Columbia Law School
Sky Blog
Joshua Mitts
The SEC Acts on Short-and-Distort Petition
On February 25, 2022, the Securities and Exchange Commission proposed rules to enhance the transparency of short positions in equity securities. One proposal would require confidential, monthly reporting of short sellers’ individual positions, which would then be aggregated by …
An Academic Critique of the SEC’s GameStop Report
On October 18, 2021, SEC staff released a long-awaited report on equity and options trading in connection with the meteoritic rise of GameStop’s share price in January 2021. The staff report addressed several issues surrounding the GameStop episode, but one …
The Price of Your Vote: Proxy Choice and Securities Lending
On October 7, 2021, BlackRock announced that, beginning in 2022, institutional clients would have the opportunity to direct the voting of shares held by index funds. Some commentators heralded this change as “a catalyst for others in [the investment management] …
Democrats’ Gift-Wrapped Cloak of Secrecy for Wall Street
On July 29, 2021, the House Financial Services Committee voted to advance H.R. 4618, The Short Sale Transparency and Market Fairness Act, a well-intentioned bill with a misguided provision that was likely the product of hurried drafting. The legislation …
A Reddit Rebellion in the Robinhood Era
For over a decade, hedge funds and other sophisticated traders have taken advantage of ordinary Americans who sought to share in the rewards of entrepreneurship and economic growth by investing in public companies. My research has identified tens of billions …
The Index-Fund Dilemma: An Empirical Study of the Lending-Voting Tradeoff
The future of corporate stewardship – and therefore corporate governance – rests in the hands of a few large institutional investors.[1] Questions of whether these funds have the necessary incentives to pursue stewardship have set off an explosion of …
Passive Exit
Economist Albert O. Hirschman (1970) classically set out the two alternatives facing dissatisfied members of an organization: They can voice displeasure or exit for greener pastures. Hirschman’s model has long explained the tradeoff facing shareholders of a poorly governed firm: …
Insider Trading and Strategic Disclosure
With COVID-19 cases rising rapidly around the world, Pfizer’s announcement on November 9, 2020, that its coronavirus vaccine was highly effective in early trials offered a rare bright spot for the coming winter.[1] But the news was soon dampened …
Short Sellers and Plaintiffs’ Firms: A Symbiotic Ecosystem
On October 8, 2020, in In re BofI Securities Litigation, the United States Court of Appeals for the Ninth Circuit reversed the district court’s finding that the plaintiffs had not adequately alleged loss causation when claiming that BofI Holding portrayed …
Fir Tree v. Jarden and M&A Appraisal
The Delaware Supreme Court’s recent decision in Fir Tree v. Jarden[1] marks an important milestone in the law of appraisal, making clear that unaffected market price can and should be decisive in some appraisal actions. Because the court’s opinion …
Petition for Rulemaking on Short and Distort
Short selling serves a critical function in the capital markets by encouraging price discovery and preventing the formation of asset bubbles. But recent years have seen a rise in “negative activism,” a novel phenomenon that has flourished in the era …
Long-Run Short Selling
On December 3, 2019, Japan’s Government Pension Fund (GPIF) announced that it would suspend share lending to short sellers. This is the latest development in a growing global regulatory skepticism of shorting, with Reuters recently reporting that short selling …
Short Selling and the New Market Manipulation
Stock market manipulation has been around since shortly after stock markets were invented. Everyone is familiar with the methodology in the standard “pump and dump” scheme: False rumors are circulated, the stock is bid up by the manipulators, supply might …
Why Investors Pay So Much for Dual Class Firms
Professor Coffee makes the insightful point that if founders receive a lower price for their stock when they retain voting control, it does not seem fair to allow other shareholders to take away that control without compensation. But, Professor Coffee …
What Can We Learn from Stock Prices?
Prices convey information. Hayek (1945) put it this way: Prices “coordinate the separate actions of different people in the same way as subjective values help the individual to coordinate the parts of his plan.” Stock prices, in particular, matter a …
Short and Distort
Anonymous political speech has a celebrated history (Publius, 1787) and has long enjoyed strong protections under the U.S. Constitution.[1] But there is a dark side to pseudonymity: Fictitious identities can wreak havoc in financial markets. A large literature in …
The SEC’s Holiday Gift to High-Speed Traders
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 …
Why the CFPB’s Qualified Mortgage Rule Misses the Mark
An Incentive-Compatible Alternative to “Don’t Ask Don’t Waive” Standstills
In a recent essay forthcoming in the Delaware Journal of Corporate Law (available on SSRN), we argue that the current controversy over “Don’t Ask, Don’t Waive” standstills in M&A practice highlights the need to apply mechanism design to …