Securities Law Prof Blog

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

Wednesday, December 16, 2015

Grundfest on SEC Administrative Proceedings


Joseph Grundfest has posted Fair or Foul? SEC Administrative Proceedings and Prospects for Reform Through Removal Legislation on SSRN with the following abstract:

The Securities and Exchange Commission has announced its intention to increase its reliance on administrative proceedings and to reduce the frequency with which it litigates in federal court. The Commission has also clearly signaled its intent to call for Chevron deference to its rulings in administrative proceedings. These developments have triggered a firestorm of controversy. Critics challenge the fairness of the agency's administrative process. They also warn of the adverse implications of excessive reliance on the agency's interpretations of the federal securities laws to the exclusion of interpretations by the federal courts.

This article addresses the possibility of removal legislation as a potential response to the Commission's initiative. It emphasizes a form of removal designed not to eliminate the administrative process, but to protect respondent rights in a manner that provides the Commission with a powerful incentive to reform its internal procedures. The proposal is also sensitive to the potential burdens that would be imposed on already crowed federal dockets. The proposed legislation would identify a category of cases that would not be removable because they raise matters that are well suited to administrative adjudication and need not clutter the federal courts' dockets. Late filing claims and allegations of violations of the Commission's net capital rules might fall in this category. A second category of cases would give rise to removal as of right because they likely implicate matters that would benefit from resolution in proceedings subject to the full panoply of rights available in federal court. Insider trading cases and allegations of bribery in violation of the Foreign Corrupt Practices Act might fall in this second category. Respondents in all other cases would have the right to petition a federal district court for an order of removal in a process modeled on Federal Rule of Procedure 23(f). In considering this petition for discretionary removal, the court could consider a range of factors including the adequacy of the Commission's procedures given the complexity of the allegations and the implications of the prosecution for respondents' businesses and careers. The discretionary nature of the review is designed to incentivize the Commission to reform its internal processes in an effort to prevent the grant of the discretionary petition in a larger percentage of proceedings.

December 16, 2015 | Permalink | Comments (0)

Varottil on Securities Regulation in India

Umakanth Varottil has posted The Nature of the Market for Corporate Control in India on SSRN with the following abstract:

Given its deep and liquid stock markets, India presents a favourable environment for public takeovers. In order to develop and regulate takeover activity, India’s securities regulator the Securities and Exchange Board of India (SEBI) has enacted specific regulations. While at a broad level these regulations appear to attribute their origins to the United Kingdom (UK) and other countries that have adopted the UK model or its variants, I argue in this paper that takeover regulation in India bears fundamental differences and unique characteristics that have necessitated special treatment.

Due to the prevalence of concentrated shareholdings in Indian companies, the incidence of hostile takeovers has been negligible. While SEBI’s takeover regulations do not confer much power to the target’s board to set up takeover defences, the nature of concentration of shareholdings and other factors offer sufficient protection to incumbent shareholders and managements against corporate raiders. Hence, substantial attention in India is focused on the mandatory bid rule (MBR), which operates to grant equality of treatment to minority shareholders by conferring them an exit option in case of a change in control. India’s takeover regulations are arguably stringent in implementing the MBR. This impedes value-enhancing takeovers unless they are effected with the concurrence of the controlling shareholders, who could potentially block them.

Added to this, India’s takeover regulations confer benefits on incumbents that would impede a market for corporate control in the conventional sense. For example, promoters can take advantage of creeping acquisition limits, and also certain exemptions from the MBR when they enhance their positions in the company. Hence, while the takeover regulation overtly appears designed to engender a market for corporate control, its operation coupled with the corporate structure and culture in India attenuate the possibility of takeovers.

Relying upon the political economy of takeover regulation, and more specifically the interest group theory, my goal in this paper is to demonstrate the influence of promoters in shaping India’s takeover regulation. I seek to do so both analytically and empirically. While the Indian markets have witnessed a constant stream of takeovers, they are almost entirely organized changes of control in a friendly manner that trigger the MBR. Voluntary, unsolicited offers that are common in the more developed markets are miniscule in number in India.

December 16, 2015 | Permalink | Comments (0)

Monday, December 14, 2015

National Business Law Scholars Conference Call for Papers

The National Business Law Scholars Conference (NBLSC) will be held on Thursday and Friday, June 23-24, 2016, at The University of Chicago Law School. 

