Securities Law Prof Blog

Commissioner Aguilar on Pension Fund Investments

On June 27, 2014 at the Latinos on Fast Track (LOFT) Investors Forum in Washington, D.C., Commissioner Luis A. Aguilar offered remarks on Evaluating Pension Fund Investments Through The Lens Of Good Corporate Governance.

Testimony on “Oversight of the SEC’s Division of Trading and Markets”

On June 26, 2014, Stephen Luparello, Director of the SEC's Division of Trading and Markets offered testimony before the United States House of Representatives Subcommittee on Capital Markets and Government Sponsored Enterprises, Committee on Financial Services.  The testimony mainly related to the Division's activities and responsibilities.

SEC Announces New Hires in the Office of Administrative Law Judges

The SEC has announced new hires in its Office of Administrative Law Judges.  The press release states:

The Securities and Exchange Commission today announced that two new judges and three new attorneys will join the Office of Administrative Law Judges this summer.

James E. Grimes joined the office as an Administrative Law Judge on June 30. The office also recently hired attorneys Darien S. Capron, William Weihao Miller, and Jessica Neiterman as law clerks. Another Administrative Law Judge is expected to join the office in August. These additions will nearly double the size of the office, which received more than 200 assignments to conduct public hearings and issued 34 Initial Decisions in fiscal 2013.

NASAA: Notice of Request for Comment Regarding a Proposed Model Rule for the Electronic Filing of Form D and Other Securities Registration or Notice Filing Documents

Details available here.

Johnston on Electricity Markets

David Cay Johnston written an interesting piece, US Electricity Markets Are Anti-Consumer, which asserts that lack of transparency in electricity markets may violate federal securities law.  The piece asserts:

Accusations of market manipulation dog the electricity markets from coast to coast, raising questions about the integrity of these secretive entities and whether they can ensure sufficient generating capacity at all times.

Opportunities to drive electricity prices up through misconduct are rampant and sure to grow unless the current rules are reformed and veils of secrecy are pulled back.

The electricity markets, originally designed by Enron, are supposed to benefit consumers by attracting the necessary investment in power plants to meet the demand for juice at all times, especially during peak periods such as hot summer evenings.

Enforcement Division’s Chief Operating Officer Adam Storch to Leave SEC

Details available here.

Geoffrey Aronow, Chief Counsel, Office of International Affairs, to Leave SEC

Details available here.

SEC Adopts Cross-Border Security-Based Swap Rules

Details available here.  Chair Mary Jo White's statement is available here.  Commissioner Luis A. Aguilar's statement is available here.  Commissioner Daniel M. Gallagher's statement is available here.  Commissioner Michael S. Piwowar's statement is available here.  Commissioner Kara M. Stein's statement is available here.

IOSCO Issues Report on Risk Identification and Assessment Methodologies

The press release is available here, and the report is available here.

This Week in Securities Litigation

The SEC Actions Blog has compiled This Week In Securities Litigation (Week ending June 27, 2014).

New in Print

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

John Patrick Clayton, Note, The Two Faces of Janus:  The Jurisprudential Past and New Beginning of Rule 10b-5, 47 U. Mich. J.L. Reform 853 (2014).

Keegan S. Drake, Note, The Fall and Rise of the Exit Consent, 63 Duke L.J. 1589 (2014).

Ronald J. Gilson & Reinier Kraakman, Market Efficiency after the Financial Crisis:  It's Still a Matter of Information Costs, 100 Va. L. Rev. 313 (2014).

Bernice Grant, Independent Yet Captured:  Compensation Committee Independence after Dodd-Frank, 65 Hastings L.J. 761 (2014).

Jill Gross, The Improbable Birth and Conceivable Death of the Securities Arbitration Clinic, 15 Cardozo J. Conflict Resol. 597 (2014).

Joseph A. Grundfest, Damages and Reliance under Section 10 (b) of the Exchange Act, 69 Bus. Law. 307 (2014).

Soo Ji Jung, Case Comment, U.S. v. Rajaratnam--No "Gain" without Pain:  Amending the Sentencing Guidelines for Insider Trading to Better Reflect the Rapidly Evolving Financial Industry, 40 New Eng. J. on Crim. & Civ. Confinement 295 (2014).] 

