In April 2018, the Commission proposed for public comment a significant rulemaking package designed to serve our Main Street investors that would (1) require broker-dealers to act in the best interest of their retail customers, (2) reaffirm and in some
Securities Regulation
What Happened to “Meaningfully Close Personal Relationship” in Insider Trading?
Did insider trading law almost devolve into an effort to define what kind of relationship a tipper and tippee must have for a defendant to be liable? And was any federal judge or jury qualified to say? Since the Second …
How the Level of Blame Affects Companies’ Willingness to Disclose
What motivates a firm to disclose information rather than remain silent following a material, negative economic event? For example, why did oil companies issue multiple, detailed disclosures about oil spills caused by Hurricane Katrina and Hurricane Rita but not disclose …
Revisiting the SEC Ruling on Whether Cryptocurrencies are Securities
In June 2018, the cryptocurrency community waited with baited breath for the Securities and Exchange Commission (SEC) decision on whether cryptocurrencies were securities, commodities, or something else.
If the commission treated them as securities, they would be subject to …
The Problematic Role of Computer Code in Initial Coin Offerings
The Initial Coin Offering (ICO) is one of the stranger financial innovations in recent memory. Imagine if Coca-Cola had funded its initial deployment of vending machines through the sale of tokens its machines might one day require. Now replace soda …
Gibson Dunn Offers 2018 Mid-Year Update on Securities Litigation
The continued explosion in the number of securities class action filings is once again the big headline in our half yearly update. The now-sustained increase in both the number of filings and average and median settlement amounts—including a five-fold increase …
The Power of Words: How SEC Comment Letters to Foreign Issuers Affect the Capital Markets
In our recent paper, we find that the tone of language in Securities and Exchange Commission (SEC) comment letters after enforcement reviews has capital market implications, which are amplified or abbreviated based on the strength of a given country’s enforcement.…
SEC Chair Issues Statement on Proxy Process Roundtable
Shareholder engagement is a hallmark of our public capital markets, and the proxy process is a fundamental component of that engagement. In 2010, the Commission issued a concept release seeking public comment on whether the U.S. proxy system as a …
Is Silence Golden? Negative Effects of Mandatory Disclosure
“When you talk, you are only repeating what you already know. But if you listen, you may learn something new.” – Dalai Lama XIV
Disclosure regulation is a cornerstone of modern securities markets. Its economic consequences have been extensively studied …
Davis Polk Discusses Ninth Circuit Approval of Securities Suit Over Unsponsored ADRs
On July 17, 2018, the Ninth Circuit issued an opinion in Automotive Industries Pension Trust Fund v. Toshiba Corp., No. 16-56058 (9th Cir. July 17, 2018), holding that the Supreme Court’s Morrison decision does not preclude purchasers of …
Tippees and Tippers: The Impact of Martoma II
This is a column for insider trading junkies—a special breed who love all the nuances in this very nuanced subject. Late last month, a Second Circuit panel did something fairly unusual: It withdrew a 2017 decision and substituted a new …
Taking Investor Preferences Seriously
Over the last half century, finance has made remarkable progress explaining the pricing of financial assets. In relying on portfolio theory, however, mainstream pricing models tend to ignore investor preferences for certain asset types. This is a mistake. In a …
The Role of Disclosure in the Unregulated Crypto Market
Our new research paper studies the issuers of unregulated crypto-tokens such as EOS and Tether. We examine two dimensions: the success of the Initial Coin Offering (ICO) process, and the capital market patterns following the listing of the tokens on …
How External Whistleblower Rewards Affect Internal Reporting
Does paying employees for blowing the whistle on corporate crime to regulators discourage internal reporting and undermine corporate governance? The answer is not as simple as it might seem. My research shows that, as the amount of reward increases, the …
Latham & Watkins Discusses SEC Official’s Analysis of Digital Assets as Securities
William Hinman, Director of the US Securities and Exchange Commission (SEC) Division of Corporation Finance, provided substantial color on the SEC’s evolving view of digital asset classification recently when he shared his thoughts on how to characterize purchases and sales …
SEC Proposes Changes to Whistleblower Rule
The Securities and Exchange Commission voted on June 28, 2018, to propose amendments to the rules governing its whistleblower program. The whistleblower program was established in 2010 to incentivize individuals to report high-quality tips to the Commission and help the
SEC Adopts New Requirements on Using XBRL Reporting Language for Financial Statements
The Securities and Exchange Commission voted on June 28, 2018, to adopt amendments to eXtensible Business Reporting Language (XBRL) requirements for operating companies and funds. The amendments are intended to improve the quality and accessibility of XBRL data.
The amendments,
SEC Updates Definition of “Smaller Reporting Companies”
The Securities and Exchange Commission voted on June 28, 2018, to adopt amendments to the “smaller reporting company” (SRC) definition to expand the number of companies that qualify for certain existing scaled disclosure accommodations.
“I want our public capital markets
SEC Proposes New Approval Process for Exchange Traded Funds
The Securities and Exchange Commission voted on June 28, 2018, to propose a new rule and form amendments intended to modernize the regulatory framework for exchange-traded funds (ETFs), by establishing a clear and consistent framework for the vast majority of
SEC Adopts Changes to Disclosure of Funds’ Liquidity Risk
The Securities and Exchange Commission on June 28, 2018, adopted amendments to public liquidity-related disclosure requirements for certain open-end funds. Under the amendments, funds would discuss in their annual or semi-annual shareholder report the operation and effectiveness of their liquidity