Thursday, August 13, 2015
The following law review articles relating to securities regulation are now available in paper format:
Carlos Berdejo, Going Public After the JOBS Act, 76 Ohio St. L.J. 1 (2015).
Daniel Chatlos, Note, Grabbing the Bull by the Horns: The Future of Mortgage Lending and Securitization in the Aftermath of the Financial Crisis, 25 U. Fla. J.L. & Pub. Pol'y 137 (2014).
Alexis A. Geeza, Comment, Put Your Money Where Your Mind Is: Protecting the Markets in the Age of Post-JOBS Act Rule 506 Offerings, 45 Seton Hall L. Rev. 581 (2015).
Julian J.Z. Polaris, Note, Backstop Ambiguity: A Proposal for Balancing Specificity and Ambiguity in Financial Regulation, 33 Yale L. & Pol'y Rev. 231 (2014).
Dodd-Frank, the Financial Crisis, and a Christian View of Financial Markets, Articles by Paul J. Foley, Tory L. Lucas and student Joshua C. Dawson; abstract by Rodney Chrisman; note by Kaitlyn E. Evans. 9 Liberty U. L. Rev. 445-595 (2015).
Symposium, Investor-State Disputes, Preface by Michael B. Brown; articles by Matthew D. McGill, Alexander N. Harris, Melissa Stear Gorsline, Maria Pradilla Picas, Henry G. Burnett, Jessica Bees und Chrostin, Ellen Ginsberg Simon, Q. Monty Crawford, Simon Lester, Ryan Mellske, David N. Cinotti, Adriana T. Ingenito and Christina G. Hioureas; note by Jordan Reth. 30 Md. J. Int'l L. 1-167 (2015).
Wednesday, August 5, 2015
On August 4, 2015, Commissioner Daniel M. Gallagher delivered his last formal speech as an SEC commissioner to the U.S. Chamber of Commerce in Washington, D.C. The speech related to Dodd-Frank, and he stated in part:
Last month marked the fifth anniversary of the Dodd-Frank Act, meaning that my entire tenure as a Commissioner has occurred in the midst of the first Five-Year Plan for our national economy. And, as is always the case with grandiose central plans, Dodd-Frank has backfired, strangling our economy, increasing the fragility of the financial system, and politicizing our independent financial regulators.
The press release states in part:
The North American Securities Administrators Association (NASAA) today announced that its new Electronic Filing Depository (EFD) has been used to facilitate more than 10,000 notice filings with state securities regulators since its launch less than eight months ago.
Developed by NASAA, EFD is an online system that allows issuers to submit a Form D for a Regulation D, Rule 506 offering to state securities regulators and pay related fees. The EFD website also enables the public to search and view, free of charge, Form D filings made with state securities regulators through EFD, which is available at: https://www.efdnasaa.org.
SEC Adopts Registration Rules for Security-Based Swap Dealers and Major Security-Based Swap Participants
The press release states in part:
The Securities and Exchange Commission today adopted new rules to provide a comprehensive, efficient process for security-based swap dealers and major security-based swap participants to register with the SEC. The new rules mark a significant milestone in the SEC’s final implementation of Title VII of Dodd-Frank Wall Street Reform and Consumer Protection Act.
The press relates states in part:
The Securities and Exchange Commission today adopted a final rule that requires a public company to disclose the ratio of the compensation of its chief executive officer (CEO) to the median compensation of its employees. The new rule, mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act, provides companies with flexibility in calculating this pay ratio, and helps inform shareholders when voting on “say on pay.”
Monday, August 3, 2015
The following law review articles relating to securities regulation are now available in paper format:
Wendy Gerwick Couture, Materiality and a Theory of Legal Circularity, 17 U. Pa. J. Bus. L. 453 (2015).
Sandeep Gopalan & Katherine Watson, An Agency Theoretical Approach to Corporate Board Diversity, 52 San Diego L. Rev. 1 (2015).
Kenneth Hsu, Note, The Delaware Carve-Out's Carve: Examining and Repairing SLUSA's State Law Exception, 11 Hastings Bus. L.J. 385 (2015).
