Monday, October 20, 2014
The following announcement comes to us from Alicia Plerhoples (Georgetown). The 14th annual transactional clinic conference will be held at UMKC School of Law in Kansas City, Missouri and the Ewing Marion Kauffman Foundation is serving as a host partner. Proposals are due by December 15, 2014 and more information about the conference is available after the break.
14TH ANNUAL TRANSACTIONAL CLINICAL CONFERENCE
CALL FOR PROPOSALS, PAPERS, & PANELISTS
Teaching and Writing Methods of the Transactional Clinician
This year’s conference theme is Teaching and Writing Methods of the Transactional Clinician. The conference will have two tracks: (1) a “Nuts & Bolts” Teacher Workshop and (2) a “Pen & Paper” Scholarship Workshop. The Planning Committee seeks proposals for (1) presentations, (2) papers, and (3) panelists as outlined below.
That’s how long we’ve been waiting for the SEC's exemption for crowdfunded securities offerings.
The JOBS Act, which authorized the crowdfunding exemption, was signed by President Obama on April 5, 2012. The act required the SEC to enact the necessary rules within 270 days. The SEC has now missed that deadline, December 31, 2012, by 658 days.
To put it in context, when the JOBS Act passed, I had three grandchildren. I now have six. I may have great grandchildren by the time the SEC acts.
The 270-day deadline was unrealistic, given the time required to draft rules from scratch and the delay imposed by the notice-and-comment requirements of the Administrative Procedure Act. But the SEC finally proposed the rules on October 23, 2013, almost a year ago. The deadline for commenting on the proposal expired last February and the SEC still hasn’t done anything. It’s getting a little ridiculous.
I’m on record that the crowdfunding exemption passed by Congress is unlikely to be very useful. (See my article analyzing the JOBS Act’s crowdfunding provisions.) But we won’t know until we actually have a crowdfunding exemption. At the SEC’s current rate of progress, some new technology may have supplanted the Internet before that happens, and we’ll have to start all over again.
Sunday, October 19, 2014
SEC: "This marks the first high frequency trading manipulation case." http://t.co/TZVPtpTsgi— Stefan Padfield (@ProfPadfield) October 16, 2014
"SEC Announces Date for Annual Government-Business Forum on Small Business Capital Formation" http://t.co/jeUmFirCok— Stefan Padfield (@ProfPadfield) October 16, 2014
Brief: law firm "inappropriately represented...both [corporation] and the individual director and officer defendants” http://t.co/4PWixxGU1y— Stefan Padfield (@ProfPadfield) October 18, 2014
Saturday, October 18, 2014
The Columbia Journalism Review blog reports:
Since 2008, one particular federal government agency has aggressively investigated leaks to the media, examining some one million emails sent by nearly 300 members of its staff, interviewing some 100 of its own employees and trolling the phone records of scores more. It’s not the CIA, the Department of Justice or the National Security Agency.
It’s the Securities and Exchange Commission. …
All that effort was for naught. Despite the time and resources that have been poured into them, none of the SEC’s eight investigations in the past six years have uncovered the leakers.…
The article further points out that the SEC’s pursuit of leakers has ramped up in the wake of the financial crisis, and it has no problem with leaks (if you call them “leaks”) when the leaks make the agency look good.
The SEC’s argument is that it needs to protect against the release of market moving information, and I'm quite sympathetic to that point, but the leaks involved here seem to be at least in part about concealing internal problems or dissension within the agency.
Considering how at least two Commissioners have recently spoken out about their dissatisfaction with the SEC’s enforcement efforts (not to mention the best SEC speech ever), I tend to be sympathetic to the argument that sunlight - or at least less intimidation - is in order.
(Also, if they can't catch their own leakers.... )
Friday, October 17, 2014
(Photo courtesy of Wikimedia Commons, by Patrick Delahanty from Louisville, United States)
Alison Lundergan Grimes and I both graduated from Rhodes College, a small liberal arts college in Memphis, TN. I have not spoken to Alison since college, so I was surprised to see her mentioned on CNN a number of weeks ago as the democratic nominee for U.S. Senator from Kentucky. Since then, she has been in the news quite a bit. She will face Minority Leader Mitch McConnell, in what has turned into one of the hotter Senate races this year.
