and enforcement as well as the SEC’s subsequent guidance, which attempts to elucidate the regulation’s application to new technologies. Part II analyzes the specific problems that arise when Regulation FD is applied to information distributed through social media and assesses scholars’ proposed solutions to these problems. Lastly, …

The Indian Securities Fraud Class Action: Is Class Arbitration The Answer?, Brian T. Fitzpatrick, Randall S. Thomas

Vanderbilt Law School Faculty Publications

In 2013, India enacted one of the most robust private enforcement regimes for securities fraud violations in the world. Unlike in most other countries, Indian shareholders can now initiate securities fraud lawsuits on their own, represent all other defrauded shareholders unless those shareholders affirmatively opt out, and collect money damages for the entire class. The only thing missing is a better financing mechanism: unlike the United States, Canada, and Australia, India does not permit contingency fees, so class action lawyers cannot front the costs of litigation in exchange for collecting a percentage of what they recover. On the other hand, …

Beyond Internal And External: A Taxonomy Of Mechanisms For Regulating Corporate Conduct, Ann Lipton

Publications

Corporate discourse often distinguishes between internal and external regulation of corporate behavior. The former refers to internal decisionmaking processes within corporations and the relationships between investors and corporate managers, and the latter refers to the substantive mandates and prohibitions that dictate how corporations must behave with respect to the rest of society. At the same time, most commenters would likely agree that these categories are too simplistic; relationships between investors and managers are often regulated with a view toward benefitting other stakeholders.

As a result, this Article will seek to develop a taxonomy of tactics available to, and used by, …

Crowdfunding Issuers In The United States, Andrew A. Schwartz

Publications

Startup companies can now legally sell shares of stock, bonds, or other securities to the broad public using equity crowdfunding, a new type of online capital market modeled on Kickstarter and other reward crowdfunding websites. Through equity crowdfunding, entrepreneurs can go directly to the broad public (the “crowd”) for investment, without having to go through the usual (and costly) process of an initial public offering (IPO). Equity crowdfunding thus offers a chance for all entrepreneurs, regardless of their physical location, gender, or anything else, to solicit investors and raise capital.

In 2012, new federal legislation—the Jumpstart Our Business Startups (JOBS) …

Remutualization, Erik F. Gerding

Publications

Policymakers need to rediscover the organizational form of business entity as a tool of financial regulation. Recent and classic scholarship has produced evidence that financial institutions organized as alternative entity forms – including investment bank partnerships and banks and insurance companies organized as mutual or cooperatives – tend to take less risk, exploit customers/consumer less, or commit less misconduct compared to counterparts organized as investor-owned corporations. This article builds off the work of Hill and Painter on investment banks organized as partnerships, Hansmann on the history and economics of banks and insurance companies organized as mutuals and cooperatives, and other …

Table Of Contents, Seattle University Law Review

Seattle University Law Review

Table of Contents