Kevin Laws & Zeb Zankel, Funding Innovation: Regulating Seed Financing, 31 Santa Clara High Tech. L.J. 1 (2015).
James Naughton & Holger Spamann, Fixing Public Sector Finances: The Accounting and Reporting Lever, 62 UCLA L. Rev. 572 (2015).
Joshua E. Perry, The People's NIH? Ethical and Legal Concerns in Crowdfunded Biomedical Research, 29 Notre Dame J.L. Ethics & Pub. Pol'y 453 (2015).
Stan Polit, Comment, Friends, Followers, and Fairness: SEC Fair Disclosure Requirements in a Changing Information Marketplace, 17 U. Pa. J. Bus. L. 619 (2015).
Itzhak Ben-David, Francesco A. Franzoni, Rabih Moussawi, and John Sedunov III have posted The Granular Nature of Large Institutional Investors on SSRN with the following abstract:
Over last 35 years institutional ownership became concentrated at unprecedented levels; e.g., the stock holdings by the largest ten asset management firms quadrupled from 5.6% to 23.1%. Due to their sheer size, institution-level shocks cannot be diversified away and can spill over to the underlying securities. We document that stock ownership by the largest institutional investors leads to an increase in the volatility of the assets that they hold. Furthermore, stocks held by the largest institutional investors exhibit patterns of price inefficiency. We show that these effects are triggered by institution-level idiosyncratic news and channeled through large trades.
Benjamin Clapham, Martin Haferkorn, and Kai Zimmermann have posted Does Speed Matter? The Role of High-Frequency Trading for Order Book Resiliency on SSRN with the following abstract:
This paper explores limit order book resiliency following liquidity shocks in the presence of high-frequency trading firms. Based on a unique data set that enables the identification of orders submitted by algorithmic traders and subscribers of co-location services, we study whether high-frequency traders are involved in the reconstruction of the order book. We analyze order submission and deletion activity before and after a liquidity shock initiated by a large market order. Our results show that exclusively high- frequency traders reduce the spread within the first seconds after the market impact making use of their speed advantage. However, liquidity recovery in terms of order book depth takes significantly longer and is accomplished by human traders' submission activity only.
Roger G Clarke, Harindra de Silva, and Steven Thorley have posted Factor Portfolios and Efficient Factor Investing on SSRN with the following abstract:
Even in the absence of security-specific alphas, constructing a total portfolio from factor sub-portfolios is not generally mean-variance efficient. For example, an optimal combination of four fully-invested factor sub-portfolios, Low Beta, Small Size, Value, and Momentum, captures only about 45 percent of the potential improvement over the market Sharpe ratio. In contrast, a long-only portfolio of individual securities, using the same risk model and return forecasts, captures about 90 percent of the potential improvement. In this paper, we adapt general portfolio theory to the concept of factor-based investing, and investigate optimal combinations of factor portfolios using the largest one thousand common stocks in the U.S. equity market from 1968 to 2014.
Doron Israeli, Charles M.C. Lee, and Suhas A. Sridharan have posted Is There a Dark Side to Exchange Traded Funds (ETFs)? An Information Perspective on SSRN with the following abstract:
In a noisy rational expectations framework with costly information, some agents expend resources to become informed, and earn a return for their efforts by trading with the uninformed. Applying this insight, we examine the proposition that an increase in ETF ownership is accompanied by a decline in pricing efficiency for the underlying component securities. Our tests show an increase in ETF ownership is associated with: (1) higher trading costs (measured as bid-ask spreads and price impact of trades); (2) an increase in “stock return synchronicity” (measured as the co-movement of firm-level stock returns with general market and related-industry stock returns); (3) a decline in “future earnings response coefficients” (measured as the predictive power of current returns for future earnings), and (4) a decline in the number of analysts covering the firm. Collectively, our findings support the view that increased ETF ownership can lead to higher trading costs and lower benefits from information acquisition, a combination which results in less informative security prices for the component firms.
Saturday, August 1, 2015
The SEC is soliciting comments on exchange-traded products and the window for comment is drawing to a close. This issue has not received the attention that it deserves. Hopefully, some of this Blog's readers will consider contributing.
