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Benjamin P. Edwards

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Benjamin Edwards joined the faculty of the William S. Boyd School of Law in 2017. He researches and writes about business and securities law, corporate governance, arbitration, and consumer protection.

Prior to teaching, Professor Edwards practiced as a securities litigator in the New York office of Skadden, Arps, Slate, Meagher & Flom LLP. At Skadden, he represented clients in complex civil litigation, including securities class actions arising out of the Madoff Ponzi scheme and litigation arising out of the 2008 financial crisis. Read More

I just posted a new article, Regulatory Ritualism and other Lessons from the Global Experience of Insider Trading Law, on SSRN. This article is the culmination of a five-year research project. It offers a comprehensive comparative study of insider-trading regimes around the globe with an eye to much-needed reform in the United States. It is the first article to consider global insider trading enforcement in light of the problem of regulatory ritualism. Regulatory ritualism occurs where great attention is paid to the institutionalization of a regulatory regime without commitment to, or acceptance of, the normative goals that those institutions are designed to achieve. The article develops and expands upon some themes and arguments that were first sketched out in Chapters 5 and 11 of my book, Insider Trading: Law, Ethics, and Reform. Here’s the article’s abstract:

There is growing consensus that the insider-trading regime in the United States, the oldest in the world, is in need of reform. Indeed, three reform bills are currently before Congress, and one recently passed the House with overwhelming bipartisan support. As the U.S. considers paths to reforming its own insider trading laws, it would be remiss to ignore potential lessons from global…

    Commenters have likened the recent retail “meme” trading in stocks such as GameStop Corp. to buying a ticket on a roller coaster—“You don’t go on a roller coaster because you end up in a different place, you go on it for the ride and it’s exciting because you’re part of it.” See, Bailey Lipschultz and Divya Balji, Historic Week for Gamestop Ends with 400% Rally as Shorts Yield, Bloomberg (January 29, 2021).

    The comparison is apt in a number of respects. These retail traders, led by some members of the “WallStreetBets” group on the Reddit social media platform, “got on” GameStop a couple weeks ago at just under $20 a share, and, despite its rapid rise to a high of just under $500 a share, I think most people expect (including the meme traders) that the price at which this turbulent ride will end is somewhere around where it began. After all, GameStop’s fundamentals have not changed. It remains a brick-and-mortar business that was devastated by the pandemic, and it is expected to steadily lose market share to online vendors.

    For anyone interested in the mechanics of the “short squeeze” and how these traders managed to move price…

If you haven’t been living under a rock, you probably know about the rally in GameStop’s stock price now causing losses for hedge funds and dominating the news cycle.  Today, major retail brokerages began to restrict trading activity in the stock, limiting their customers ability to place additional buy orders for the stock.  

The increase in GameStop’s stock’s trading price from about $4 a share in July 2020 to a brief high of $492 today seems plainly disconnected from any fundamental value thesis.  Many retail investors may have been simply buying the stock on the theory that because other people are buying the stock they’ll be able to sell at a profit amid the continuing rise.  Of course, it’s impossible to know with certainty when this obvious bubble will pop.  

A variety of reasons may explain the decision to no longer execute buy orders into the expanding GameStop bubble.  Some of it may be simple paternalism.  Regulators might ask why brokerages are letting retail investors commit possible financial suicide by buying into the bubble.  Of course, this makes unknowable assumptions about the sources of capital being used to fuel the rally.  We don’t know how many people are actually putting…

The Southeastern Association of Law Schools (SEALS) is scheduled to hold its annual conference in person, July 26-August 1, at The Omni Amelia Island Resort, Amelia Island, Florida.  SEALS has always been one of my favorite law conferences. It combines the opportunity to attend fascinating panels and discussion groups (showcasing our colleagues’ latest research) with plenty of networking opportunities and some fun in the sun! And one of the highlights of the conference is always the New Scholars Workshop, which provides opportunities for new legal scholars to interact with their peers and experts in their respective fields. Here’s an excerpt from the SEALS New Scholars Committee website:

For over a decade, the New Scholars Workshop has provided new scholars with the opportunity to present their work in a supportive and welcoming environment. The New Scholars Committee accepts and reviews nominations to the program, organizes new scholars into colloquia based on subject matter, and coordinates with the Mentors Committee to match each new scholar with a mentor in his or her field. We also hold a New Scholars Luncheon at the Annual Meeting at which New Scholars and their mentors can get to know one another and the…

We have some significant developments in the law for expungement hearings. As a quick refresher for those that don’t follow this corner of securities law closely, the process for deciding whether or not to remove customer dispute information from a broker’s record is unreliable, poorly designed, and seemingly emboldens brokers to commit more misconduct.  One study found that “with prior expungements are 3.3 times as likely to engage in new misconduct as the average broker.” 

Many of the problems flow from how brokers procure expungements.  Often they simply file an arbitration against their employer. (Notably, the employer benefits if its broker/sales agent has red flags and past misconduct removed from regulatory and public databases.)  At some point, they notify the customer about the arbitration and their right to participate, but non-party customers have little incentive or ability to meaningfully participate–and usually don’t participate.  Arbitrators, hearing no reason not to grant the expungement from the parties overwhelmingly recommend expungement.  The broker then notifies FINRA and has the arbitration award “confirmed” by a state court.  As I wrote in my comment letter, “judicial review under these circumstances provides no meaningful check on this process and only serves as a dubious veneer.”  Under the law, courts confirming arbitration awards do not meaningfully review these awards–they simply confirm them absent certain, statutorily-defined problems with the award.

In October, I wrote about a proposal to change some of the rules for brokers seeking to expunge customer dispute information from their records and linked to my own extensive comment letter on the proposal which drew heavily from a law review article explaining how the system fails to surface relevant information because many hearings are not adversarial.  (The SEC also received comments from Arbitrator Julius Z. Frager,  PIABA, NASAA, AdvisorLaw, Pace Law School’s Securities Clinic, St. John’s Securities Clinic, and Steven Caruso.) At the time, I explained that the proposal would do much to change the fundamental dynamic and would leave many problems in place:

But there are many things the proposal won’t do.  It won’t address common customer barriers to participation.  It won’t provide a lengthy notice period so customers can figure out what is going on and get legal help. It won’t even guarantee customers can receive all of the documents filed in these arbitrations.  It won’t make it clear that these proceedings are really ex-parte proceedings and that all advocates must be held to higher standards in them.  It won’t change the system in any truly significant way.  It burdens the customer with protecting the public record at the customer’s expense.

After the comment period, FINRA extended the time for SEC action on the proposal before providing a response to comments and an amended proposal, addressing some of the problems I highlighted.  The amended proposal meaningfully engages with the comments and makes some real improvements.  Although I didn’t get everything I wanted, I’m glad that the amendment addresses some of the most egregious flaws in the current system.  I have my thoughts on FINRA’s response after the jump.

    Along with my co-authors J. Kelly Strader, Mihailis E. Diamantis, and Sandra D. Jordan, I am pleased to announce that the Fourth Edition of our textbook White Collar Crime: Cases, Materials, and Problems has gone to press and is expected to be available through Carolina Academic Press by June of 2021, in plenty of time for Fall 2021 adoptions.