This is the seventh annual meeting of the NBLSC, a conference that annually draws legal scholars from across the United States and around the world.  We welcome all scholarly submissions relating to business law.  Junior scholars and those considering entering the legal academy are especially encouraged to participate. 

To submit a presentation, email Professor Eric C. Chaffee at eric.chaffee@utoledo.edu with an abstract or paper by February 19, 2016.  Please title the email “NBLSC Submission – {Your Name}.”  If you would like to attend, but not present, email Professor Chaffee with an email entitled “NBLSC Attendance.”  Please specify in your email whether you are willing to serve as a moderator.  We will respond to submissions with notifications of acceptance shortly after the deadline.  We anticipate the conference schedule will be circulated in May. 

Keynote Speakers:

Professor Steven L. Schwarcz, Stanley A. Star Professor of Law & Business, Duke Law School

Chief Judge Diane P. Wood, The United States Court of Appeals for the Seventh Circuit

Conference Organizers:

Tony Casey (The University of Chicago Law School)
Eric C. Chaffee (The University of Toledo College of Law)
Steven Davidoff Solomon (University of California, Berkeley School of Law)
Joan Heminway (The University of Tennessee College of Law)
Kristin N. Johnson (Seton Hall University School of Law)
Elizabeth Pollman (Loyola Law School, Los Angeles)
Margaret V. Sachs (University of Georgia School of Law)
Jeff Schwartz (The University of Utah, S.J. Quinney College of Law)

December 14, 2015 | Permalink | Comments (0)

Koehler on the FCPA

Mike Koehler has posted The Uncomfortable Truths and Double Standards of Bribery Enforcement on SSRN with the following abstract:

In recent years, Foreign Corrupt Practices Act (FCPA) enforcement has become a top priority for the U.S. government, and government enforcement officials have stated that "we in the United States are in a unique position to spread the gospel of anti-corruption" and that FCPA enforcement ensures not only that the United States "is on the right side of history, but also that it has a hand in advancing that history."

However, the FCPA is not the only statute in the federal criminal code concerning bribery. Rather, the FCPA was modeled in large part after the U.S. domestic bribery statute, and when speaking of its FCPA enforcement program, the government has recognized that it "could not be effective abroad if we did not lead by example here at home." Indeed, the policy reasons motivating Congress to enact the FCPA — that corporate payments were subverting the democratic process, undermining the integrity and stability of government, and eroding public confidence in basic institutions — apply with equal force to domestic bribery.

Against this backdrop, this Article explores through various case studies and examples whether the United State’s crusade against bribery suffers from uncomfortable truths and double standards. Through these case studies and examples, readers can decide for themselves whether the U.S. government "practices what it preaches" when it comes to the enforcement of bribery laws and whether the United States is indeed "in a unique position to spread the gospel of anti-corruption."

December 14, 2015 | Permalink | Comments (0)

Dolgopolov on High-Frequency Trading

Stanislav Dolgopolov has posted Regulating Merchants of Liquidity: Market Making from Crowded Floors to High-Frequency Trading on SSRN with the following abstract:

This Article develops a framework for analyzing the very existence of regulation of market makers and singles out such key factors as externalities in the market for liquidity, vulnerability of these market participants to certain trading strategies, and their own opportunism. This framework is explored through the evolution of the market making segment of the securities industry from crowded floors to high-frequency trading, and the regulatory outlook is analyzed from the standpoint of the current market structure crisis.

December 14, 2015 | Permalink | Comments (0)

Tuesday, October 27, 2015

New in Print

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

Mystica M. Alexander, John O. Hayward & David Missirian, Asadi:  Renegade or Precursor of Who Is a Whistleblower under the Dodd-Frank Act?, 35 Pace L. Rev. 887 (2015).

James M. Anderson, Eric Helland & Merritt McAlister, Measuring How Stock Ownership Affects Which Judges and Justices Hear Cases, 103 Geo. L.J. 1163 (2015). 

Lindsay Sherwood, Fouse, Student Article, Social Media Disclosure:  A More Efficient Method of Disseminating Material, Nonpublic Corporate Information, 17 Duq. Bus. L.J. 49 (2015). 

Garry A. Gabison, Equity Crowdfunding:  All Regulated But Not Equal, 13 DePaul Bus. & Com. L.J. 359 (2015).