Even in college I did not know Alison well, but we did take a public speaking class together. Alison was the type of student who was often in a suit and pearls in class, while I wore flip flops year-round and whatever wrinkled, Goodwill-purchased clothes were the most clean. She was a Chi Omega (easily the most refined group on campus), and I was a part of the football team for all four years (if there was a rowdier group on campus than the football team, it was the rugby club, which I joined because my playing time on the football team was minimal).
The public speaking class that Alison and I took together was definitely one of the most practical classes I took. Each student gave short speeches almost every day, and we were video-taped. We then watched and critiqued the videos as a class. Almost all of us had at least a few nervous habits, but we all appeared to break them after our nervous habits were seen on the screen and pointed out in front of the entire class. It was all quite embarrassing, but effective. I think there were only about a dozen of us in the class, which made this sort of personal attention possible. Our final exam was a presentation to an audience of 100 or more people, and our professor had lined up enough options for each of us, which must have taken a lot of time to organize.
I had some opportunities to do public speaking in law school. I know those who competed in moot court and trial advocacy had even more opportunities, but I think we should try to give our students even more chances to hone their public speaking skills. Regardless of post-graduation job, almost all students will need public speaking skills, even if their audiences are small. I try to include student presentations in as many of my classes as I practically can.
While we can all work public speaking into at least some of our classes, a required class fully dedicated to public speaking might be worthwhile. Do any law schools do this? I know public speaking is usually a part of a legal writing or litigation class, but I have not heard of a required course devoted specifically to public speaking.
Update: I should note that Alison is also legally trained. She is a graduate of American University's Washington College of Law.
Thursday, October 16, 2014
I plan to write a more traditional blog post later if I have time, but I am in the midst of midterm grading hell. I was amused today in class when a student compared the drama of the Francis v. United Jersey Bank case with the bankruptcy, bank, and mortgage fraud convictions of husband and wife Joe and Teresa Guidice from the reality TV hit the Real Housewives of New Jersey.
I had provided some color commentary courtesy of Reinier Kraakman and Jay Kesten’s The Story of Francis v. United Jersey Bank: When a Good Story Makes Bad Law, and apparently Mrs. Pritchard’s defenses reminded the student of Teresa Guidice’s pleas of ignorance. Other than being stories about New Jersey fraudsters, there aren’t a lot of similarities between the cases. Based on my quick skim of the indictment I don’t think that Teresa served on the board of any of the companies at issue--Joe apparently had an LLC and was the sole member, and the vast majority of the counts against the couple relate to their individual criminal conduct. In addition, Teresa is also going to jail, and no one suffered that fate in United Jersey. But luckily, she may see a big payday from a purported book deal and reality TV show spinoff after she’s out, possibly disproving the adage that crime doesn’t pay.
Wednesday, October 15, 2014
Whether you are teaching insider trading as part of a corporations or a securities regulation course, you practice in the area, or you like these cases because they contain some of the most interesting fact patterns..... I have a couple of gems for you.
First, the on line edition of the New Yorker features two great stories on insider trading. The first story, The Empire of Edge written by Patrick Radden Keefe, focuses on the conviction of a trader at S.A.C. capital for trades made 10 days before the release of results from clinical trials on an alzheimer's medication. The hedge fund reversed its $.785B position in two companies testing the drug and took a short position against the companies earning the fund $275M. In classic long-form journalism at its best, the story is riveting as it unfolds. The second story, A Dirty Business by George Packer, tells the story of Raj Rajaratnam, head of the Galleon hedge fund at the heart of the 2009 informant ring scandal, the prosecution and the SEC's stance on enforcement.
For those of you who are interested, the SEC posted a running list of insider trading enforcement actions here.
Tuesday, October 14, 2014
To be clear, I'm not an economist. I do, however, have an interest in economics, economic theory, and especially behavioral economics. I incorporate basic concepts of economics into my courses, especially Business Organizations and Energy Law. This week's announcement of Jean Tirole as the 2014 Nobel Laureate in economics thus caught my eye.
