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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

In the movie Margin Call, which “[f]ollows the key people at an investment bank, over a 24-hour period, during the early stages of the financial crisis,” one of the main characters says: “There are three ways to make a living in this business: be first, be smarter, or cheat.”  Given that only a few folks will be first or smarter, it may not be surprising that a “new report finds 53% of financial services executives say that adhering to ethical standards inhibits career progression at their firm.”  In a piece over at The Guardian, Chris Arnade, a former Wall Street trader describes why.  What follows is an excerpt from that piece, but you should go read the whole thing here.

After a few years on Wall Street it was clear to me: you could make money by gaming anyone and everything. The more clever you were, the more ingenious your ability to exploit a flaw in a law or regulation, the more lauded and celebrated you became. Nobody seemed to be getting called out. No move was too audacious. It was like driving past the speed limit at 79 MPH, and watching others…

The CFA Institute, the Journal of Corporate Finance, and the Schulich School of Business are sponsoring a Conference on Financial Misconduct, April 3-4, 2014, in Toronto, Canada.  Deadline for submissions is December 15, 2013.  You can go here for all the information.  What follows is the stated rationale, along with suggested research questions.

RATIONALE:

Financial market misconduct erodes investors trust, and in turn influences stock market liquidity and performance, and exacerbates volatility.  Financial market misconduct includes but is not limited to fraud.  Despite the widespread media attention on market misconduct, the causes and consequences of market misconduct are often misunderstood and under researched around the world. The evolving structure of markets gives rise to new work on topic

This international conference will provide a timely debate on financial market misconduct. The conference also encourages, but does not require, submission to the Journal of Corporate Finance. Papers submitted to the Journal of Corporate Finance would go through the normal review process.

RESEARCH QUESTIONS:

Some research questions that contributors to the conference might address are:

  • Is market misconduct more common in different countries or across different exchanges?  If so, what types (earnings management, insider trading, market manipulation, dissemination of

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I was reading the introduction to the 35th anniversary edition of Atlas Shrugged the other day, and a number of quotes taken from Ayn Rand’s related journal entries struck me (bold highlights are mine):

  • I must show in what concrete, specific way the world is moved by the creators.  Exactly how do the second-handers live on the creators. Both in spiritual matters—and (most particularly) in concrete, physical events. (Concentrate on the concrete, physical events—but don’t forget to keep in mind at all times how the physical proceeds from the spiritual.)
  • [I]t is proper for a creator to be optimistic, in the deepest, most basic sense, since the creator believes in a benevolent universe and functions on that premise. But it is an error to extend that optimism to other specific men. First, it’s not necessary, the creator’s life and the nature of the universe do not require it, his life does not depend on others. Second, man is a being with free will; therefore, each man is potentially good or evil, and it’s up to him and only to him (through his reasoning mind) to decide which he wants to be. The decision will affect only him;

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Peter Turchin recently posted an interesting piece on Bloomberg entitled, “Blame Rich, Overeducated Elites as Our Society Frays.”  Here is an excerpt:

The “great divergence” between the fortunes of the top 1 percent and the other 99 percent is much discussed, yet its implications for long-term political disorder are underappreciated…. Increasing inequality leads not only to the growth of top fortunes; it also results in greater numbers of wealth-holders…. There are many more millionaires, multimillionaires and billionaires today compared with 30 years ago, as a proportion of the population…. Rich Americans tend to be more politically active than the rest of the population. They support candidates who share their views and values; they sometimes run for office themselves. Yet the supply of political offices has stayed flat …. In technical terms, such a situation is known as “elite overproduction.” … [Another example:] Economic Modeling Specialists Intl. recently estimated that twice as many law graduates pass the bar exam as there are job openings for them…. Past waves of political instability, such as the civil wars of the late Roman Republic, the French Wars of Religion and the American Civil War, had many interlinking causes and circumstances unique…

A quick review of the top 10 Papers for Corporate, Securities & Finance Law eJournals on SSRN for the period of September 18, 2013 to November 17, 2013 (here), led me to Utpal Bhattacharya’s paper “Insider Trading Controversies: A Literature Review.”  Here is the abstract:

Using the artifice of a hypothetical trial, this paper presents the case for and against insider trading. Both sides in the trial produce as evidence the salient points made in more than 100 years of literature on insider trading. The early days of the trial focus on the issues raised in the law literature like fiduciary responsibility, the misappropriation theory and the fairness and integrity of markets, but the trial soon focuses on issues like Pareto-optimality, efficient contracting, market efficiency, and predictability raised in the financial economics literature. Open issues are brought up. A jury finally hands out its verdict.