M. Todd Henderson, Alan D. Jagolinzer & Karl A. Muller, III, Offensive Disclosure:  How Voluntary Disclosure Can Increase Returns from Insider Trading, 103 Geo. L.J. 1275 (2015).

Kevin Neumar, Student Article, Arbitration Agreements or Forum Selection Clauses Involving FINRA Members:  Circuit Split Creates Confusion, Increases Investor Skepticism, 17 Duq. Bus. L.J. 289 (2015).

Anna M. Rice, Note, Investing in Detroit:  Automobiles, Bankruptcy, and the Future of Municipal Bonds, 103 Geo. L.J. 1335 (2015).

October 27, 2015 | Permalink | Comments (0)

Tuesday, October 20, 2015

Thomas & Cuban on SEC Judges

Suja A. Thomas and Mark Cuban have a piece on the N.Y. Times Dealbook about  SEC judges deciding SEC cases.  It is well worth a read.

October 20, 2015 | Permalink | Comments (0)

Saturday, October 3, 2015

New in Print

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

Tapas Agarwal, Anti-Retaliation Protection for Internal Whistleblowers under Dodd-Frank Following the Fifth Circuit's Decision in Asadi, 46 St. Mary's L.J. 421 (2015).

Jill E. Fisch, The Broken Buck Stops Here: Embracing Sponsor Support in Money Market Fund Reform, 93 N.C. L. Rev. 935 (2015).

M. Saleh Jaberi & Bruno Zeller, How Much Can It Be Bent Before Breaking? Changing the Foundations of Arbitration in Securities Disputes, 15 Pepp. Disp. Resol. L.J. 317 (2015).

Andrew Verstein, Benchmark Manipulation, 56 B.C. L. Rev. 215 (2015).

Twenty-Seventh Annual Corporate Law Symposium: Crowdfunding Regulations and Their Implications. Articles by C. Steven Bradford, Joseph J. Dehner, Jin Kong, Tianlong Hu, Dong Yang, Joan MacLeod Heminway, David J. Willbrand, Medha Kapil and Andrew A. Schwartz. 83 U. Cin. L. Rev. 371-528

October 3, 2015 | Permalink | Comments (0)

Wednesday, September 30, 2015

Shelby on Hedge Funds

Cary Martin Shelby has posted Are Hedge Funds Still Private? Exploring Publicness in the Face of Incoherency on SSRN with the following abstract:

Academics have frequently noted that the term “public” is one of the most under theorized concepts under our federal securities laws. It has never been sufficiently defined by Congress, and issuers must instead rely on various indicators of publicness gleaned from an extensive patchwork of rules and exemptions. A prevalent indicator of publicness includes the status of investors, where investment companies that broadly offer investments to the general public, such as mutual funds and money-market funds, are required to register under a complex web of federal legislation. Relatedly, private investment companies such as hedge funds and private equity funds, which restrict offerings to elite investors, are typically considered private and are thus exempt from federal regulation. Other historical indicators include advertising, size of pool, and number of investors/clients. However, these historical indicators of publicness did not capture the increasing effect that private funds were having on the general public, such as systemic risk, retailization, and participation in the shadow banking industry. Congress responded by expanding indicators of publicness through the Dodd-Frank Act of 2010, which created new registration requirements for private funds irrespective of the status of such underlying investors.

 

Nevertheless, this article argues that Congress has improperly focused on ancillary laws, such as the Investment Advisers Act of 1940 and the Commodity Exchange Act of 1936, to integrate evolving notions of publicness in the regulation of investment companies. Congress should instead focus on the Investment Company Act of 1940 (“1940 Act”), which is the primary legislation tailored to the industry. In focusing on these ancillary laws, Congress has effectively expanded and complicated the patchwork of regulation that applies to these entities, which has further complicated the examination of publicness from a theoretical, regulatory, and practical perspective. This improper focus has also resulted in under-inclusive and over-inclusive indicators of publicness under the 1940 Act, further compromising investor protection in these burgeoning markets. An alternative framework should include the following tasks: (1) integrate emerging indicators of publicness under the 1940 Act; (2) conduct a wholesale review of the 1940 Act; and (3) monitor other strategies that could invoke public concerns such as hedge fund activism, third-party litigation funding, and investment in distressed economies such as Detroit, Puerto Rico, and Greece. This article builds on the current literature on this topic which has largely focused on the incoherency of publicness in the context of the Securities Act of 1933 and the Securities Exchange Act of 1934. This article is the first to assess whether emerging notions of publicness have been properly incorporated under the 1940 Act.