I admit I did not much about Tirole before the announcement, and after just a little reading, it's clear to me that I need to know more. A nice summary of Tirole's work (written by Tyler Cowen) can be found here. Cowen introduces the announcement and Tirole this way:
A theory prize! A rigor prize! I would say it is about principal-agent theory and the increasing mathematization of formal propositions as a way of understanding economics. He has been a leading figure in formalizing propositions in many distinct areas of microeconomics, most of all industrial organization but also finance and financial regulation and behavioral economics and even some public choice too. He is a broader economist than many of his fans realize.
Tirole is a Frenchman, he teaches at Toulouse, and his key papers start in the 1980s. In industrial organization, you can think of him as extending the earlier work of Ronald Coase and Oliver Williamson with regard to opportunism and recontracting, but applying more sophisticated and more mathematical forms of game theory. Tirole also has been a central figure in procurement theory and optimal contracts when there is asymmetric information about costs. The idea of mechanism design runs throughout his papers in many different guises. Many of his papers show “it’s complicated,” rather than presenting easily summarizable, intuitive solutions which make for good blog posts. That is one reason why his ideas do not show up so often in blogs and the popular press, but they nonetheless have been extremely influential in the economics profession. He has shown a remarkable breadth and depth over the course of the last thirty or so years.
Cowen then summarizes (or at least introduces) much of Tirole's work. I am now working my through a paper Tirole wrote with Jean-Jacques Laffont that discusses when regulatory capture is likely to happen. (Cowen notes, " I have yet to see the insights of this paper incorporated into the rest of the literature adequately.")
The papers is called The Politics of Government Decision-Making: A Theory of Regulatory Capture. Two of my favorite lines:
- "The assumption that Congress is a benevolent maximizer of a social welfare function is clearly an oversimplification, as its members are themselves subject to interest-group influence."
- "In contrast with the conventional wisdom on interest-group politics, an interest group may be hurt by its own power."
Here's the abstract (paper available on JSTOR):
The paper develops an agency-theoretic approach to interest-group politics and shows the following: (1) the organizational response to the possibility of regulatory agency politics is to reduce the stakes interest groups have in regulation. (2) The threat of producer protection leads to low-powered incentive schemes for regulated firms. (3) Consumer politics may induce uniform pricing by a multiproduct firm. (4) An interest group has more power when its interest lies in inefficient rather than efficient regulation, where inefficiency is measured by the degree of informational asymmetry between the regulated industry and the political principal (Congress).
It's worth a read, even if the math part is a little beyond some of us.
H/T: Geoffrey Manne
Monday, October 13, 2014
OK. I cannot compete with the brevity or humor of the student comment Steve Bradford posted earlier today. [sigh] But my post today does relate to a student comment/question--one from my Business Associations course earlier this semester. Specifically, a student posted the following on our class discussion board under the title "Swiss Vereins and piercing the veil":
I was curious about Swiss Vereins and how that works when trying to pierce the veil since a Swiss Verein consists of independent offices that have limited liability amongst them. Would it have been beneficial for Westin [referring to the Gardemal v. Westin Hotel Co. case] to have used such a structure instead of having Westin Mexico be a subsidiary? It seems that most Swiss Vereins are large law firms, such as DLA Piper and Baker & McKenzie or accounting firms, such as Deloitte.
This is the first time a student has asked me about the Swiss verein structure in my almost fifteen years of teaching. My familiarity with Swiss vereins comes solely from what I have read and heard over the years. I never advised a firm in setting one up (or deciding not to). Here is the core substance of my response:
Several years ago, I was at the front of the classroom preparing for my Business Associations class when a student approached and asked if her friend could sit in on the class. “My friend’s interested in law school,” she said, “and I’m trying to talk her out of it."
No comment needed. Res ipsa loquitur.
Sunday, October 12, 2014
"The Theory of the Transnational Corporation at 50+"; "J.M. Keynes, F.A. Hayek and the Common Reader" & other papers http://t.co/WfoxmsVudx— Stefan Padfield (@ProfPadfield) October 6, 2014
Factors leading to the "disconnect between the financial sector and the real economy" include: http://t.co/nfX4ecgrgt— Stefan Padfield (@ProfPadfield) October 9, 2014
"the creation of the SEC caused boards to become significantly less independent" http://t.co/dha69KiAEh— Stefan Padfield (@ProfPadfield) October 9, 2014
Are "markets and regulatory systems ... rigged to favor the few at the expense of the many"? http://t.co/q72j6vGF0T— Stefan Padfield (@ProfPadfield) October 9, 2014
"Investor Advisory Committee Offers Recommendations on Accredited Investor Definition and Proxy Vote Disclosure" http://t.co/PBZk2MWHb6— Stefan Padfield (@ProfPadfield) October 11, 2014
Saturday, October 11, 2014
One of the most complex issues in Section 10(b) litigation concerns loss causation, i.e., the question whether the fraud ultimately resulted in a loss to the plaintiffs.
