In the paper “Equity Crowdfunding: A Market for Lemons?”, recently made publicly available on SSRN, I take a comprehensive look at crowdfunding’s place in entrepreneurial finance. I begin by observing that angel investors and venture capitalists (VCs) have funded Google, Facebook, and virtually every technological success of the last thirty years, and that these investors operate in tight geographic networks which mitigates uncertainty, information asymmetry, and agency costs both pre- and post-investment. It follows, then, that a major concern with equity crowdfunding (the sale of securities over the Internet) is that the very thing touted about it – the democratization … Read more
In connection with a meeting of stockholders, many companies face the decision of whether and how to prepare and file supplemental or amended proxy materials.
The decision to supplement or amend, and how to deliver the message, is guided as much by developed practices over time as it is by the law. Since the proxy solicitation rules only permit discussions with stockholders and other attempts to influence the vote of stockholders based on what has been disclosed in filed proxy soliciting material, it is critical that such disclosure is correct and complete throughout the solicitation process. In light of the … Read more
Shareholders are organizing and mobilizing on new social media platforms like Twitter. This changes the dynamics of shareholder proxy contests to favor small shareholders over management. Disruptive technology may bring about a shareholder revolution, which may not be in all shareholders’ best interests, at least from the perspective of shareholder wealth maximization, and it also has powerful implications for the future of corporate social responsibility.
Twitter and other social media are platforms for global social interaction. A twitter user can send a “tweet,” which is a sort of 140-character text message, to the world. About 500 million tweets are sent … Read more
The following post comes from Elizabeth Howell, a doctoral student in law at the University of Oxford and a visiting scholar at Columbia Law School in the Fall Semester 2014. It is related to her paper, ‘Short Selling Reporting Rules in the EU and the US: A Greenfield Area’ that is forthcoming in the European Company Law Journal. Further details are available here http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2536523.
Short selling reporting obligations can be helpful to regulators, particularly in relation to deterring abusive behavior. Following the recent financial crisis, the European Short Selling Regulation (the ‘Regulation’) introduced a common framework for short … Read more
These remarks were made by SEC Chair Mary Jo White before the Association of American Law Schools Annual Meeting on January 3, 2015.
Thank you, for that excellent introduction.
I am truly honored to have been asked to be the inaugural speaker in your Showcase Speaker Program. This is an impressive forum for a serious discussion of the most important issues affecting law schools and the legal profession. And the theme of this year’s annual meeting – “Legal Education at the Crossroads” – is an apt description of the critical juncture we are facing in 2015.
Many of the challenges … Read more
[Two weeks ago], the Securities and Exchange Commission (SEC) proposed rules to implement Title V and Title VI of the Jumpstart Our Business Startups Act (the JOBS Act).  Specifically, the SEC proposed to revise the rules governing registration, termination of registration and suspension of reporting under the Securities Exchange Act of 1934 (the Exchange Act) to reflect the new thresholds set forth in the JOBS Act.
Background: Title V and Title VI of the JOBS Act
The JOBS Act amended Sections 12(g) and 15(d) of the Exchange Act to adjust the thresholds for registration, termination of registration and suspension … Read more
The following post comes to us from Wendy Gerwick Couture, Associate Professor at the University of Idaho College of Law. It is based on her recent paper entitled “Answering Halliburton II’s Unanswered Question: Burdens of Production and Persuasion on Price Impact,” which is forthcoming in the Securities Regulation Law Journal and is available here.
In Halliburton Co. v. Erica P. John Fund, Inc. (“Halliburton II”), 134 S. Ct. 2398, 2407 (2014), the Supreme Court held that a defendant can rebut the fraud-on-the-market presumption of reliance at class certification by showing the absence of price impact. As Professor … Read more
This Article discusses the impact of the international financial crisis on Brazilian capital markets. While the banking industry was not significantly affected, leading nonfinancial corporations experienced severe financial turmoil. Two Brazilian corporations cross-listed in the United States — Sadia S.A. and Aracruz Celulose S.A. — suffered billion-dollar losses when the Brazilian real unexpectedly plummeted in relation to the dollar. These great losses were found to be the result of their highly speculative trading in currency derivatives, despite earlier disclosure that these companies had engaged only in pure hedging activity. Consequently, several private lawsuits were filed both in the United States … Read more
[On December 10, 2014] the Second Circuit Court of Appeals issued an important decision overturning the insider trading convictions of two portfolio managers while clarifying what the government must prove to establish so-called “tippee liability.” United States v. Newman, et al., Nos. 13-1837-cr, 13-1917-cr (2d Cir. Dec. 10, 2014). The Court’s decision leaves undisturbed the well-established principles that a corporate insider is criminally liable when the government proves he breached fiduciary duties owed to the company’s shareholders by trading while in possession of material, non-public information, and that such a corporate insider can also be held liable if he … Read more
The following speech was given by Commissioner Kara M. Stein of the U.S. Securities and Exchange Commission at Columbia Law School on November 21, 2014. A copy of the speech is also available here.
Thank you, John [Coffee], for your kind introduction.
Before I begin my remarks, I am required to tell you that the views I am expressing today are my own and do not necessarily reflect those of the Commission, my fellow Commissioners, or the staff of the Commission.
