Securities Law Prof Blog

New in Print

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

Weiling Chou, Note, Restoring Integrity in American Businesses: A Broad Interpretation of the Foreign Corrupt Practices Act, 60 Wayne L. Rev. 283 (2014).

Meredith R. Conway, Money, Money, Money; It's a Rich Man's World: Making the Corporate Tax Fair, 17 U. Pa. J. Bus. L. 1181 (2015).

George W. Dent, Jr., A Defense of Proxy Advisors, 2014 Mich. St. L. Rev. 1287.

Asaf Eckstein, Great Expectations: The Peril of an Expectations Gap in Proxy Advisory Firm Regulation, 40 Del. J. Corp. L. 77 (2015).

Sharon Hannes, Super Hedge Fund, 40 Del. J. Corp. L. 163 (2015).

Suren Gomtsian, The Governance of Publicly Traded Limited Liability Companies, 40 Del. J. Corp. L. 207 (2015).

Tara E. Levens, Comment, Too Fast, Too Frequent? High-Frequency Trading and Securities Class Actions, 82 U. Chi. L. Rev. 1511 (2015).

Jeremy R. McClane, The Sum of Its Parts: The Lawyer-Client Relationship in Initial Public Offerings, 84 Fordham L. Rev. 131 (2015).

Galit A. Sarfaty, Shining Light on Global Supply Chains, 56 Harv. Int'l L.J. 419 (2015).

Jeremy Schara, Note, Knowledge is salvation: informing investors by regulating disclosures to safeguard best execution, 43 Hofstra L. Rev. 1231 (2015).

Symposium--Transnational Securities and Regulatory Litigation in the Aftermath of Morrison v. Australia National Bank. Introduction by Franklin A. Gevurtz; articles by Katherine Florey, Kenneth S. Gallant, Xandra E. Kramer and Bart Krans, 27 Pac. McGeorge Global Bus. & Dev. L.J. 173-301 (2014).

Candadian Crowdfunding Exemption

The securities regulatory authorities in Manitoba, Ontario, Québec, New Brunswick and Nova Scotia have adopted in final form Multilateral Instrument 45-108, which governs crowdfunding in those jurisdictions.  The Canadian Securities Administrators's Notice of Publication is available here.  The Notice states in part:

As securities regulators, we have the responsibility to examine whether securities law contributes to the efficient functioning of our capital markets, while maintaining adequate investor protection. This includes assessing whether the securities regulatory framework remains responsive and relevant in a dynamic environment that is being shaped by advances in technology and a broad array of demographic, cultural and economic forces.The internet and social media have enabled start-ups and technology companies that foster innovation to reach out to a large number of investors, including retail investors (the crowd), to raise capital.

Selling securities over the internet to a large number of investors, sometimes referred to as "crowdfunding", has emerged as a new way for some businesses, particularly start-ups and small and medium-sized enterprises (SMEs), to access capital that would not have otherwise been accessible. "Crowdfunding" is an umbrella term used to capture many forms of capital and fund raising, that in this context, we mean raising capital from members of the public through the distribution/sale of securities. Crowdfunding may enable issuers to raise capital more effectively and at a lower cost while also providing investors with greater access to investment opportunities. The 45-108 crowdfunding regime is intended to leverage the use of the internet and social media to facilitate capital formation primarily for start-ups and SMEs that foster innovation and to provide new investment opportunities for investors. At the same time, we believe the 45-108 crowdfunding regime maintains an appropriate level of investor protection and regulatory oversight to be responsive both to global market developments in this area and to our mandate to provide protection to investors.

The 45-108 crowdfunding regime will enable start-ups and SMEs in their early-stages of development to raise capital online from a large number of investors through a single registered funding portal. A limit on the total amount that can be raised will be imposed on issuers and investors will be subject to investment limits as a means of limiting their exposure to a highly risky investment. The registration of the funding portal is a key investor protection measure as registration addresses, among other things, potential integrity concerns that may apply to funding portals and the persons operating them, as well as potential concerns relating to conflicts of interest and self-dealing.

We believe the introduction of the 45-108 crowdfunding regime is a significant step in enhancing capital raising alternatives in Canada, particularly for start-ups and SMEs. The introduction of the 45-108 crowdfunding regime in the participating jurisdictions will allow start-ups and SMEs to benefit from greater access to capital from investors that was previously limited.

This Week in Securities Litigation

The SEC Actions Blog has compiled This Week In Securities Litigation (Week ending January 29, 2016).