The reason loss causation is so complex is because companies rarely simply admit to wrongdoing, out of the blue. Most of the time, the "truth" behind the fraud - whatever that truth may be - is revealed gradually or indirectly. The first revelations concerning an accounting fraud, for example, might simply be a drop in earnings, as the company tries to "make up" for past premature revenue recognition without admitting to wrongdoing. A company might announce a slowdown in product sales without ever admitting that it had previously lied about the product's features. A key officer might resign without explanation. And very often, the first rumblings of a problem come from the announcement of a government investigation - without any further details - that may or may not ultimately culminate in an enforcement action.
In response to any of these announcements, the company might experience a stock price drop, even though the market either is unaware of the possibility of fraud or uncertain as to whether a fraud exists and/or its scope. In such situations, can the fraud be said to have "caused" a loss?
In a pair of decisions by the Fifth and Ninth Circuits, it appears that whether such early warning signals constitute "loss causation" depends very much on what happened later.
[More under the cut]
Friday, October 10, 2014
Last night (actually this morning around 1 a.m.), I returned to Nashville after a delayed connection on my way back from an excellent conference at Seattle Pacific University. The conference was hosted by SPU's Center for Integrity in Business.
I was only in Seattle for about 48 hours, but the trip was well worth it. As I have mentioned before, there isn’t a good substitute for meeting people in person. Seattle Pacific University gathered an excellent, diverse group of practitioners and academics from various disciplines to discuss topics at the intersection of faith and social enterprise. I may write more about the conference later, but am pretty wiped out right now after limited sleep, catching up, and teaching today.
While I seem to always get at least one delayed flight when I travel, I do not mind traveling because I love the quiet time on the plane or the car. (With an 18-month old son at home "quiet" is relatively rare in my life.) Almost always, I can finish at least one full book on the airplane on a trip like this one. This time I read Paul Collier’s The Plundered Planet. I might write more on the book later, but for now I will just provide an excerpt from the opening pages:
Environmentalists and economists have been cat and dog. Environmentalists see economists as the mercenaries of a culture of greed, the cheerleaders of an affluence that is unsustainable. Economoists see environmentalists as romantic reactionaries, wanting to apply the brakes to an economic engine that is at last reducing global poverty.
The argument of this book is that environmentalists and economists need each other. They need each other because they are on the same side of a war that is being lost. The natural world is being depleted and natural liabilities accumulated in a manner that both environmentalists and economists would judge to be unethical. But the need for an alliance runs deeper than the practical necessities of preventing defeat. Environmentalists and economists need each other intellectually. (pg. 9)
Paul Collier is a good person to write a book about the intersection of economics and environmentalism; he is an economics professor at Oxford University and his wife is an environmental historian.
This conference at Seattle Pacific University not only brought together economists and environmentalists, but also professors in finance, marketing, management, accounting, political science, geography, psychology, theology, and law. A number of business and legal practitioners, including Bill Clark (the primary drafter of the Model Benefit Corporation Legislation) and multiple business owners, were also part of the group. The conversation was rich, in large part because we all brought different perspectives on the issue from our own areas.
Georgia State University has posted a legal studies professor opening in their Robinson College of Business. I graduated from law school at Georgia State University, was a VAP at the law school, and taught a few sections of business law in the business school. It is a wonderful school, right in the heart of Atlanta, with an excellent faculty.
The position posting is below:
GEORGIA STATE UNIVERSITY:
Robinson College of Business, Department of Risk Management & Insurance
TENURE TRACK and/or NON-TENURE TRACK POSITIONS IN LEGAL STUDIES
GEORGIA STATE UNIVERSITY invites applications for one or more tenure track and/or non-tenure track appointments in Legal Studies for openings effective fall 2015 in the Department of Risk Management and Insurance at the Robinson College of Business. Rank is open but we expect to hire at the level of Assistant Professor (tenure track) and/or Clinical Assistant Professor (non-tenure track).