Congratulations to Eric Chaffee, former BLPB contributing editor & friend of the blog, for taking over the Securities Law Prof Blog reins from Barbara Black.  Barbara has left some big shoes for Eric to fill, having single-handedly built the Securities Law Prof Blog into one of the staple blogs for business law folks, but if anyone is up to the task it’s Eric.  Make sure you add the Securities Law Prof Blog to your personal blogroll.

I have posted an updated draft of my latest paper Rehabilitating Concession Theory, which is forthcoming in the Oklahoma Law Review, on SSRN.  I have made only minor changes to the the prior draft, but I thought I’d post the abstract and link to the paper here in case any blog readers haven’t seen the paper before and might be interested in the content.

In Citizens United v. FEC, a 5-4 majority of the Supreme Court ruled that, “the Government cannot restrict political speech based on the speaker’s corporate identity.” The decision remains controversial, with many arguing that the Court effectively overturned over 100 years of precedent. I have previously argued that this decision turned on competing conceptions of the corporation, with the majority adopting a contractarian view while the dissent advanced a state concession view. However, the majority was silent on the issue of corporate theory, and the dissent went so far as to expressly disavow any role for corporate theory at all. At least as far as the dissent is concerned, this avoidance of corporate theory may have been motivated at least in part by the fact that concession theory has been marginalized to the point

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Martin Gelter & Geneviève Helleringer posted “Constituency
Directors and Corporate Fiduciary Duties” on SSRN a few weeks ago, and I’m
finally getting around to passing on the abstract:

In this chapter, we identify a fundamental contradiction in
the law of fiduciary duty of corporate directors across jurisdictions, namely
the tension between the uniformity of directors’ duties and the heterogeneity
of directors themselves. Directors are often formally or informally selected by
specific shareholders (such as a venture capitalist or an important
shareholder) or other stakeholders of the corporation (such as creditors or
employees), or they are elected to represent specific types of shareholders
(e.g. minority investors). In many jurisdictions, the law thus requires or
facilitates the nomination of what has been called “constituency” directors.
Legal rules tend nevertheless to treat directors as a homogeneous group that is
expected to pursue a uniform goal. We explore this tension and suggest that it
almost seems to rise to the level of hypocrisy: Why do some jurisdictions
require employee representatives that are then seemingly not allowed to
strongly advocate employee interests? Looking at US, UK, German and French law,
our chapter explores this tension from the perspective of economic and
behavioral theory.

As Marc O. DeGirolami notes here: “In an extensive
decision, a divided panel of the U.S. Court of Appeals for the Seventh Circuit
has enjoined the enforcement of the HHS contraception mandate against several
for-profit corporations as well as the individual owners of those corporations.”  I have not had a chance to read the entire
decision (which you can find here), but I did do a quick search for “corporation” and pass on the
following excerpts I found interesting.

The plaintiffs are two Catholic families and their closely
held corporations—one a construction company in Illinois and the other a
manufacturing firm in Indiana. The businesses are secular and for profit, but
they operate in conformity with the faith commitments of the families that own
and manage them…. These cases—two among many currently pending in courts around
the country—raise important questions about whether business owners and their
closely held corporations may assert a religious objection to the contraception
mandate and whether forcing them to provide this coverage substantially burdens
their religious-exercise rights. We hold that the plaintiffs—the business
owners and their companies—may challenge the mandate. We further hold that
compelling them to cover these services substantially burdens their

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The Economist has an interesting piece on how “[a] mutation in the way companies are financed and managed will change the distribution of the wealth they create.”  You can read the entire article here.  A brief excerpt follows.

The new popularity of the [Master Limited Partnership] is part of a larger shift in the way businesses structure themselves that is changing how American capitalism works…. Collectively, distorporations such as the MLPs have a valuation on American markets in excess of $1 trillion. They represent 9% of the number of listed companies and in 2012 they paid out 10% of the dividends; but they took in 28% of the equity raised…. [The] beneficiaries, though, are a select class. Quirks in various investment and tax laws block or limit investing in pass-through structures by ordinary mutual funds, including the benchmark broad index funds, and by many institutions. The result is confusion and the exclusion of a large swathe of Americans from owning the companies hungriest for the capital the markets can provide, and thus from getting the best returns on offer….

Another booming pass-through structure is that of the “business development company” (BDC). These firms raise public equity and…