Cary Martin Shelby

September 30, 2015 | Permalink | Comments (0)

Monday, September 28, 2015

Yadav on Insider Trading

Yesha Yadav has posted Insider Trading and Market Structure on SSRN with the following abstract:

This Article argues that the emergence of algorithmic trading raises a new challenge for the law and policy of insider trading. It shows that securities markets comprise a cohort of algorithmic “structural insiders” that – by virtue of speed and physical proximity to exchanges – systematically gain first access to information and play an outsize role in price formation. This Article makes three contributions. First, it introduces and develops the concept of structural insider trading. Securities markets increasingly rely on automated traders utilizing algorithms – or pre-programmed electronic instructions – for trading. Policy allows traders to enjoy important structural advantages: (i) to physically locate on or next to an exchange, shortening the time it takes for information to travel to and from the marketplace; and (ii) to receive feeds of richly detailed data directly to these co-located trading operations. With algorithms sophisticated enough to respond instantly and independently to new information, co-located automated traders can receive and trade on not-fully-public information ahead of other investors. Secondly, this Article shows that structural insider trading exhibits harms that are substantially similar to those regulated under conventional theories of corporate insider trading. Structural insiders place other investors at a persistent informational disadvantage. Through their first sight of market-moving data, structural insiders can capture the best trades and erode the profits of informed traders, reducing their incentives to participate in the marketplace. Despite the similarity in harms, however, this Article shows that doctrine does not apply to restrict structural insider trading. Rather, structural insiders thrive in full view and with regulatory permission. Thirdly, the Article explores the implications of structural insider trading for the theory and doctrine of insider trading. It shows them to be increasingly incoherent in their application. In protecting investors against one set of insiders but not another, law and policy appear under profound strain in the face of innovative markets.

September 28, 2015 | Permalink | Comments (0)

Zaring on SEC Enforcement

David T. Zaring has posted Enforcement Discretion at the SEC on SSRN with the following abstract:

The Dodd-Frank Wall Street Reform Act allowed the Securities & Exchange Commission to bring almost any claim that it can file in federal court to its own Administrative Law Judges. The agency has since taken up this power against a panoply of alleged insider traders and other perpetrators of securities fraud. Many targets of SEC ALJ enforcement actions have sued on equal protection, due process, and separation of powers grounds, seeking to require the agency to sue them in court, if at all.

This article evaluates the SEC’s new ALJ policy both qualitatively and quantitatively, offering an in-depth perspective on how formal adjudication – the term for the sort of adjudication over which ALJs preside – works today. It argues that the suits challenging the SEC’s ALJ routing are without merit; agencies have almost absolute discretion as to who and how they prosecute, and administrative proceedings, which have a long history, do not threaten the Constitution. The controversy illuminates instead dueling traditions in the increasingly intertwined doctrines of corporate and administrative law; the corporate bar expects its judges to do equity, agencies, and their adjudicators, are more inclined to privilege procedural regularity.

September 28, 2015 | Permalink | Comments (0)

Velikonja on SEC Enforcement

Urska Velikonja has posted Reporting Agency Performance: Behind the SEC's Enforcement Statistics on SSRN with the following abstract:

Every October, after the end of its fiscal year, the Securities and Exchange Commission releases its annual enforcement report, detailing its activity for the year. The report boasts record enforcement activity, often showing significant increases over the prior fiscal year in the number of enforcement actions brought and monetary penalties ordered. The numbers suggest that the SEC is ever tougher on securities violators. The SEC includes these statistics in its budget requests; the figures are repeated in congressional testimony, scholarship, policy proposals, and the business press.

Yet the SEC’s metrics are deeply flawed. The Article reviews fifteen years of enforcement actions and demonstrates that the widely-circulated statistics are invalid because they do not measure what they purport to measure, and unreliable because they can be manipulated all too easily. The SEC double and triple counts many of its cases and overstates the fines it orders. This Article constructs better measures. These measures reveal that the SEC’s statistics mask the fact that core enforcement has remained steady since 2002, and obscure a shift in enforcement towards easier-to-prosecute strict-liability violations.

