Shadow Trading, Corporate Investments, and Macroeconomic Risk

Corporate insiders engage in “shadow trading” when they use private information about their own firm to trade in the shares of economically connected companies such as suppliers, customers, or competitors. While legal scholars have long recognized that shadow trading can be profitable, SEC v. Panuwat (a recent case in which the head of business development at a pharmaceutical company traded in the stocks of a competitor) has reinvigorated the debate on the consequences of shadow trading and the extent to which it ought to be regulated.  We investigate these issues in a pair of forthcoming papers. In the first paperRead more

Law Professors Urge SEC to Revise Proxy Adviser Proposal

We write as legal scholars and economists who conduct research and teach in areas of corporate law, securities law, and administrative law. In addition, one of us has previously worked at the Securities and Exchange Commission (“Commission”) as a financial economist and an attorney advisor between 2007 and 2012, in what is now called the Division of Economic & Risk Analysis. None of us is being compensated or otherwise assisted in developing the opinions articulated below. Every word is our own, drafted solely by the three of us.

We submit this letter pursuant to the notice-and-comment request issued by the … Read more

SEC Rules, Stakeholder Interests, and Cost-Benefit Analysis

The D.C. Circuit’s 2011 decision in Business Roundtable v. SEC , 647 F.3d 1144 (D.C. Cir. 2011) spawned a lot of debate regarding the value of cost-benefit analysis in financial regulation. On one side of the debate were those who felt more should be required of the SEC. as well as other financial regulators. At least some members on the Hill must have thought so. No fewer than three independent legislative efforts[1] sought to impose a more stringent cost-benefit analysis requirement on the SEC, including one that proposed to have the SEC and other independent regulatory commissions submit their … Read more