Kaal & Oesterle on Hedge Fund Regulation

Wulf A. Kaal and Dale A. Oesterle have posted The History of Hedge Fund Regulation in the United States on SSRN with the following abstract: 

The hedge fund industry in the United States evolved from a niche market participant in the early 1950s to a major industry operating in international financial markets. Hedge funds in the United States were originally privately-held, privately-managed investment funds, unregistered and exempt from federal securities regulation. With increasing investor demand and significant growth of the hedge fund industry came a tectonic shift in the regulatory framework applicable to the industry. The book chapter summarizes the regulatory evolution of the hedge fund industry.

Schwartz on Crowdfunding

Andrew A. Schwartz has posted The Digital Shareholder on SSRN with the following abstract: 

Crowdfunding, a new Internet-based securities market, was recently authorized by federal and state law in order to create a vibrant, diverse, and inclusive system of entrepreneurial finance. But will people really send their money to strangers on the Internet in exchange for unregistered securities in speculative startups? Many are doubtful, but this Article looks to first principles and finds reason for optimism.

Well-established theory teaches that all forms of startup finance must confront and overcome three fundamental challenges: uncertainty, information asymmetry, and agency costs. This Article systematically examines this “trio of problems” and potential solutions in the context of crowdfunding. It begins by considering whether known solutions used in traditional forms of entrepreneurial finance — venture capital, angel investing, and public companies — can be borrowed by crowdfunding. Unfortunately, these methods, especially the most powerful among them, will not translate well to crowdfunding.

Finding traditional solutions inert, this Article presents five novel solutions that respond directly to crowdfunding’s distinctive digital context: (1) wisdom of the crowd; (2) crowdsourced investment analysis; (3) online reputation; (4) securities-based compensation; and (5) digital monitoring. Collectively, these solutions provide a sound basis for crowdfunding to overcome the three fundamental challenges and fulfill its compelling vision.

 

New in Print

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

Jeffrey E. Alberts, & Bertrand Fry, Is Bitcoin a Security?, 21 B.U. J. Sci. & Tech. L. 1 (2015).

John P. Anderson, What's the Harm in Issuer-Licensed Insider Trading?, 69 U. Miami L. Rev. 795 (2015).

Alicia J. Davis, The Institutional Appetite for "Quack Corporate Governance," 2015 Colum. Bus. L. Rev. 1.

James A. Fanto, Surveillant and Counselor: A Reorientation in Compliance for Broker-Dealers, 2014 BYU L. Rev. 1121.

Zachary J. Gubler, Making Experimental Rules Work, 67 Admin. L. Rev. 551 (2015).

Nadelle Grossman, The Sixth Commissioner, 49 Ga. L. Rev. 693 (2015).

Kevin Haeberle, Stock-Market Law and the Accuracy of Public Companies' Stock Prices, 2015 Colum. Bus. L. Rev. 121.

Leo Katz, The Problem with Consenting to Insider Trading, 69 U. Miami L. Rev. 827 (2015).

Christopher Takeshi Napier, Note, Resurrecting Rule 14a-11: A Renewed Call for Federal Proxy Access Reform, Justifications and Suggested Revisions, 67 Rutgers U. L. Rev. 843 (2015).

Tyler A. O'Reilly, Reconstructing Short Selling Regulatory Regimes, 59 Wayne L. Rev. 53 (2013).

Frank Pasquale, Law's Acceleration of Finance: Redefining the Problem of High-Frequency Trading, 36 Cardozo L. Rev. 2085 (2015).

Gerald Paulovich, Note, Do "Say-on-Pay" Votes Say Anything about Director Fiduciary Duties?, 59 Wayne L. Rev. 875 (2013). 

Usha R. Rodrigues, The Once and Future Irrelevancy of Section 12(g), 2015 U. Ill. L. Rev. 1529.

Luke N. Roniger, Note, Regulatory Dissent and Judicial Review, 2015 Colum. Bus. L. Rev. 390.

Daniel Schwarcz, A Critical Take on Group Regulation of Insurers in the United States, 5 UC Irvine L. Rev. 537 (2015).

J. Kelly Strader, (Re)conceptualizing Insider Trading: United States v. Newman and the Intent to Defraud, 80 Brook. L. Rev. 1419 (2015).

Sonila Themeli, Comment, FCPA Enforcement and the Need for Judicial Intervention, 56 S. Tex. L. Rev. 387 (2014).

Stephen Coleman Tily, Note, National Security Whistleblowing vs. Dodd-Frank Whistleblowing: Finding a Balance and a Mechanism to Encourage National Security Whistleblowers, 80 Brook. L. Rev. 1191 (2015).

William K.S. Wang, The Importance of "The Law of Conservation of Securities": A reply to John P. Anderson's "What's the Harm in Issuer-Licensed Insider Trading?", 69 U. Miami L. Rev. 811 (2015).

Yesha Yadav, Clearinghouses and Regulation by Proxy, 43 Ga. J. Int'l & Comp. L. 161 (2014).