Market Practices and the Awareness/Use Problem in Insider Trading Law

In a new article, I respond to an article by Professor Andrew Verstein concerning the awareness/use problem in insider-trading law. As many readers know, this problem arises because, although Rule 10b-5 prohibits persons bound by a duty of confidentiality from trading securities on the basis of material, non-public information (“MNPI”), it is unclear just what it means to trade on the basis of such information. Do you violate the rule if you trade merely while you are aware of MNPI, even though that MNPI played no causal role in your decision to trade (i.e., the awareness rule)? Or does a … Read more

Stock Market Value and Deal Value in Appraisal Proceedings

In a new article, I consider two methods of valuing public companies in appraisal proceedings under Section 262 of the Delaware General Corporation Law: the unaffected market price of the company’s shares and the deal price (less synergies, as applicable) that the acquirer pays in the merger.

Following their decisions in the DFC, Dell, and Aruba cases, the Delaware courts have strongly favored market-based methods of valuation in appraisal proceedings, and they have used both the unaffected market price and the deal price in appropriate cases. To be sure, each of these methods is reliable only when certain assumptions … Read more

RMBS Put-Back Litigations and the Efficient Allocation of Endogenous Risk Over Time

In many cases pending around the country, purchasers of residential mortgage-backed securities (RMBSs) are suing the financial institutions that created and sold the RMBSs, alleging that representations and warranties made by these institutions concerning the quality of the underlying mortgage loans were false in various respects. Because the agreements memorializing the securitization transactions that created the RMBSs generally provide that, if a loan fails to conform to the seller’s representations, the seller will repurchase the loan at full value, these cases are generally referred to as the RMBS Put-Back Litigations. A key issue in many of these cases, including cases … Read more

Journeys in Revlon-Land with a Conflicted Financial Advisor

When the board of directors of a Delaware corporation begins a process that results in a change of control of the company (typically, a cash-out merger), the board’s Revlon duties are triggered: the directors then have a fiduciary obligation to take reasonable steps to get for the shareholders the best price reasonably available. In my recent article, Journeys in Revlon-Land With a Conflicted Financial Advisor: Del Monte and El Paso, I discuss two cases in which the Delaware Court of Chancery considered claims that a board of directors had breached its Revlon duties because its financial advisor had a … Read more

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Editor's Tweet: Professor Robert T. Miller of the University of Iowa College of Law discusses Revlon duties with a Conflicted Financial Advisor