George L. Miles, Note, Let Judges Judge:  Advancing a Review Framework for Government Securities Settlements Where Defendants Neither Admit Nor Deny Allegations, 46 Conn. L. Rev. 1111 (2014).

Paul Radvany, The SEC Adds a New Weapon:  How Does the New Admission Requirement Change the Landscape?, 15 Cardozo J. Conflict Resol. 665 (2014).

Teresa J. Verges, Opening the Floodgates of Small Customer Claims in FINRA Arbitration: FINRA v. Charles Schwab & Co., Inc., 15 Cardozo J. Conflict Resol. 623 (2014).

IOSCO Research Department Publishes Securities Markets Risk Survey

The survey is available here, and the press release is available here.

Chair White on Securities Markets

On June 20, 2014 at Economic Club of New York, Chair Mary Jo White offered remarks on Intermediation in the Modern Securities Markets: Putting Technology and Competition to Work for Investors.

Proposed Amendments to the SEC's Regulations Under the Freedom of Information Act

The SEC has published for comment proposed amendments to the Commission’s regulations under the Freedom of Information Act (“FOIA”).

Chair White on the SEC

On June 23, 2014 at the Stanford University Rock Center for Corporate Governance Twentieth Annual Stanford Directors’ College, Chair Mary Jo White spoke about A Few Things Directors Should Know About the SEC.

New in Print

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

Upton Au, Note, Toward a Reconceived Legislative Intent Behind the Foreign Corrupt Practices Act: The Public-Safety Rationale for Prohibiting Bribery Abroad, 79 Brook. L. Rev. 925 (2014).

Mukesh Bajaj, Sumon C. Mazumdar & Daniel A. McLaughlin, Assessing Market Efficiency for Reliance on the Fraud-on-the-Market Doctrine After Wal-Mart and Amgen, 26 Research in L. & Econ. 161 (2014).

Lauren A. Demanovich, Recent development, Holding Out for a Change: Why North Carolina Should Permit Holder Claims, 92 N.C. L. Rev. 988 (2014).

Eric Fortineaux, Student Article, The fight Against the Extractive Industries Transparency Initiative, 11 Loy. U. Chi. Int'l L. Rev. 65 (2013).

Jonathan D. Glater, Hurdles of Different Heights for Securities Fraud Litigants of Different Types, 2014 Colum. Bus. L. Rev. 47.

Ethan E. Litwin & Morgan J. Feder, European Collective Redress: Lessons Learned from the U.S. Experience, 26 Research in L. & Econ. 209 (2014).

Brett Neve, Note, NML Capital, Ltd. v. Republic of Argentina: An Alternative to the Inadequate Remedies Under the Foreign Sovereign Immunities Act, 39 N.C. J. Int'l L. & Com. Reg. 631 (2014).

Steven Thel, Taking Section 10(b) Seriously: Criminal Enforcement of SEC Rules, 2014 Colum. Bus. L. Rev. 1.

Welds, Leanne M. Note. Giving local municipalities the power to affect the national securities market: why the use of eminent domain to take mortgages should be subject to greater regulation. 79 Brook. L. Rev. 861 (2014).

Symposium: Hedge Funds in Bankruptcy, Articles by Keith Sharfman, G. Ray Warner, Hon. James M. Peck, Edward I. Altman, Alistaire Bambach, Anthony J. Casey, Eric B. Fisher, Katie L. Weinstein, Michelle M. Harner, Jamie Marincic Griffin, Jennifer Ivey-Crickenberger, Wulf A. Kaal and Daniel B. Kamensky, 22 Am. Bankr. Inst. L. Rev. 61-246 (2014).

Halliburton Co. v. Erica P. John Fund: Commentary

The Court gets it right in Halliburton.  Although the private right of action and the fraud-on-the-market theory should not have been imagined into existence, Congress has repeatedly acquiesced to both in subsequent legislation.   The acquiescence is largely the product of Congress's failure to codify the private right of action, which is a necessary component of policing securities markets in the United States, although its scope likely needs to be narrowed.  I like to hope that Congress will take this opportunity to codify the private right of action.  But imagining that Congress will act seems more fanciful than believing that the 1934 Congress intended a private right of action under section 10(b) with a fraud-on-the-market theory of reliance.