The news release reads as follows:
The Securities and Exchange Commission today announced that it is seeking public comment to help inform its review of the listing and trading of new, novel, or complex exchange-traded products (ETPs). The request for comment addresses key issues that arise when exemptions are sought by a market participant to trade a new ETP or when a securities exchange seeks to establish standards for listing new ETPs. Due to the expansion of ETP investment strategies in recent years that has led to a significant increase in the number and complexity of these requests, the Commission determined it would be beneficial to receive public input on these issues.
“Exchange-traded products have become an increasingly important investment vehicle to market participants ranging from individuals to large institutional investors,” said SEC Chair Mary Jo White. “As new products are developed and their complexity grows, it is critical that we have broad public input to inform our evaluation of how they should be listed, traded, and marketed to investors, especially retail investors.”
The request for comment addresses arbitrage mechanisms and market pricing for ETPs, legal exemptions and other regulatory positions related to the trading of ETPs, and securities exchange listing standards for ETPs. In addition, the request invites comment on how market professionals sell ETPs, especially to retail investors, and on investors’ understanding of the nature and use of ETPs.
ETPs constitute a diverse class of financial products that seeks to provide investors with exposure to financial instruments, financial benchmarks, or investment strategies across a wide range of asset classes. ETP trading occurs on national securities exchanges and other secondary markets that are regulated by the Commission under the Securities Exchange Act of 1934.
The public comment period will remain open for 60 days following publication of the comment request in the Federal Register.
Cynthia Bond, a professor at John Marshall Law School, has requested that I post the following survey announcement:
Greetings Law Teacher Colleagues:
I am working on an article this summer on uses of popular culture in the law school classroom. I am defining popular culture broadly to include mass culture texts like movies, TV shows, popular music, images which circulate on the internet, etc, and also any current events that you may reference in the classroom which are not purely legal in nature (i.e. not simply a recent court decision).
To support this article, I am doing a rather unscientific survey to get a sense of what law professors are doing in this area. If you are a law professor and you use popular culture in your class, I would be most grateful if you could answer this quick, anonymous survey I have put together:
Thanks in advance for your time and have a wonderful rest of summer!
The John Marshall Law School
The following law review articles relating to securities regulation are now available in paper format:
Bryce Cullinane, Case Note, Assessing Irving Picard's Writ of certiorari in Picard v. JPMorgan Chase: Another Chapter in the Saga of Bernie Madoff and His Impact on the Securities Industry, 8 J. Bus. Entrepreneurship & L. 287 (2014).
Christopher R. Dyess, Credit Rating Agency Review Board: The Challenges and Implications of Implementing the Franken-Wicker Amendment to Dodd-Frank, 8 J. Bus. Entrepreneurship & L. 79 (2014).
Alex B. Heller, Comment, Corporate Death Penalty: Prosecutorial Discretion and the Indictment of SAC Capital, 22 Geo. Mason L. Rev. 763 (2015).
Allison Hintz, Comment, Lost in the Dark: An Analysis of the SEC's Regulatory Response to Dark Pools, 13 DePaul Bus. & Com. L.J. 329 (2015).
Christopher Ippoliti, Governing the Corporate Insiders: Improving Regulation Fair Disclosure with More Robust Guidance and Stronger Penalties for Individual Executives, 8 J. Bus. Entrepreneurship & L. 13 (2014).
James Tyler Kirk, Deranged Disgorgement, 8 J. Bus. Entrepreneurship & L. 131 (2014).
Steven McNamara, Insider Trading and Evolutionary Psychology: Strong Reciprocity, Cheater Detection, and the Expanding Boundaries of the Law, 22 Va. J. Soc. Pol'y & L. 241 (2015).
Felipe G.C. Prado, Restricted Offerings in the U.S. and in Brazil: A Comparative Analysis, 48 Int'l Law. 33 (2014).
Marc I. Steinberg & Alex Prescott, The Emergence of a New Battleground: Liability for Secondary Market Violations in Ontario, 48 Int'l Law. 17 (2014).
Max Vogel, Note, Crowdfunding Human Capital Contracts, 36 Cardozo L. Rev. 1577 (2015).
