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Colleen Baker

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PhD (Wharton) Professor Baker is an expert in banking and financial institutions law and regulation, with extensive knowledge of over-the-counter derivatives, clearing, the Dodd-Frank Act, and bankruptcy, in addition to being a mediator and arbitrator.

Previously, she spent time at the U. of Illinois Urbana-Champaign College of Business, the U. of Notre Dame Law School, and Villanova University Law School. She has consulted for the Federal Reserve Bank of Chicago, and for The Volcker Alliance.  Prior to academia, Professor Baker worked as a legal professional and as an information technology associate. She is a member of the State Bars of NY and TX. Read More

I just finished reading an interesting book on entrepreneurship, and I thought I would share it with the blog. It’s Worthless, Impossible and Stupid: How Contrarian Entrepreneurs Create and Capture Extraordinary Value, by Daniel Isenberg.

Isenberg uses case studies to explode three myths: (1) that entrepreneurs must be innovators; (2) that entrepreneurs must be experts; and (3) that entrepreneurs must be young. He argues that successful entrepreneurship has three elements: (1) perceiving extraordinary value; (2) creating extraordinary value; and (3) capturing extraordinary value. (He obviously likes to group things into triplets.) All three are necessary for success. I, for example, might be able to think of a value creation opportunity but, since I have spent most of my life in the classroom, it’s unlikely I could do much to create that value-turn the idea into reality.

But my favorite part of reading the book was seeing the many examples of successful entrepreneurs being told initially by venture capitalists and others that it just wouldn’t work–that the idea was worthless, impossible, or stupid.

It seems like almost everyone, including the President of the United States, has been offering grandiose ideas to reform legal education. Rather than add to that cacophony, I’m thinking on a micro-level, wondering how I might change my favorite course, Securities Regulation. I think we may be teaching securities registration exemptions backwards.

A very quick overview for those not versed in federal securities law: A company raising money by selling securities must register its offering with the SEC unless it has an exemption from the registration requirement. A number of exemptions are available and companies would prefer an exemption, ceteris paribus, because registration is very expensive.

In securities law practice, the analysis typically proceeds in this order:

Offering Details–Universe of Possible Exemptions–Modification of Offering–Particular Exemption.

The client presents the lawyer with a proposed offering. The client has typically already given some thought to the amount of money needed, the proposed offerees, and perhaps even the manner of offering to those people. The lawyer considers those constraints, considers the universe of possible exemptions and, perhaps after a modification to what the client wants, chooses a particular exemption.

This is also how securities professors like me often test their students…

I intended to begin with a brief introduction, but I beat myself to the gun. 

I’m happy to be blogging on the Business Law Prof Blog once again. I enjoyed it the first time but got too busy to continue and, quite frankly, ran out of interesting things to say. (People who know me well may doubt that.) I’ll try to keep the posts interesting. If I can’t, I’ll quit. You all have enough drivel to read without me adding to the load.

For those of you who don’t know me, I’m a professor at the University of Nebraska College of Law. I teach Business Associations;  Mergers and Acquisitions; Accounting for Lawyers; Securities Regulation; and Mutual Funds, Investment Advisers, and Brokers. My primary area of research is Securities Act exemptions, particularly small business exemptions. If you read the prior blog, you know I have a strong interest in crowdfunding, and I’m sure I will be blogging more about that as time passes.

I hope you all enjoy the blog. If you have any suggestions for improvement, don’t hesitate to contact one of us.

The New York Times Dealbook has an interesting article on why the SEC hasn’t sued any Lehman Brothers executives in connection with the 2008 collapse of that firm. The short answer: because they didn’t think they could prove those executives violated federal securities law.

The Times article is a strong reminder that business responsibility for a business’s collapse is not equivalent to a securities law violation and that the SEC’s scarce resources are best directed to violations it can prove. The SEC’s role is to enforce the law, not to satisfy the public clamor for a scapegoat.

The Times article is also an interesting story of how an SEC staff member, George S. Canellos, resisted the political pressure to bring a case. Canellos was the head of the SEC’s N.Y. office at the time and now heads the SEC’s enforcement division. According to the article, he faced strong pressure from then-Chair Mary Schapiro to bring a case, but refused.

The failure to find a case apparently wasn’t from lack of trying. According to the Times, the SEC reviewed more than 15 million documents and interviewed three dozen witnesses.