Candidates for a non-tenure track position must have significant professional experience as a lawyer, the capability for publishing research in refereed professional or pedagogical journals, evidence of excellence in teaching preferably in an accredited AACSB business school, and an earned J.D. from an ABA accredited law school.
Candidates for a tenure track position must have an earned J.D. from an ABA accredited law school, have the capability of significant scholarship in law reviews as well as peer reviewed journals, and capability for high quality teaching. Candidates for more senior positions must have a significant and current scholarly research record consistent with appointment at the appropriate rank.
For all candidates we are particularly interested in those who study the relationship between law and risk. Applications from those with specific interests in the areas of life and disability insurance, employee benefits, and/or financial planning are especially welcome, but candidates in all areas of business law will be considered.
ABOUT THE ENVIRONMENT
The mission of the Department of Risk Management and Insurance at Georgia State University is to better understand how risks faced by individuals, institutions, and societies can be more accurately measured and more efficiently managed. Faculty members have risk-related research interests including behavioral economics, experimental methods, actuarial science, mathematical finance, econometrics, household finance, corporate decision making, legal risk, and insurance economics, among others.
The department is one of the oldest and most influential risk management programs in the U.S. and has a distinguished history of serving students, alumni, and the risk management profession for more than 60 years. We are currently rated #4 in the U.S. News and World Report ranking of RMI programs; we hold a Center of Actuarial Excellence designation from the Society of Actuaries; and we are an Accredited Risk Program according to the Professional Risk Management International Association (PRMIA).
The salary level and course load are competitive.
Positions are contingent on budget approval. Applications received prior to November1 may be given preference, but applications will be accepted until the position is filled. To apply, send a letter of application, curriculum vitae, three recommendation letters, teaching evaluations, if any, to ademicjobsonline.org (strongly preferred) or mailed to Ms. Carmen Brown, Department of Risk Management & Insurance, Robinson College of Business, Georgia State University, PO Box 4036, Atlanta. GA 30302. Be sure to indicate in the cover letter that you are applying for the legal studies position (tenure track) or the legal studies position (Non-tenure track).
Georgia State University is an equal opportunity educational institution and an affirmative action employer.
Thursday, October 9, 2014
The numbers are in on SEC Dodd-Frank conflict minerals filings. According to a Tulane study, the average company spent over half a million dollars to comply. A review by law firm Schulte Roth & Zabel shows how meaningless (in my view), some of those filings were. Meanwhile, Canada failed to pass another conflict minerals bill and NGOs are pressuring the EU to step up to the plate for more rigorous regulation. I continue to believe that there has to be a better way to resolve a deadly human rights crisis, and that disclosure and due diligence in the supply chain are important but are not the solutions.
Wednesday, October 8, 2014
Call for Papers
ITEM 6 – Lyon
Microfinance: Coaching, Counting, and Crowding
The Banque Populaire Chair in Microfinance of the Burgundy School of Business (France) organizes the 6th edition of the annual conference “Institutional and Technological Environments of Microfinance” (ITEM) in March 2015 (17, 18, 19) in Lyon, France. This conference was initially programmed in Tunis, Tunisia within the campus of l’École supérieure du commerce de Tunis.
The 6th edition brings together--but is not limited to--three major issues that are shaping the sector of microfinance: Coaching, Counting, and Crowding.
Coaching in microfinance provides training in business and soft skills (attributes enhancing an individual's interactions and self-performance) that the poor micro-entrepreneurs rarely have. Increasingly, microfinance academics and practitioners consider building the human capital of micro-entrepreneurs as a critical ingredient of moving out of poverty.
Counting and tracking the microfinance clients and prospects with information technologies not only lessen information asymmetry, but also lower the transaction cost of financial intermediation. Corollary: information technologies can open ways for offering financial services to the poor as a normal way of doing and extending normal business and accelerate their social integration.
Crowding, based on Web 2.0 technologies, enables direct interactions between millions of lending and borrowing people. Through crowdfunding, micro and small entrepreneurs can raise the crucial funds required for their projects by a large number of individuals via social networks on the Internet. It provides an unprecedented opportunity for alleviating poverty in both developed and developing countries.