Karen E. Woody, Securities Laws as Foreign Policy, 15 Nev. L.J. 297 (2014).
Tuesday, July 14, 2015
Carlos Gomez-Jara Diez, Honest Services Fraud as a Criminal Breach of Fiduciary Duties: A Comparative Law Approach for Reform, 18 New Crim. L. Rev. 100 (2015).
Sarah E. Light, The New Insider Trading: Environmental Markets within the Firm, 34 Stan. Envtl. L.J. 3 (2015).
Marc Morris, United in Diversity, Divided by Sovereignty: Hybrid financing, Thin Capitalization, and Tax Coordination in the European Union, 31 Ariz. J. Int'l & Comp. L. 761 (2014).
Friday, July 10, 2015
The SEC Actions Blog has compiled This Week In Securities Litigation (Two weeks ending July 10, 2015).
Kabir Ahmed & Dezso Farkas, A Proposal to Encourage Up-the-Ladder Reporting by Insulating In-House Corporate Attorneys from Managerial Power, 39 Del. J. Corp. L. 861 (2015).
Annalisa Leibold, Extraterritorial application of the FCPA under International Law, 51 Willamette L. Rev. 225 (2015).
Thomas J. Manning, Private Equity and the FCPA: Deal-Making as Reform Mechanism, 42 Pepp. L. Rev. 377 (2015).
Stephen Miles, Exploring Unexplored Frontiers: The Private Right of Action under the Louisiana Securities Law, 75 La. L. Rev. 801 (2015).
Jeff Vogt, Note, Don't Tell Your Boss? Blowing the Whistle on the Fifth Circuit's Elimination of Anti-Retaliation Protection for Internal Whistleblowers under Dodd-Frank, 67 Okla. L. Rev. 353 (2015).
Natalie Wong, Note, NML Capital, Ltd. v. Republic of Argentina and the Changing Roles of the Pari Passu and Collective Action Clauses in Sovereign Debt Agreements, 53 Colum. J. Transnat'l L. 396 (2015).
Andrew N. Vollmer has posted SEC Revanchism and the Expansion of Primary Liability Under Section 17(a) and Rule 10b-5 on SSRN with the following abstract:
An important issue in many enforcement cases brought by the Securities and Exchange Commission is the scope of primary liability under the two main anti-fraud provisions, Section 17(a) of the Securities Act and Rule 10b-5 of the Exchange Act. In Flannery, which was an administrative enforcement case, a bare majority of SEC Commissioners adopted broad positions on primary liability under Rule 10b-5(a) and (c) and Section 17(a)(1), (2), and (3). The Commission not only advanced expansive legal conclusions, but it also insisted that the courts accept the agency’s legal interpretations as controlling.
This article discusses two issues that Flannery raises, both of them related to the role of administrative agencies in the development, enforcement, and adjudication of federal law. First, the article compares the Commission’s interpretations of the parts of Section 17(a) and Rule 10b-5 with the reasoning and analysis of a series of prominent Supreme Court decisions that imposed meaningful boundaries around aspects of primary liability under Rule 10b-5. That comparison shows that much about Flannery is not consistent with, and is antagonistic to, the Supreme Court’s decisions in Central Bank, Stoneridge, and Janus.
Second, the article evaluates Flannery’s explicit demand for Chevron deference and concludes that a reviewing court would have doctrinal and precedential grounds for refusing to accept the Flannery positions as controlling. The reasons start with the text of the provision of the Administrative Procedure Act governing judicial review of agency actions and also cover the actual practice of the Supreme Court and courts of appeals when they review a legal conclusion in an agency adjudication.
The precedents identify good reasons for not granting Chevron deference to Flannery. Giving controlling effect to the SEC’s decision would allow the agency both to avoid the teachings of leading Supreme Court authorities and to trump the Supreme Court and other federal courts on significant matters of statutory interpretation.
Tuesday, June 23, 2015
J.H. Dalhuisen, Globalization and the Transnationalization of Commercial and Financial Law, 67 Rutgers U. L. Rev. 19 (2015).
Martin Gelter & Zehra G. Kavame Eroglu, Whose Trojan Horse?: The Dynamics of Resistance Against IFRS, 36 U. Pa. J. Int'l L. 89 (2014).