    Professor Diamantis and I are excited to join Professors Strader and Jordan in the new edition. We hope that our unique practice experiences and theoretical perspectives will add value to what is already a popular White Collar casebook. We have posted the current drafts of Chapter 1 (Overview of White Collar Crime) and Chapter 5 (Securities Fraud) on SSRN as samples for review. Here, also, is an excerpt from the Preface summarizing our approach to the new edition:

[W]e have endeavored to write a problem-based casebook that provides a topical, informative, and thought-provoking perspective on this rapidly evolving area of the law. We also believe that the study of white collar criminal law and practice raises unique issues of criminal law and justice policy, and serves as an excellent vehicle for deepening our understanding of criminal justice issues in…

    With so much recent controversy and uncertainty surrounding the personal benefit test for tipper-tippee liability pursuant to Section 10b insider trading liability (see, e.g., here, and here), prosecutors have recently looked to other statutory bases for obtaining convictions. As part of the Sarbanes-Oxley Act of 2002, Congress enacted 18 U.S.C. § 1348, Securities and Commodities Fraud. This general anti-fraud provision provides that:

Whoever knowingly executes, or attempts to execute, a scheme or artifice…[t]o defraud any person in connection with…any security…or [t]o obatain, by means of false or fraudulent pretenses, representations, or promises, any money or property in connection with the purchase or sale of any…security… shall be fined under this title, or imprisoned not more than 25 years, or both.

    While the language of §1348 is similar to Section 10b, relatively few insider trading cases have been brought under it. It looked as though this might, however, be changing in the wake of a recent Second Circuit decision holding that the controversial personal-benefit test does not apply to tipper-tippee actions brought under §1348. In United States v. Blaszczak, 947 F.3d 19 (2d Cir. 2019), the court held that §1348 and Section 10b were adopted…

Near the end of the term, the Trump Department of Labor recently announced its rule for investment advice accompanied by a WSJ op-ed from Jay Clayton and Eugene Scalia.  While there is much to digest, the rule largely aligns Labor with SEC Regulation Best Interest.  Much like the SEC’s approach under Chair Clayton, the DOL proposal takes the “eliminate or disclose” approach to conflicts as well. 

Ultimately, the new regulation isn’t likely to significantly improve outcomes for retail investors.  It leaves financial advisers free to continue operating with significant conflicts even when providing advice about retirement assets.  

This is my second post in a series of blog posts on the “Study on Directors’ Duties and Sustainable Corporate Governance (“Study on Directors’ Duties”) prepared by Ernst & Young for the European Commission.

In 2015, the world gathered at the United Nations Sustainable Development Summit for the adoption of the Post-2015 development agenda. That Summit was convened as a high-level plenary meeting of the United Nations General Assembly. At this meeting, Resolution A/70/L.1, Transforming our World: The 2030 Agenda for Sustainable Development, was adopted by the General Assembly. In 2016, the Paris Agreement was signed. In my last post, I called both the United Nations 2030 Agenda and the Paris Agreement trendsetters because they kicked-off a global discussion on sustainable development at so many levels, including at the financial level.

During the 2015 United Nations Sustainable Development Summit, I recall that the Civil Society representatives called for a UN resolution on sustainable capital markets to tackle the absence of concrete actions regarding global financial sustainability following the 2008 Great Recession.

At the end of 2016, the European Commission (Commission) created the High-Level Expert Group on Sustainable Finance (HLEG). In early 2018, the HLEG published its report…

Sarah Haan recently posted a new detailed and meticulously documented draft article that we’ll likely be talking about for years to come.  In it, she presents a forgotten history of an era when women came to outnumber men as the stockholders of public corporations.  At the time, many corporations disclosed the gender breakdowns for their stockholders.  Early on, the Wall Street Journal covered the rise of women as shareholders, revealing that more women than men held stock in American Express, Western Union, and Eastman Kodak as of 1916.  Women bought stock at a robust clip for years afterward as well and gained clear per capita majorities at many public companies.

Haan points out that women likely sought stock ownership and participation earnestly because it allowed them a much greater measure of equality than the labor market.  Each share received the same dividend, regardless of the owner’s gender.  In contrast, the labor markets reduced (and continue to reduce) women’s returns.

Women began to outnumber men as shareholders around the time Berle and Means shaped the course of corporate law and theory with their distinction between dispersed, uninformed, and passive shareholders and active management.  Haan explains that modern scholars have largely forgotten…