Wednesday, May 24, 2017
I have posted A Call for Legislative Reform: Expanding the Extraterritorial Application of the Private Rights of Action Under Federal Securities Law While Limiting the Scope of Relief Available on SSRN with the following abstract:
When the Supreme Court of the United States issued its opinion in Morrison v. National Australia Bank Ltd. on June 24, 2010, the Court took a narrow view of the extraterritorial application of federal securities regulation and held that a general presumption exists against the extraterritorial application of federal securities law. Speaking for the majority, Justice Scalia wrote, “Rather than guess anew in each case [involving the extraterritorial application of federal securities law] we apply the presumption [against the extraterritorial reach] in all cases, preserving a stable background against which Congress can legislate with predictable effects.” Remarkably, Congress immediately at least in part took up this charge to legislate. When President Barack Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act on July 21, 2010, Congress clarified the scope of the SEC’s extraterritorial jurisdiction by adopting a conduct and effects approach in section 929P of the Act. Moreover, Congress demonstrated a willingness to consider extending the extraterritorial application of the private rights of action under the Securities Exchange Act of 1934 by mandating a study of the issue by the United States Securities and Exchange Commission.
When the SEC issued its study in April 2012, however, it failed to make a definitive recommendation to Congress regarding the extraterritorial application of the private rights of action under the Exchange Act. Commissioner Luis Aguilar even went so far as to release a dissenting statement arguing that the SEC had failed to meet its Congressional mandate under Section 929Y to provide a recommendation regarding the extraterritorial application of the private rights. The SEC’s reluctance to provide such a recommendation is understandable. Considering the controversy surrounding the private rights of action, especially the implied private right of action under Section 10(b) and Rule 10b-5, the SEC took a cautious approach hoping that Congress would finally provide some actual legislative guidance on this murky area of federal securities law. Congress, however, still has not acted on this issue.
This Article suggests that the best solution would be to allow broad extraterritorial application of the private rights of action under the Securities Act and Exchange Act in regard to issuers seeking injunctive relief, rather than those seeking monetary damages. Such an approach would promote greater disclosure while limiting the nuisance litigation that has plagued the private rights of action under federal securities law. Such an approach is not without precedent. For example, even after the adoption by the United States Court of Appeals for the Second Circuit of the purchaser-seller requirement for standing to bring a private cause of action under section 10(b) and Rule 10b-5, which was later adopted by the Supreme Court of the United States in Blue Chip Stamps v. Manor Drug Stores, many courts adopted an exception to the purchaser-seller requirement for private parties seeking only injunctive relief under section 10(b) and Rule 10b-5. In that context and in the context of the extraterritorial application of the private rights of action under federal securities law, allowing availability of injunctive relief supports the underlying purpose of the federal securities laws to promote full and fair disclosure, while at the same time controlling nuisance litigation that can impede the efficient functioning of the capital markets. Such an approach will help to police and stabilize securities markets both domestically and abroad.
Kurt S. Schulzke and Gerlinde Berger-Walliser have posted Toward a Unified Theory of Materiality in Securities Law on SSRN with the following abstract:
In the face of rapidly advancing globalization of capital markets, data, and information channels, U.S. and E.U. securities regulators are increasingly focused on formally defining materiality, an essential securities law concept. In the United States, the Supreme Court has loosely regulated materiality through a line of cases beginning with TSC Industries v. Northway and Basic, Inc. v. Levinson, whose reasonable investor rubric is frequently disregarded by lower courts, prosecutors, and the Securities and Exchange Commission, and is criticized in legal and behavioral economics scholarship for its ambiguity, unpredictability, and disconnection from market psychology. Recognizing these criticisms, this article conducts an international comparative investigation of materiality in the legislation, regulation, and case law of the United States and European Union, revealing a shared, probabilistic Bayesian infrastructure of materiality. The article then proposes a flexible Bayesian framework that harmonizes the substantive evaluation of materiality under existing U.S. and E.U. law, and then models application of the framework using Bayesian network analysis in the context of a hypothetical stock transaction.
Mike Koehler has posted The FCPA's Record-Breaking Year on SSRN with the following abstract:
On a number of levels, 2016 was a record-breaking year for Foreign Corrupt Practices Act enforcement. This article, part of annual series, highlights how 2016 witnessed the largest number of corporate enforcement actions and largest aggregate corporate settlement amounts in the FCPA’s nearly 40 year history.
FCPA enforcement in 2016 was also notable given the wide spectrum of enforcement actions. For instance, there were FCPA enforcement actions against U.S. companies as well as foreign companies; enforcement actions that alleged egregious instances of corporate bribery executed at the highest levels of a company as well as enforcement actions finding bribery based on allegations of “golf in the morning and beer-drinking in the evening” and internship and hiring practices; enforcement actions against large multinational companies as well as small publicly-traded companies, privately-held companies and limited liability companies; enforcement actions across a wide spectrum of industries such as technology, oil and gas, pharmaceutical and medical device, airlines, and financial services; and enforcement actions involving conduct across the globe from Latin America to South America, to Eastern Europe to Africa with a majority of enforcement actions focusing in whole or in part on conduct occurring in China.
2016 was notable not just for record-breaking and diverse enforcement activity often tied to expansive and evolving enforcement theories, but also FCPA policy developments. For instance, both the Department of Justice and Securities and Exchange Commission renewed their long-standing FCPA enforcement commitment and the DOJ released a one year FCPA Pilot Program designed in large part to further motivate business organizations to voluntarily disclose FCPA issues to better facilitate enforcement actions against culpable individuals.
In short, much happened in the FCPA space in 2016 and this article provides a detailed analysis of the most notable FCPA enforcement and policy developments and will be value to anyone seeking to elevate their FCPA knowledge.
Tuesday, May 23, 2017
The following law review articles relating to securities regulation are now available in paper format:
Felix B. Chang, Second-Generation Monopolization: Parallel Exclusion in Derivatives Markets, 2016 Colum. Bus. L. Rev. 657.
Stephen S. Laudone, Comment, The Foreign Corrupt Practices Act: Unbridled Enforcement and Flawed Culpability Standards Deter SMEs from Entering the Global Marketplace, 106 J. Crim. L. & Criminology 355 (2016).
James J. Park, Auditor Settlements of Securities Class Actions, 14 J. Empirical Legal Stud. 169 (2017).
George Tepe, Note, Broker-Dealer Use of "Idle" Customer Assets: Customer Protection with Sweep Programs and Securities Lending, 2016 Colum. Bus. L. Rev. 823.