David Groshoff, Alex Nguyen & Kurtis Urien, Crowdfunding 6.0: Does the SEC's FinTech Law Failure Reveal the Agency's True Mission to Protect--Solely Accredited--Investors?, 9 Entrepren. Bus. L.J. 277 (2015).
Joseph Hogan, Comment, Like Oil and Water: Equity Crowdfunding and Securities Regulation, 18 Lewis & Clark L. Rev. 1091 (2014).
Hayden C. Holliman, Note, The Consolidated Audit Trail: An Overreaction to the Danger of Flash Crashes from High Frequency Trading, 19 N.C. Bank. Inst. 135 (2015).
Jonathan R. Hornok, The Alternative Investment Market: Helping Small Enterprises Grow Public, 9 Entrepren. Bus. L.J. 323 (2015).
Caroline E. Keen, Note, Clarifying What Is "Clear": Reconsidering Whistleblower Protections under Dodd-Frank, 19 N.C. Bank. Inst. 215 (2015).
J. Tyler Kirk, Superior Supererogation: Why Credit Default Swaps Are Securities under the Investment Advisers Act of 1940, 6 Wm. & Mary Bus. L. Rev. 237 (2015).
Charles R. Korsmo, Market Efficiency and Fraud on the Market: The Danger of Halliburton, 18 Lewis & Clark L. Rev. 827 (2014).
Nathan Lee, The Extraterritorial Reach of United States Securities actions after Morrison v. National Australian Bank, 13 Rich. J. Global L. & Bus. 623 (2015).
Tom C.W. Lin, Reasonable Investor(s), 95 B.U. L. Rev. 461 (2015).
Brian M. McCall, Gambling on our Financial Future: How the Federal Government Fiddles While State Common Law Is a Safer Bet to Prevent Another Financial Collapse, 46 Ariz. St. L.J. 1347 (2014).
Richard Moberly, Jordan A. Thomas & Jason Zuckerman, De Facto Gag Clauses: The Legality of Employment Agreements that Undermine Dodd-Frank's Whistleblower Provisions, 30 A.B.A. J. Lab. & Emp. L. 87 (2014).
Tyler H. Morris, Note, Too Big to Jail: The Lack of Suitable Culpability Elements in the Criminal Liability of Principals, 9 Brook. J. Corp. Fin. & Com. L. 335 (2014).
Charles W. Murdock, Halliburton, Basic, and Fraud on the Market: The Need for a New Paradigm, 60 Vill. L. Rev. 203 (2015).
Hossein Nabilou & Alessio M. Paccesm, The Hedge Fund Regulation Dilemma: Direct vs. Indirect Regulation, 6 Wm. & Mary Bus. L. Rev. 183 (2015).
Adi Osovsky, The Curious Case of the Secondary Market with Respect to Investor Protection, 82 Tenn. L. Rev. 83 (2014).
Po-Ting Peng, Note, Deciding the Applicable Law in Private Antifraud Claims Arising from Cross-Border Security-Based Swaps, 24 Minn. J. Int'l L. 131 (2015).
Taylor J. Phillips, The Federal Common Law of Successor Liability and the Foreign Corrupt Practices Act, 6 Wm. & Mary Bus. L. Rev. 89 (2015).
Carlton B .Price, Note, What Money Market Mutual Fund Reform Means for Banks and Money Market Deposit Accounts, 19 N.C. Bank. Inst. 243 (2015).
Gregory Scopino, Do Automated Trading Systems Dream of Manipulating the Price of Futures Contracts? Policing Markets for Improper Trading Practices by Algorithmic Robots, 67 Fla. L. Rev. 221 (2015).
Brian J. Shea, Note, Better Go It Alone: An Extension of Fiduciary Duties for Investment Fund Managers in Securities Class Action Opt-Outs, 6 Wm. & Mary Bus. L. Rev. 255 (2015).
Gregory H. Shill, Boilerplate Shock: Sovereign Debt Contracts as Incubators of Systemic Risk, 89 Tul. L. Rev. 751 (2015).
