On January 14, Robert S. Khuzami and George S. Canellos published their response in the National Law Journal to my earlier column, “SEC Enforcement: What Has Gone Wrong?” Their column—“Unfair Claims, Untenable Solution”(available here)—minces no words, but in my judgment continues to miss the forest for the trees. In responding, I want to emphasize that I am criticizing policies, not individuals. I have no doubt that both men are able lawyers who have worked hard to improve the SEC’s performance.
In their response, Khuzami and Canellos focus primarily on whether the median value of SEC settlements has … Read more
Since 2010, when the U.S. Supreme Court unleashed corporate political spending in Citizens United v. Federal Election Commission, shareholder advocates have been warning of the dire consequences of secret campaign contributions and demanding that corporations reveal their political spending. The Coalition for Accountability in Political Spending, among other groups, called upon the Securities and Exchange Commission to mandate the disclosure of corporate campaign spending, but the SEC has so far sidestepped the issue. Activists working with groups such as the Center for Political Accountability have used the threat (and occasionally the fact) of proxy votes on disclosure to pressure … Read more
The humbling of two global banks in recent weeks has been greeted very differently on opposite sides of the Atlantic. Still, from the perspective of either side, large fines for interest rate rigging by Swiss bank UBS, and money-laundering by HSBC, point to the same conclusion: from now on, banks must protect their reputations as their most valuable asset.
On the US side, there has been considerable grumbling about the “lenient” treatment meted out to HSBC and UBS. Associations with Mexican drug cartels and Iranian militants or documented solicitation of price fixing usually attract the attention of federal prosecutors. Yet, … Read more
In the policy-oriented paper, “Re-energizing the IPO Market,”which will be published in the 2013 Brookings Press book Restructuring to Speed Economic Recovery, I summarize results from a number of my related co-authored papers and address why IPO volume, and especially small company IPO volume, has been so depressed for more than a decade.
From 1980-2000, an annual average of 310 operating companies went public in the U.S. During 2001-2011, on average only 99 operating companies went public. This decline occurred in spite of the doubling of real gross domestic product (GDP) during this 32-year period. The decline … Read more
A disturbingly persistent pattern has emerged in U.S. Securities and Exchange Commission enforcement cases that involves three key elements: (1) The commission rarely sues individual defendants at large financial institutions, settling instead with the entity only; (2) when it does sue individual defendants, it frequently loses; and (3) the penalties collected by the commission from corporate defendants are declining and, in any event, are modest in proportion to the profits obtained.
In November, the SEC sued and settled with JPMorgan Chase & Co. and Credit Suisse Group A.G. for a collective $417 million, but named no individual defendants. This continues … Read more
My recent article published in the Stanford Law Review Securities Class Actions Against Foreign Issuers addresses the fundamental question of whether, as a matter of good policy, it is ever appropriate that a foreign issuer be subject to the U.S. fraud-on-the-market private damages class action liability regime, and, if so, by what kinds of claimants and under what circumstances. The bulk of payouts under the U.S. securities laws arise out of fraud-on-the-market class actions—actions against issuers on behalf of secondary market purchasers of their shares for trading losses suffered as a result of issuer misstatements in violation of Rule 10b-5. … Read more
In 2002, the UK began requiring an advisory shareholder vote on the annual executive and non-executive director compensation practices of UK-incorporated quoted companies (“UK Companies”). Eight years later, in July 2010, the US followed suit when President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), providing for an advisory say-on-pay vote for most large US public companies.
The UK government has now gone one step further by proposing to reform the approval process for director remuneration, including through the introduction of a binding shareholder vote for all UK Companies that must occur … Read more