If you’ve been following along, you know all about the pending challenge to FINRA in the D.C. Circuit.  Many amicus briefs have come in, including my own.  To make it easier for people to see what’s happening, I’ve pulled the briefs and put them in a Google Drive folder for easier access.  The briefs in the folder include:

• FINRA
• Alpine Opening
• DTC & Clearing Groups
• National Futures Association
• North American Securities Administrators Association
• Public Investor Advocate Bar Association
• Securities Exchanges
• Horseracing
• Free Enterprise Chamber of Commerce
• New Civil Liberties Alliance
• The United States of America
• Benjamin P. Edwards

We also have additional litigation raising similar issues now pending in North Carolina.

I predicted that we’d see these challenges and that they could pose big risks to the financial system in my Supreme Risk article.  So far, I’ve been cited by Alpine and the DTC and other clearing corporation’s amicus.  The DTC  brief agreed with my assessment and block quoted the article.

Any perceived weakness in Amici’s authority to enforce their rules could undermine their ability to deliver critical functions to the markets, such as individual participant risk monitoring, the setting of collateral requirements to cover credit, market, and liquidity risk

…

Texas Tech University School of Law, Lubbock, Texas

Summary Information

The School of Law at Texas Tech University invites applications for a full-time, 9-month tenure-track Professor of Law position to begin in August of 2024.  The position is open to both entry-level candidates and candidates who are on the tenure-track or tenured at another school.  Candidates who satisfy Texas Tech University’s requirements to be hired with tenure will also be eligible to hold the Frank McDonald Endowed Professorship in business law.

Required Qualifications

In line with TTU’s strategic priorities to engage and empower a diverse student body, enable innovative research and creative activities, and transform lives and communities through outreach and engaged scholarship, applicants should have experience or demonstrated potential for working with diverse student populations at the undergraduate and/or graduate levels within individual or across the areas of teaching, research/creative activity, and service.

Specific required qualifications are:

1. Candidates should have a J.D.;
2. Candidates should have a demonstrated potential for excellence in research, teaching, and service; and
3. Candidates should have demonstrated potential for excellence in the areas of Contracts and in corporate/business law, such as Business Entities, Securities Regulation, Mergers & Acquisitions, and related courses.

Preferred Qualifications

In addition to…

In an address on Halloween, President Biden announced his support for a new rule proposal from the Department of Labor.  The rule would impose a fiduciary duty on persons giving advice about retirement assets.  His remarks framed the issue as addressing “junk fees” in financial services.

The rule targets critical transactions.  In 2022, Americans moved about $800 billion from 401(k) type plans into individual retirement accounts.  The decisions people make when moving their funds out of their 401(k) and into something else matter.  It’s also often a vulnerable point for many.  We know that cognitive decline affects a greater percentage of the population as they age. Yet our regulatory infrastructure does not currently impose consistent standards on persons giving advice about that pot of money.

The kind of advice a retiree receives depends on the person and product at issue.  A registered investment adviser will owe a fiduciary duty under the Investment Advisers Act.  A stockbroker will owe an obligation to give advice in the investor’s “best interest” under the SEC’s regulation “Best Interest.” 

What about the duties owed by insurance producers who often aim to divert retirement savings into insurance products?  An insurance agent selling equity-indexed or fixed-indexed annuities…

PIABA, the Public Investor Advocate Bar Association, and the PIABA Foundation released a new report on FINRA expungement earlier this week. The current report gives a good snapshot of where things stand at the end of an era with a new set of FINRA rules around expungement going into effect on October 16, 2023.  FINRA adopted some of these changes after comment letters I sent in on earlier proposals. On the whole, my record remains mixed with FINRA continuing to keep this process in arbitration.  James Tierney and I have a forthcoming paper on this contending that an administrative procedure would produce much better results than leaving this outsourced to the arbitration forum.  My core view is that the current structure simply fails to generate any real scrutiny, much less adversarial scrutiny, for most of these requests.

To address the scrutiny problem, we have some changes.  One of the biggest changes to the rules is a new process for notifying state regulators and allowing them to participate in hearings.  On the one hand, this is a good thing.  State regulators should be able to take steps to appropriately prevent the deletion of public records.  But on the other…

Another case challenging FINRA’s constitutionality has generated a District Court opinion upholding FINRA’s constitutionality.  Judge Reyes found that, Alpine “does not suggest that courts must enjoin every challenged FINRA enforcement action pending the Alpine merits decision.”

Kim differs from Alpine in some significant ways.  The plaintiff does not face expulsion, just an ordinary fine and disciplinary proceeding.  Kim faces a possible $30,000 fine and a requirement to disgorge $16,000 in profits.  This, unsurprisingly, complicates his attempt to secure an injunction against the enforcement action because it doesn’t seem as though he will face any irreparable harm–just “an enforcement hearing, months away, and most likely, monetary fines.”

The case also differs in that amici got involved at an early stage this time.  The opinion thanks “CBOE Global Markets, Inc.; CME Group Inc.; National Futures Association; and the Securities Exchanges.”  

Most courts will not be familiar with SROs.  Given that, it makes sense for a range of amici to come in on these cases to help give context to courts.

Ultimately, how this issue will turn out for Kim depends on the pending Alpine appeal.

You may be interested in an event taking place on October 11 at the Center for American Progress in Washington, DC, which will focus on the regulation of private markets and feature SEC Commissioner Caroline Crenshaw, as well as business law professors Renee Jones (BC) and George Georgiev (Emory).

The registration link (in-person or virtual) is as follows: https://www.americanprogress.org/events/accessing-public-capital-without-public-disclosure/

Event description:

Accessing Public Capital Without Public Disclosure

Oct. 11, 2023

12:30 PM – 12:35 PM

Introductory remarks provided by CAP Senior Vice President for Inclusive Growth Emily Gee.

12:35 PM – 1:05 PM

Keynote remarks provided by Caroline A. Crenshaw, Commissioner of the U.S. Securities and Exchange Commission.

1:05 PM – 1:45 PM

A panel discussion with experts on the topic moderated by CAP Senior Director for Financial Regulation Alexandra Thornton, featuring Renee Jones (Boston College Law School) and George Georgiev (Emory University School of Law)

Today, more capital is raised annually in private markets than in the public markets. Hundreds of multibillion-dollar companies can raise all the capital they need from an unlimited number of unaffiliated investors, while selling products and services to tens of thousands of customers and employing thousands of people. Many are unicorns—companies that started in…

Last week, we hosted the Fourth Annual Corporate Governance Summit at the Wynn in Las Vegas.  You can see the program here.  Stephen Bainbridge came in to give our keynote address in a talk focused on his new book, The Profit Motive.  We ended up drawing about 130 participants.  I’m incredibly grateful to Mike Bonner at Greenberg Traurig and the rest of the Greenberg team that helped put the event together.  We were also fortunate to have some great sponsors for the event: Joele Frank, Connor Group, Deloitte, J.P. Morgan Chase & Co., and Whittier Trust.