Securities Law Prof Blog

Turk & Woody on Securities Law, Judge Kavanaugh & the Supreme Court

Matthew C. Turk and Karen E. Woody have posted Judge Kavanaugh, Lorenzo v. SEC, & the Post-Kennedy Supreme Court on SSRN with the following abstract: 

This Article analyzes an upcoming Supreme Court case, Lorenzo v. SEC (Lorenzo), and explains why it provides a unique window into the Court’s future now that Justice Kennedy has departed and presumably will be replaced by Brett Kavanaugh. When the Court issues its decision on Lorenzo in 2019, it will be ruling on a lower court opinion from the D.C. Circuit in which Judge Kavanaugh wrote separately in an extensive dissent. That dissent is quite remarkable. It contains a scathing assessment of securities fraud enforcement and adjudication at the SEC, the majority opinion’s interpretation of deceptive financial conduct under Rule 10b-5, and the SEC’s overall role in the development of federal securities law doctrine. In the dissent, Judge Kavanaugh further identifies how the legal deficiencies specific to Lorenzo also motivate his broader skepticism towards the Constitutional legitimacy of the administrative and regulatory state as a whole, a view that represents his signature contribution as a federal judge. Thus, in Lorenzo, the defining judicial philosophy of an incoming Supreme Court Justice is on full display.

As this article further argues, the deeper import of Lorenzo is not what it reveals about the views of Judge Kavanaugh. Rather, it is in the reception those views will meet from the other eight Justices on the Court. In addressing the argument set forth in Lorenzo’s dissent, the current members of the Court will be confronting the positions of a peer and future colleague. By necessity, they will also signal their openness to being persuaded by Judge Kavanaugh on issues where speaks with greatest authority and can be expected to act as forceful advocate for his vision of the law at the Court. In short, Lorenzo will serve as a bellwether for Judge Kavanaugh’s influence as judicial entrepreneur on behalf of his trademark theory of the Constitutional separation of powers in administrative law. Given the current juncture at which the Court finds itself, the stakes could not be higher. Accordingly, this article concludes its analysis by turning to where the stakes are highest of all—the role that Judge Kavanaugh may play in the demise of the Chevron doctrine and the collapse of judicial deference toward the administrative state.

New Securities Law Articles in Print

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

J. Robert Brown Jr., Shareholder Proposals and the Limits of Encrypted Interpretations, 63 Vill. L. Rev. 35 (2018).

Caelainn Carney, Note, Robo-Advisers and the Suitability Requirement: How They Fit in the Regulatory Framework, 2018 Colum. Bus. L. Rev. 586.

Lesley Chen, Comment, The SEC's Forgotten Power of Exemption: How the SEC Can Receive Deference in Favor of Internal Whistleblowers Even When the Text Is Clear, 67 Emory L.J. 1043 (2018).

Antonio M. DiNizo Jr., Comment, Battle of the Bayou: Placing a Receiver in the Right Position During a Bankruptcy Proceeding, 30 St. Thomas L. Rev. 290 (2018).

Marek Dubovec & Adalberto Elias, The Challenges of the Mexican Intermediated Securities Holding System and Opportunities for Modernization, 19 Or. Rev. Int'l L. 93 (2018).

Brandon Faske, Comment, Turning Billions Into (Green) Trillions: Tracking the Growth and Development of the Green Bond Market in China, France, India, and the United States, 31 Tul. Envtl. L.J. 293 (2018).

Ross Levine, Chen Lin & Lai Wei, Insider Trading and Innovation, 60 J.L. & Econ. 749 (2017).

Jonathan S. Masur & Eric A. Posner, Cost-Benefit Analysis and the Judicial Role, 85 U. Chi. L. Rev. 935 (2018).

Matthew Evans Miehl, Note, The Cost of Appraisal Rights: How to Restore Certainty in Delaware Mergers, 52 Ga. L. Rev. 651 (2018).

Matthew L. Mustokoff & Margaret E. Mazzeo, Loss Causation on Trial in Rule 10b-5 Litigation a Decade after Dura, 70 Rutgers U. L. Rev. 175 (2017).

Ori Oren, Note, ICO's, DAO's, and the SEC: A Partnership Solution, 2018 Colum. Bus. L. Rev. 617.

Bernard S. Sharfman, A Private Ordering Defense of a Company's Right to Use Dual Class Share Structures in IPOs, 63 Vill. L. Rev. 1 (2018).

Jeff Thomas, Equity Crowdfunding Portals Should Join and Enhance the Crowd by Providing Venture Formation Resources, 42 Nova L. Rev. 375 (2018).

Sharfman on the Agency Costs of Agency Capitalism

Bernard Sharfman has an interesting post over at the Delaware Corporate and Commercial Litigation Blog discussing the agency costs generated by the dominance of institutional investors as shareholders of record of the voting stock of publicly traded companies.  In part, he writes:

Agency costs are generated when an institutional investor acts based on its own preferences, not the preferences of those who provide it with the funds to purchase securities. That is, there is a divergence between the objective of shareholder wealth maximization, the default objective of those 100 million plus retail investors in the United States who invest in mutual funds either directly or through retirement accounts, or are the beneficiaries of public pension funds, and the preferences of institutional investors who manage those funds.  The result is that these agency costs may significantly harm the efficiency of corporate governance and lead to lower returns for investors. . . .

Former Chancellor William T. Allen was prescient when he stated in the famous 1988 Delaware Chancery Court case of Blasius Industries, Inc. v. Atlas Corp., that “[i]t may be that we are now witnessing the emergence of new institutional voices and arrangements that will make the stockholder vote a less predictable affair than it has been.” However, it is doubtful that he was including in this “less predictable affair” language the additional uncertainty and, most importantly, the inefficiency created by the agency costs of agency capitalism. It is now up to corporate law to respond.

The post is worth a read.

New Securities Law Articles in Print

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

Yifat Aran, Note, Beyond Covenants Not to Compete: Equilibrium in High-Tech Startup Labor Markets, 70 Stan. L. Rev. 1235 (2018).

Ronald H. Filler & Jerry W. Markham, Whistleblowers--A Case Study in the Regulatory Cycle for Financial Services, 12 Brook. J. Corp. Fin. & Com. L. 311 (2018).

Brent Hammack, Student Article, A Comparative Analysis of U.S. & U.K. Regulations Pertaining to Domestic Corporate Takeovers, and the Resulting Differences in Hostile Takeover Activities Between the Two Markets, 25 Willamette J. Int'l L. & Disp. Resol. 121 (2018).

Echo Kaixi Wang, Note, Financing Green: Reforming Green Bond Regulation in the United States, 12 Brook. J. Corp. Fin. & Com. L. 467 (2018).