The SEC is not alone in using misleading statistics to report its performance. Multiple reporting statutes authorize Congress to cut agencies’ budgets for failing to meet performance targets. In response, agencies report flawed metrics to protect their ability to continue enforcing the law. The Article suggests that Congress should not threaten to reduce an agency’s budget because of year-to-year fluctuations in enforcement. In addition, to make reported numbers more reliable, non-financial performance measures should not be developed by the agency. Instead, the selection and development of performance indicators should be standardized across agencies, much like financial reporting has already been standardized. Doing so would depoliticize reporting, as well as enable comparisons among agencies, both domestically and internationally.

September 28, 2015 | Permalink | Comments (0)

New in Print

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

Robert P. Bartlett, III, Do Institutional Investors Value the Rule 10b-5 Private Right of Action? Evidence from Investors' Trading Behavior Following Morrison v. National Australia Bank Ltd., 44 J. Legal Stud. 183 (2015).

Allan Gustin, Comment, Investors Beware: How California Municipalities Get Away with Defrauding Investors after Nuveen Municipal High Income Opportunity Fund v. City of Alameda, 48 Loy. L.A. L. Rev. 277 (2014).

The Administrative Law of Financial Regulation, Foreword by James D. Cox & Steven L. Schwarcz; articles by John C. Coates IV, James D. Cox, Kathryn Judge, Steven L. Schwarcz, Gillian E. Metzger and David Zaring; responses by Ryan Bubb, Robert J. Jackson, Jr., Michael S. Barr and Thomas W. Merrill. 78 Law & Contemp. Probs. 1-204 (2015).

September 28, 2015 | Permalink | Comments (0)

Tuesday, September 22, 2015

New in Print

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

Kevin Kearney, Note, Proxy.gov: A Proposal to Modernize Shareholder Lists and Simplify Shareholder Communications, 37 Hastings Comm. & Ent. L.J. 391 (2015).

Tabetha Martinez, Note, Amending Rule 10b-5: SAC Capital and the Willfully Blind Financial Executive, 37 T. Jefferson L. Rev. 447 (2015).

David M. Reeb, Yuzhao Zhang & Wanli Zhao, Insider Trading in Supervised Industries, 57 J.L. & Econ. 529 (2014).

September 22, 2015 | Permalink | Comments (0)

Wednesday, September 16, 2015

Strader on Insider Trading

Kelly Strader has posted (Re)Conceptualizing Insider Trading: United States v. Newman and the Intent to Defraud on SSRN with the following abstract:

Insider trading law is a mens rea morass. The confusion concerning the mental element of this crime risks both the deprivation of fair notice to potential defendants and the abuse of prosecutorial discretion. In the wake of aggressive and high-profile insider trading prosecutions, these concerns are particularly salient. The Second Circuit’s decision in United States v. Newman takes an important first step in articulating the mens rea component of insider trading. Taking Newman as a starting point, this article seeks to re-conceptualize and systematize insider trading law. When articulating the mens rea of insider trading, courts should focus on the underlying concept of insider trading law: the harm caused by the breach of trust attendant to the theft of inside information. When a court clearly focuses on the core purpose of insider trading law, the second level of reform is possible. That is, we can assess the culpability of alleged inside traders by the harm that they intended to cause and assign levels of mens rea accordingly. Applying common law fraud principles, and using Model Penal Code terminology and methodology, this article identifies the elements of insider trading and attaches appropriate levels of mens rea to each element. The article concludes with a set of jury instructions that reflect these underlying principles.

September 16, 2015 | Permalink | Comments (0)

Monday, September 7, 2015

New in Print

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

Onnig H. Dombalagian, Substance and Semblance in Investor Protection, 40 J. Corp. L. 599 (2015).

Michael D. Guttentag, On Requiring Public Companies to Disclose Political Spending, 2014 Colum. Bus. L. Rev. 593.

Vincent R. Johnson, International Financial Law: The Case Against Close-Out Netting, 33 B.U. Int'l L.J. 395 (2015).

Susan Lorde Martin, Compliance Officers: More Jobs, More Responsibility, More Liability, 29 Notre Dame J.L. Ethics & Pub. Pol'y 169 (2015).

Geeyoung Min, The SEC and the Courts' Cooperative Policing of Related Party Transactions, 2014 Colum. Bus. L. Rev. 663.

