Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Tuesday, September 26, 2017

Reuters: U.S. SEC Chair Grilled by Senate Panel Over Cyber Breach, Equifax

Michelle Price and Pete Schroeder of Reuters have authored an article, U.S. SEC Chair Grilled by Senate Panel Over Cyber Breach, Equifax, reporting on Chair Clayton's testimony today before the Senate Banking Committee.  Their story states in part:

The chairman of the U.S. Securities and Exchange Commission (SEC) told a congressional committee on Tuesday he did not believe his predecessor Mary Jo White knew of a 2016 cyber breach to the regulator’s corporate disclosure system, the exact timing of which could not be known “for sure.”

Jay Clayton, who was formally appointed to his role in May, also said listed companies should disclose more detailed information on cyber breaches “sooner,” and that the U.S. regulator was working on new guidelines to ensure this.

September 26, 2017 | Permalink | Comments (0)

Monday, September 25, 2017

SEC Announces Enforcement Initiatives to Combat Cyber-Based Threats and Protect Retail Investors

The press release states in part:

The Securities and Exchange Commission today announced two new initiatives that will build on its Enforcement Division’s ongoing efforts to address cyber-based threats and protect retail investors. The creation of a Cyber Unit that will focus on targeting cyber-related misconduct and the establishment of a retail strategy task force that will implement initiatives that directly affect retail investors reflect SEC Chairman Jay Clayton’s priorities in these important areas.

September 25, 2017 | Permalink | Comments (0)

New Securities Law Articles in Print

The following law review articles relating to securities regulation are now available in paper format:

S. Burcu Avci & H. Nejat Seyhun, Why Don't General Counsels Stop Corporate Crime?,19 U. Pa. J. Bus. L. 751 (2017).

Lucian A. Bebchuk & Kobi Kastiel, The Untenable Case for Perpetual Dual-Class Stock, 103 Va. L. Rev. 585 (2017).

Stewart L. Brown, Mutual Funds and The Regulatory Capture of the SEC, 19 U. Pa. J. Bus. L. 701 (2017).

Herve Gouraige, Do Federal Courts Have Constitutional Authority to Adjudicate Criminal Insider-Trading Cases?, 69 Rutgers U. L. Rev. 47 (2016).

Virginia Harper Ho, "Comply or Explain" and the Future of Nonfinancial Reporting, 21 Lewis & Clark L. Rev. 317 (2017).

Darian M. Ibrahim, Crowdfunding Without the Crowd, 95 N.C. L. Rev. 1481 (2017).

Katherine A. Pancak & Thomas J. Miceli, Just Compensation for the Taking of Mortgage Loans, 13 J.L. Econ. & Pol'y 143 (2017).

Alexander D. Selig, A Practitioner's Guide to When Real Estate Becomes a Security, 9 Elon L. Rev. 391 (2017).

D. Gordon Smith, Insider Trading and Entrepreneurial Action, 95 N.C. L. Rev. 1507 (2017).

Celia R. Taylor, The Unsettled State of Compelled Corporate Disclosure Regulation After the Conflict Mineral Rule Cases, 21 Lewis & Clark L. Rev. 427 (2017).

September 25, 2017 | Permalink | Comments (0)

Monday, September 18, 2017

Sharfman on Dual Class Shares

Bernard S. Sharfman has posted A Private Ordering Defense of a Company's Right to Use Dual Class Share Structures in IPOs on SSRN with the following abstract:

The shareholder empowerment movement (movement) has renewed its effort to eliminate, restrict or at the very least discourage the use of dual class share structures in initial public offerings (IPOs). This renewed effort was triggered by the recent Snap Inc. IPO that utilized non-voting stock. Such advocacy, if successful, would not be trivial, as many of our most valuable and dynamic companies, including Alphabet (Google) and Facebook, have gone public by offering shares with unequal voting rights.

Unless there are significant sunset provisions, a dual class share structure allows insiders to maintain voting control over a company even when, over time, there is both an ebbing of superior leadership skills and a significant decline in the insiders’ ownership of the company’s common stock. Yet, investors are willing to take that risk even to the point of investing in dual class shares where the shares have no voting rights and barely any sunset provisions, such as in the recent Snap Inc. IPO. Why they are willing to do so is a result of the wealth maximizing efficiency that results from the private ordering of corporate governance arrangements and the understanding that agency costs are not the only costs of governance that need to be minimized.

In this essay, Zohar Goshen and Richard Squire’s newly proposed “principal-cost theory,” “each firm’s optimal governance structure minimizes the sum of principal costs, produced when investors exercise control, and agent costs, produced when managers exercise control,” is used to argue that the use of dual class shares in IPOs is a value enhancing result of private ordering, making the movement’s renewed advocacy unwarranted.

September 18, 2017 | Permalink | Comments (0)

Thursday, September 14, 2017

NASAA Issues Advisory on Binary Option Schemes

NASAA has issued an advisory regarding binary option schemes.  A notice provided on the NASAA site states:

The North American Securities Administrators Association (NASAA) is cautioning investors about schemes related to binary options amid the proliferation of online binary option platforms and a growing number of related investor complaints. The advisory provides information and resources to help investors better understand binary options, their risks and where to turn for help.

The advisory also discusses common investor complaints and offers common tactics and warning signs of schemes related to binary options, including: unsolicited investment offers; high-pressure sales tactics; personal information requests; and a lack of information about the offering firm or its management.

The full advisory is available here.

September 14, 2017 | Permalink | Comments (0)

SEC Monitoring Impact of Hurricane Irma on Capital Markets, Continues to Monitor Impact of Hurricane Harvey

An SEC press release is available here.

September 14, 2017 | Permalink | Comments (0)

New Securities Law Articles in Print

The following law review articles relating to securities regulation are now available in paper format:

Eric C. Chaffee, The Supreme Court as Museum Curator: Securities Regulation and the Roberts Court, 67 Case W. Res. L. Rev. 847 (2017).

Zachary Naidich, Note, Regulation A-Plus's Identity Crisis: A One-Size-Fits-None Approach to Capital Formation, 82 Brook. L. Rev. 1005 (2017).

James Walsh, Comment, "Look Then to Be Well Edified, When the Fool Delivers the Madman": Insider-Trading Regulation After Salman v. United States, 67 Case W. Res. L. Rev. 979 (2017).

Karen E. Woody, No Smoke and No Fire: The Rise of Internal Controls Absent Anti-Bribery Violations in FCPA Enforcement, 38 Cardozo L. Rev. 1727 (2017).

September 14, 2017 | Permalink | Comments (0)