It is a pleasure to speak in front of an audience that cares so passionately about securities regulation. … Read more
Last month, we released a new study, How the SEC Helps Speedy Traders, covered here by the Wall Street Journal, revealing that the Securities and Exchange Commission’s systems have been giving certain investors market-moving corporate filings before those same filings are made available to the investing public. In the days after the Journal published its article, the Senate Banking Committee issued a bipartisan letter to the SEC, “urg[ing] the SEC to quickly investigate this timing disparity for company filings and take the necessary steps to eliminate it.” Based on our subsequent research, the Journal later reported that the … Read more
On November 19, 2014, the five commissioners of the U.S. Securities and Exchange Commission (SEC) unanimously voted to adopt Regulation SCI, which stands for Systems Compliance and Integrity, to govern the technology infrastructure of the U.S.’s securities exchanges and certain other trading platforms and market participants. The new rules, first proposed in March 2013, are designed to minimize disruptions to the U.S.’s markets and enhance the capability of exchanges and trading platforms to respond to, and remedy, breakdowns in their systems. The rules are the first updates in more than two decades to the technological standards governing exchange-based automated trading … Read more
The following speech was given by Andrew Ceresney, Director of the Division of Enforcement at the U.S. Securities and Exchange Commission, at the 31st International Conference on the Foreign Corrupt Practices Act on November 19, 2014. A copy of the speech is also available here.
At the outset, let me give the requisite reminder that the views I express today are my own and do not necessarily represent the views of the Commission or its staff.
I am very excited to be here again this year to discuss the latest developments in the SEC’s FCPA enforcement. Pursuing such … Read more
On November 6, 2014, the SEC issued a notice of intention to grant an application for exemptive relief (the “Application”) under the Investment Company Act, as amended (the “1940 Act”), filed on behalf of Eaton Vance Management, Eaton Vance ETMF Trust, and Eaton Vance ETMF Trust II (collectively, the “Applicants”). If granted, the Application would permit the operation of a new type of exchange-traded fund, called an exchange-traded managed fund (“ETMF”), the shares of which would trade on an exchange at prices that are based on the net asset value (“NAV”) next determined at the end of each day (as … Read more
On November 12, 2014, in Halliburton, Inc. v. Admin. Review Bd., 5th Cir. No. 13-cv-60323, the Fifth Circuit affirmed an ARB’s decision that disclosing the identity of a whistleblower may constitute an “adverse action” under Section 806 of SOX. This decision presents a number of risks for employers—even when they are acting conscientiously and in good faith—and is mandatory reading for in-house employment counsel and compliance professionals.
Anthony Menendez (Plaintiff), an employee of Halliburton (Company), used the Company’s internal procedures to submit a complaint to management about what he allegedly believed to be “questionable” accounting practices. He also … Read more
About two months ago, this columnist was asked to prepare a short report to the SEC’s Investor Advisory Committee on the then still largely unnoticed trend toward bylaw and charter provisions that imposed some form of a “loser pays” rule on plaintiffs in intracorporate litigation. After a quick and dirty investigation, I reported three interesting facts:
First, between May 29, 2014 and September 29, 2014, some 24 companies had adopted such a provision (always applicable only to plaintiffs and always without the matter being put to a shareholder vote). This was obviously a rapid response to the Delaware Supreme Court’s … Read more
A final credit risk retention rule was recently issued with respect to asset-backed securities (ABS) by the prudential bank regulators (the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency) and the Securities Exchange Commission, and, with respect to residential mortgage assets only, the Federal Housing Finance Agency and the Department of Housing and Urban Development. The final rule bears little resemblance to the approach originally proposed in April 2011 but is essentially (i.e., with the exception of a few details) identical to the rule as re-proposed in … Read more
The following remarks were delivered by Commissioner Daniel M. Gallagher of the U.S. Securities and Exchange Commission in New York, N.Y., at the the 15th Annual A.A. Sommer Jr. Lecture on Corporate, Securities and Financial Law at Fordham Law School. A copy of the speech is also available here.
Thank you, Ben [Indek], for that kind introduction. I am truly honored to be here tonight to deliver the 15th Annual A.A. Sommer Lecture. It is a particular honor to deliver this lecture in the presence of Al’s family. In addition to serving as an SEC Commissioner during a … Read more
On October 21, 2014, the Securities and Exchange Commission (SEC) approved the rules proposed earlier this year by the Public Company Accounting Oversight Board (the PCAOB).
In June 2014, the PCAOB adopted a new auditing standard, Auditing Standard No. 18, and amendments to other auditing standards to strengthen auditor performance requirements in three areas: related party transactions, significant transactions that are outside the normal course of business for the company or that otherwise appear to be unusual due to their timing, size or nature (“significant unusual transactions”), and a company’s financial relationships and transactions with its executive officers. The PCAOB … Read more
In response to a string of publicly disclosed cyberattacks against financial institutions in recent months, New York and federal regulators are pushing the financial sector to better protect itself and, notably, are seeking additional information about banks’ cybersecurity efforts. Benjamin Lawsky, the Superintendent of the New York State Department of Financial Services (“DFS”) has been at the forefront of this increased regulatory focus.
New York State
On October 21, 2014, Superintendent Lawsky reportedly sent a letter to dozens of banks that not only urges them to address the cybersecurity of their third-party service providers but also requests detailed information about … Read more