Matthew G. Newmann, Note, Neither Admit nor Deny: Recent changes to the Securities and Exchange Commission's Longstanding Settlement Policy, 40 J. Corp. L. 793 (2015).

Matthew A. Pei, Note, Intrastate Crowdfunding, 2014 Colum. Bus. L. Rev. 854.

Quigley, Helen. Note, Kicking the Can Down the Road: Dodd-Frank's Attempted Reform on Broker-Dealers, 59 N.Y.L. Sch. L. Rev. 561 (2014/15).

Robert N. Rapp, Plausible Cause: Exploring the Limits of Loss Causation in Pleading and Proving Market Fraud Claims under Securities Exchange Act Section 10(b) and SEC Rule 10b-5, 41 Ohio N.U. L. Rev. 389 (2015).

Margaret V. Sachs, Superstar Judges as Entrepreneurs: The Untold Story of Fraud-on-the-Market, 48 UC Davis L. Rev. 1207 (2015).

September 7, 2015 | Permalink | Comments (0)

Sunday, September 6, 2015

Vollmer on SEC Enforcement

Andrew N. Vollmer has posted Four Ways To Improve SEC Enforcement on SSRN with the following abstract:

The enforcement program at the Securities and Exchange Commission has been the subject of severe criticism in recent years. The occasional reforms that have been adopted have not begun to root out the deeper, structural defects with the investigation and charging process at the SEC. Reforms going to the essence of the process and the way the Division of Enforcement operates are needed.

The three fundamental problems with SEC enforcement are that the Commission and the Division of Enforcement (1) advance legal theories that are outside settled boundaries, (2) misunderstand or mischaracterize the factual record, and (3) fail to accord fair and impartial treatment to persons being investigated. The result is an unacceptably high number of cases that lack merit, meaning either that the extensive evidence collected by the SEC does not support the alleged violation or that the case relies on a legal theory that is not likely to be accepted by a court.

The SEC can do better and be more effective. It can extend more fairness and consideration to those being investigated without any damage to tough enforcement. The paper describes four ways to improve SEC enforcement:

• use established and accepted legal theories and do not base claims on new, untested liability theories,

• create an objective and balanced investigative record that considers both potential wrongdoing and innocent explanations,

• apply rigorous, neutral standards before opening investigations and initiating cases. A formal investigation should be based on credible evidence justifying a reasonable suspicion of a possible violation and on an evaluation of enforcement priorities. The Commissioners should not authorize a proceeding unless they believe a reasonable person would conclude that the SEC is more likely than not to prevail on the facts and the law and believe that a proceeding would serve broad and legitimate enforcement goals, and

• substantially shorten investigations. Each member of the staff should make an effort to limit the number of documents requested and the number of individuals called for testimony.

A fifth possible reform, discussed in an earlier article, is that the SEC should significantly narrow investigative subpoenas.

September 6, 2015 | Permalink | Comments (0)

Hornuf & Schwienbacher on German Crowdinvesting

Lars Hornuf and Armin Schwienbacher have posted Funding Dynamics in Crowdinvesting on SSRN with the following abstract:

We use hand-collected data from four German crowdinvesting portals to analyze what determines individual investment decisions in crowdinvesting. In contrast with the crowdfunding campaigns on Kickstarter where the typical pattern of project support is U-shaped, we find crowdinvesting dynamics to be rather L-shaped under a first-come, first-serve mechanism and U-shaped under an auction mechanism. The evidence shows that investors base their decisions on information provided by the entrepreneur in form of updates during the campaign and by the investment behavior and comments of other crowd investors. Moreover, we find evidence for a collective attention effect and herding behavior.

September 6, 2015 | Permalink | Comments (0)

Katz, Bommarito, Soellinger & Chen on Securities Litigation

Daniel Martin Katz, Michael James Bommarito II, Tyler Soellinger, and James Ming Chen have posted Law on the Market? Evaluating the Securities Market Impact of Supreme Court Decisions on SSRN with the following abstract:

Do judicial decisions affect the securities markets in discernible and perhaps predictable ways? In other words, is there “law on the market” (LOTM)? This is a question that has been raised by commentators, but answered by very few in a systematic and financially rigorous manner. Using intraday data and a multiday event window, this large scale event study seeks to determine the existence, frequency and magnitude of equity market impacts flowing from Supreme Court decisions.