 

 

 

Halliburton Co. v. Erica P. John Fund: Thomas Concurrence

The concurrence authored by Justice Thomas and joined by Justices Scalia and Alito argues the following:

Today we are asked to determine whether Basic was correctly decided. The Court suggests that it was, and that stare decisis demands that we preserve it. I disagree. Logic, economic realities, and our subsequent jurispru­dence have undermined the foundations of the Basic pre­sumption, and stare decisis cannot prop up the façade that remains. Basic should be overruled.

Halliburton Co. v. Erica P. John Fund: Ginsburg Concurrence

The concurrence authored by Justice Ginsburg and joined by Justices Breyer and Sotomayor reads as follows:

Advancing price impact consideration from the merits stage to the certification stage may broaden the scope of discovery available at certification. See Tr. of Oral Arg. 36–37. But the Court recognizes that it is incumbent upon the defendant to show the absence of price impact. See ante, at 17–18. The Court’s judgment, therefore, should impose no heavy toll on securities-fraud plaintiffs with tenable claims. On that understanding, I join the Court’s opinion.

Halliburton Co. v. Erica P. John Fund: Syllabus

The syllabus from the case offers the following overview of the holdings of the opinion delivered by Chief Justice Roberts and joined by Justices Kennedy, Ginsburg, Breyer, Stotomayor, and Kagan:

1. Halliburton has not shown a “special justification,” Dickerson v. United States, 530 U. S. 428, 443, for overruling Basic’s presumption of reliance. Pp. 4–16. . . .

2. For the same reasons the Court declines to overrule Basic’s presumption of reliance, it also declines to modify the prerequisites for invoking the presumption by requiring plaintiffs to prove “price impact” directly at the class certification stage. The Basic presumption incorporates two constituent presumpt ions: First, if a plaintiff shows that the defendant’s misrepresentation was public and material and that the stock traded in a generally efficient market, he is entitled to a presumption that the misrepresentation affected the stock price. Second, if the plaintiff also shows that he purchased the stock at the market price during the relevant period, he is entitled to a further presumption that he purchased the stock in reliance on the defendant’s misrepresentation. Requiring plaintiffs to prove price impact directly would take away the first constituent presumption. Halliburton’s argument for doing so is the same as its argument for over ruling the Basic presumption altogether, and it meets the same fate. Pp. 16–18.

3. The Court agrees with Halliburton, however, that defendants must be afforded an opportunity to rebut the presumption of reliance before class certification with evidence of a lack of price impact. Defendants may already introduce such evidence at the merits stage to rebut the Basic presumption, as well as at the class certification stage to counter a plaintiff’s showing of market efficiency. Forbidding defendants to rely on the same evidence prior to class certification for the particular purpose of rebutting the presumption altogether makes no sense, and can readily lead to results that are inconsistent with Basic’s own logic. Basic allows plaintiffs to establish price impact indirectly, by showing that a stock traded in an efficient market and that a defendant’s misrepresentations were public and material. But an indirect proxy should not preclude consideration of a defendant’s direct, more salient evidence showing that an alleged misrepresentation did not actually affect the stock’s price and, consequently, that the Basic presumption does not apply. Amgen does not require a different result. There, the Court held that materiality, though a prerequisite for invoking the Basic presumption, should be left to the merits stage because it does not bear on the predominance requirement of Rule 23(b)(3). In contrast, the fact that a misrepresentation has price impact is “Basic’s fundamental premise.” Erica P. John Fund, Inc. v. Halliburton Co., 563 U. S. ___, ___. It thus has everything to do with the issue of predominance at the class certification stage. That is why, if reliance is to be shown through the Basic presumption, the publicity and market efficiency prerequisites must be proved before class certification. Given that such indirect evidence of price impact will be before the court at the class certification stage in any event, there is no reason to artificially limit the inquiry at that stage by excluding direct evidence of price impact. Pp. 18–23.

718 F. 3d 423, vacated and remanded.