Monday, June 9, 2014
Today, we finished two days of amazingly rich discourse on business law issues at the Association of American Law Schools (AALS) Workshop on Blurring Boundaries in Financial and Corporate Law in Washington, DC. (Full disclosure: I chaired the planning committee for this AALS midyear meeting.) All of the proceedings have been phenomenally interesting. I have learned so many things and been forced to think about so much . . . . For those of you who couldn't be there, I tried to faithfully pick up a bunch of salient points from the talks and discussions on Twitter using #AALSBB2014. Moreover, some of the meeting was recorded. I will try to remember to let you know when, to whom, and how those recordings are being made available. (Feel free to remind me if I forget . . . .)
One idea shared at the workshop that I am particularly intrigued by is the use of a new standard in federal securities regulation, suggested by Tom Lin in his talk as part of this morning's plenary panel on "Complexity". He argues for an "algorithmic investor" standard (working off/refining the concept of the reasonable investor) in light of the growth of algorithmic trading. It's predictable that I would be interested in this idea, given that I write about materiality in securities regulation (especially insider trading law, in articles posted here and here), in which the reasonable investor standard is central. (In fact, Tom was kind enough to mention my work on the resonable investor standard in his talk.)
Tom is not the first to argue for a securities regulation standard that better serves specific investor populations. Memorable in this regard, at least for me, is Maggie Sachs's paper arguing for a standard focused on the "least sophisticated investor". But many other fine works contending with materiality or the concept of the reasonable investor in securities regulation also question (among other things) the clarity and efficacy of the reasonable investor standard in specific contexts.Perhaps it's obvious, but Tom's idea stems from the fact that the investor base in various securities regulation contexts in which the reasonable investor standard may apply is far more diverse than the standard, as defined and used by courts to date, reflects. Moreover, securities trading markets operate in ways that were inconceivable at the time the reasonable investor standard originated (and over much of the time it has been fleshed out in the courts). So, in essence, Tom's suggestion is that we enhance the reasonable investor standard to address these realities in investor and market behaviors in an effort to protect all investors better.
Tom's paper is "not yet ready for prime time" (by his own admission to me). But keep an eye out for it. And in the mean time, go ahead and read Tom's formative work in this area, including especially his recently released Alabama Law Review piece and his 2013 article in the UCLA Law Review.