We demonstrate that, while certainly not present in every case, "law on the market" events are fairly common. Across all cases decided by the Supreme Court of the United States between the 1999-2013 terms, we identify 79 cases where the share price of one or more publicly traded company moved in direct response to a Supreme Court decision. In the aggregate, over fifteen years, Supreme Court decisions were responsible for more than 140 billion dollars in absolute changes in wealth. Our analysis not only contributes to our understanding of the political economy of judicial decision making, but also links to the broader set of research exploring the performance in financial markets using event study methods.

We conclude by exploring the informational efficiency of law as a market by highlighting the speed at which information from Supreme Court decisions is assimilated by the market. Relatively speaking, LOTM events have historically exhibited slow rates of information incorporation for affected securities. This implies a market ripe for arbitrage where an event-based trading strategy could be successful.

September 6, 2015 | Permalink | Comments (0)

Saturday, September 5, 2015

New in Print

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

Tristan R. Brown, Note, Nobody Goes to Jail: The Economics of Criminal Law, Securities Fraud, and the 2008 Recession, 41 New Eng. J. on Crim. & Civ. Confinement 343 (2015).

Kerry L. Burke, II, Note, Fear Based Motivation: Dodd-Frank's New Sentencing Guidelines for Insider Trading Lead to an Extension of Tippee Liability, 41 New Eng. J. on Crim. & Civ. Confinement 395 (2015).

Cadesby B. Cooper, Note, Rule 10b-5 at the Intersection of Greenwash and Green Investment: The Problem of Economic Loss, 42 B.C. Envtl. Aff. L. Rev. 405 (2015).

Michael Evans, Note, Adding a Due Diligence Defense to Section 13(b) and Rule 13b2-2 of the Securities Exchange Act of 1934, 72 Wash. & Lee L. Rev. 901 (2015).

Alexander D. Flaschsbart, Note, Municipal Bonds in Bankruptcy Section 902(2) and the Proper Scope of "Special Revenues" in Chapter 9, 72 Wash. & Lee L. Rev. 955 (2015).

Merritt B. Fox, Halliburton II: It All Depends on What Defendants Need to Show to Establish No Impact on Price, 70 Bus. Law. 437 (2015).

Sandeep Gopalan & Katrina Hogan, Ethical Transnational Corporate Activity at Home and Abroad: A Proposal for Reforming Continuous Disclosure Obligations in Australia and the United States, 46 Colum. Hum. Rts. L. Rev. 1 (2015).

Anita K. Krug, Investing and Pretending, 100 Iowa L. Rev. 1559 (2015).

Steven W. Lippman, Comment, A Corporation's Securities Litigation Gambit: Fee-Shifting Provisions that Defend Against Fraud-on-the-Market, 49 U. Rich. L. Rev. 1321 (2015). 

Jeffrey Manns, The Reciprocal Oversight Problem, 100 Iowa L. Rev. 1619 (2015).

Janna Mouret, Comment, Shelter from the Retaliation Storm, 52 Hous. L. Rev. 1529 (2015).

Steven L. Schwarcz, Derivatives and Collateral: Balancing Remedies and Systemic Risk, 2015 U. Ill. L. Rev. 699.

Lily D. Vo, Comment, Substituted Compliance: An Alternative to National Treatment for Cross-Border Transactions and International Financial Entities, 13 Geo. J.L. & Pub. Pol'y 85 (2015).

Fourth Annual Institute for Investor Protection Conference: The New Landscape of Securities Fraud Class Actions, Foreword by Shelley Dunck; remarks by Thomas Goldstein, Judge Shira A. Scheindlin and Jeffrey Paul Mahoney; articles by David Tabak, Marc I. Gross, Leigh Handelman Smollar, Wendy Gerwick Couture and Charles W. Murdock. 46 Loy. U. Chi. L.J. 447-582 (2015).

Institute for Law and Economic Policy Symposium: Business Litigation and Regulatory Agency Review in the Era of the Roberts Court, Articles by John C. Coates IV, Donald C. Langevoort, Geoffrey Miller, Ann M. Lipton, Yoon-Ho Alex Lee, Donna M. Nagy, Brian T. Fitzpatrick, David H. Webber, Deborah A. DeMott and Mark Lebovitch, 57 Ariz. L. Rev. 1-309 (2015).

 

September 5, 2015 | Permalink | Comments (0)