William Shotzbarger, Note, Business and Friendship Don't Mix: The Government's Expansion of Insider Trading Liability under SEC Rule 10b5-2, 65 Syracuse L. Rev. 579 (2015).
Steven Davidoff Solomon & David Zaring, After the Deal: Fannie, Freddie, and the Financial Crisis Aftermath, 95 B.U. L. Rev. 371 (2015).
Andrew F. Tuch, The Self-Regulation of Investment Bankers, 83 Geo. Wash. L. Rev. 101 (2014).
Markus Wagner, Regulatory Space in International Trade Law and International Investment Law, 36 U. Pa. J. Int'l L. 1 (2014).
Daniel P. Willey, Note, Misplaced Reliance: Rethinking Rule 10b-5 and the Causal Connection, 95 B.U. L. Rev. 651 (2015).
Tuesday, June 9, 2015
Norah C. Avellan, Note, The Securities and Exchange Commission and the Growing Need for Cybersecurity in Modern Corporate America, 54 Washburn L.J. 193 (2014).
Eric C. Chaffee, An Oak Is an Oak Is an Oak Is an Oak: The Disappointing Entrenchment in Halliburton Co. v. Erica P. John Fund of the Implied Private Right of Action under Section 10(b) and Rule 10b-5, 9 N.Y.U. J.L. & Liberty 92 (2015).
Harry S. Gerla, Confidentiality Agreements and the Misappropriation Theory of Insider Trading: Avoiding the Fiduciary Duty Fetish, 39 U. Dayton L. Rev. 331 (2015).
Jamie Heine, The Whittling Away of the Private Right of Action under Rule 10b-5: The PSLRA, Janus, and the Financial Crisis, 48 Creighton L. Rev. 23 (2014).
Michael J. Kaufman & John M. Wunderlich, Leave Time for Trouble: The Limitations Periods under the Securities Laws, 40 J. Corp. L. 143 (2014).
Robert Quigley, The Impulse Towards Individual Criminal Punishment after the Financial Crisis, 22 Va. J. Soc. Pol'y & L. 103 (2015).
Jennifer Rose Roeske, Note, Broader Is Better: How Courts Should Determine Whether or Not an Allegation of Fraud Falls under the Preemption Provision of the Securities Litigation Uniform Standards Act, 88 St. John's L. Rev. 433 (2014).
Mauricio Salazar, Comment, Swapping More than Regulations: Reexamining the Goals of the Dodd-Frank Act and the European Market Infrastructure Regulation on Over-the-Counter Derivative Markets, 21 Sw. J. Int'l L. 217 (2014).
Raxit Shah, Note, Staying the Course with Broker-Dealer Registration: The SEC's Impending Regulation of Crowdfunding Portals under the JOBS Act, 40 J. Corp. L. 275 (2014).
Urska Velikonja, Public Compensation for Private Harm: Evidence from the SEC's Fair Fund Distributions, 67 Stan. L. Rev. 331 (2015).
Justin D. Weitz, A Necessary Supplement: Reinvigorating Civil RICO's Securities Fraud Predicate, 21 Widener L. Rev. 27 (2015).
Brian R. Cheffins, Steven A. Bank, and Harwell Wells have posted Shareholder Protection Across Time on SSRN with the following abstract:
This Article offers the first systematic attempt to measure the development of shareholder protection in the United States across time. Using three indices developed to measure the relative strength of shareholder protection across nations, we evaluate numerically the protections corporate and securities law have offered shareholders from the beginning of the twentieth century to the present day. We do so by tracking the rights accorded to shareholders across time under three important sources of corporate law, Delaware and Illinois and the Model Business Corporation Act.
Our novel study yields novel results. First, we find that the protections afforded to shareholders by state corporation law have decreased since 1900 but only modestly so. This implies that, contrary to the assumptions of many scholars, state competition in corporate law has not significantly eroded shareholder rights. Second, when we add in measures that count protections provided by federal as well as state law, we find that shareholder protection improved across time. This implies that federal intervention has played a crucial and perhaps underappreciated role in shaping U.S. corporate law. Beyond its specific findings, this study illustrates how empirical analysis of legal trends provides scholars with a new means for analyzing and resolving fundamental questions in corporate law.