In addition to the above topics, other microfinance-related topics (such as impact measures, social governance, innovation, and sustainable development) are welcomed.
The ITEM conference provides a forum for both researchers and practitioners to discuss and exchange on financial inclusion. The conference in March 2015 seeks quantitative, qualitative, and experience-based papers from industry and academia. Case studies and Ph.D. research-in-progress are also welcomed. It encourages reflections on the potential and use of technology in microfinance in developed and developing countries.
Papers presented at the conference will also be considered for publication in partnering journals.
Proposals: All contribution types require a proposal in the first instance, including: a short abstract between 300 and 500 words; up to five keywords; the full names (first name and surname, not initials) and email addresses of all authors; and a postal address and telephone number for at least one contact author.
Submission period for the proposals: Up to November 10, 2014.
Acceptance of proposals: By November 30, 2014. As abstract selection notifications will be sent out to relevant authors, please indicate clearly if the contact author is not the lead author.
Full paper: Only required after acceptance of abstract. Papers should not to be more than 5000 words including abstract, keywords and references.
Submission period for the full papers: Up to February 16, 2015.
- Djamchid ASSADI: Djamchid.Assadi@escdijon.eu
- Maaouia BEN NASR: Maouia.Ben-Nasr@escdijon.eu
Web site: http://item6.weebly.com
Fees: Author registration and payment must be completed by February 27, 2015.
There are special discounts available for early-bird registration, students and group bookings (3 registrations). Details will be available on the ITEM 6 website.
A while ago, I wrote a post decrying multitasking. Travis Bradberry at Forbes has an excellent post discussing some research of multitasking conducted at Stanford University. My favorite takeway: "They found that heavy multitaskers—those who multitask a lot and feel that it boosts their performance—were actually worse at multitasking than those who like to do a single thing at a time."
Alibaba dominated the September business press coverage with its record-breaking IPO last month, and news of its stock price, trading at a 30% premium, continues to dominate coverage. I have been using the headline-hogging IPO in my corporations class to discuss raising capital, which I am sure many of you are doing as well. Here are a few creative uses for the class-friendly headlines:
- I used coverage of the IPO and its short-lived halo effect on other tech IPO's as a companion to the E-bay stock spinning case (taught under director fiduciary duties).
As we move into securities next week,
- Students will examine Alibaba's registration statement as we look at section 11 liability.
- Students will review portions of a 2012 10b(5) lawsuit against Yahoo alleging that Yahoo! made materially false and misleading statements regarding its holdings in Alibaba.
Please add to the list of uses in the comments section if you have any new ideas or suggestions.
Tuesday, October 7, 2014
Georgetown University Law Center invites applicants interested in establishing and teaching in a transactional clinic. This position is tenure track. The successful applicant will begin on July 1, 2015. Georgetown seeks to add to its spectrum of business related clinics. Currently we offer clinics that teach business formation in the field of social entrepreneurship, community development and strategic planning, and that assist low income residents in the acquisition, renovation, and operation of their buildings as long-term affordable housing.
At Georgetown Law, professors dedicated to clinical teaching are fully integrated into the faculty. Both entry level and lateral hires are urged to apply. The person selected for this position would join our large clinical community, develop the clinic, be assisted by a clinical fellow and teach the clinic each semester.
The successful applicant will have a strong commitment to promoting access to justice and a demonstrated interest in nurturing student development. Candidates must demonstrate intellectual engagement including scholarly promise (for entry-level candidates) or be a proven scholar (for lateral candidates). Successful applicants will also have subject-matter expertise and a positive reputation in the field, the communication, organizational and collaborative skills necessary to direct and manage a clinic and a commitment to teaching clinically over the long term. Georgetown values excellent teaching and a successful applicant will have pedagogical skills, creativity, and enthusiasm for the academic endeavor. This law school is committed to diversity, and candidates of diverse backgrounds are encouraged to apply.
Please send a resume, including the names of references and a statement of interest to Hope Babcock, the Chair of the Clinical Subcommittee of the Appointments Committee. Her email is Babcock@law.georgetown.edu.
[Posted at the request of Haskell Murray, who is traveling today.]