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Haskell Murray

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Professor Murray teaches business law, business ethics, and alternative dispute resolution courses to undergraduate and graduate students. Currently, his research focuses on corporate governance, mergers & acquisitions, sports law, and social entrepreneurship law issues.

Professor Murray is the 2018-19 President of the Southeastern Academy of Legal Studies in Business (“SEALSB”) and is a co-editor of the Business Law Professor Blog. His articles have been published in a variety of journals, including the American Business Law Journal, the Delaware Journal of Corporate Law, the Harvard Business Law Review, and the Maryland Law Review. Read More

You may have missed the most recent amendments to federal securities law. They were tucked into the Surface Transportation Reauthorization and Reform Act (H.R. 22), which President Obama signed into law on December 4.  Where else would you put securities law amendments?

The full Act, which includes a number of changes to securities law, is available here. I don’t recommend wading through it, unless you’re really into surface transportation. Today, I want to talk about one particular provision, a new exemption for the resale of securities.

As you may know, the Securities Act’s convoluted definition of “underwriter” makes it difficult to know when one may safely resell securities purchased in an unregistered offering (or when an affiliate of the issuer may safely resell any securities, registered or not). The SEC has enacted a couple of safe harbors, Rule 144 and Rule 144A. Rule 144A limits sales to large institutional buyers, so most ordinary resales are structured to meet the requirements of Rule 144. Sellers now have another option.

H.R. 22 adds a new section 4(a)(7) exemption to the Securities Act, as well as new subsections 4(d) and 4(e) to define that exemption.

Section 4(a)(7) exempts resales to accredited investors…

A warning to all of you in the real (non-academic) world: law school exam season has begun. You know what that means: it’s whine time. Time to read blog posts by law professors complaining about the miseries of grading exams. (What you read in the blogs is nothing compared to what you hear in the hallways of law schools.)

Grading law school exams is not a pleasant task. It’s intellectually grinding, but it’s not just the work. I care about my students and I hate to see some of them waste their promise.

But, on a scale of 1 (easy) to 10 (hard), grading law school exams is at most a 3. Some people have to clear septic tanks for a living. Police officers and soldiers put their lives on the line every day. I worked in a pea cannery two summers, and, even compared to that, grading exams is a breeze.

I have it easy, so I promise not to whine this year. I have a well-paying job that mostly allows me to do what I love, so I can tolerate grading. (Don’t bother tracking down my old blog posts; I admit I’ve whined about grading in the past.). …

The New York Times DealBook has a fascinating piece on the relationship between JPMorgan Chase and one of its former brokers, Johnny Burris. After Burris complained publicly about JPMorgan’s sales practices, he was terminated and customer complaints began to appear in his regulatory files. Some of the “complaining” customers now say they had no problems with Mr. Burris. One of the customers who allegedly filed a complaint can’t even read or write. And it appears that JPMorgan was involved in drafting at least some of the complaints.

Definitely worth reading.

I never thought I would say this, but my favorite book this year is about punctuation. That’s right. Punctuation! The book is Making a Point: The Pernickety Story of English Punctuation, by David Crystal, and it’s well worth reading.

It’s an enjoyable romp through the English language, with limited attention to writing in other languages as well. (I just placed something in a German English-language publication and discovered that Germans don’t know how to “correctly” use quotation marks.)

This isn’t a rule book; Crystal talks about current usage, including areas where the “experts” disagree. (Oxford comma, anyone?) But he also covers the history—how the use of punctuation has evolved over time. One of the book’s recurring themes is how two functions of punctuation–clarifying the writer’s meaning and providing cues to speakers–can sometimes be at odds.

The history is fascinating. I have to admit that, after reading this book and seeing what excellent writers have done in the past, it’s harder to argue for a prescriptive position. I don’t always agree with Crystal’s position on disputed issues, but his case is always cogent.

Crystal covers all the major punctuation marks: , , ;, :, . . . , ., and…

It’s Thanksgiving, which means it’s time to do Christmas shopping. No, that’s not it. I’m sure Thanksgiving is supposed to be about more than that. Food? Football? No, there’s something else. It’s on the tip of my tongue; I just can’t quite remember. . . . . . . . .

Oh, yeah: being thankful.

I’m thankful for many things, but I want to use this column to thank some of the people who have touched my professional life.

First, thanks to my co-bloggers (in alphabetical order): Josh Fershee; Joan Heminway; Ann Lipton; Haskell Murray; Marcia Nanine; Stefan Padfield; and Anne Tucker. Their blog posts are always interesting and informative, and usually, I have to admit, better than anything I write. But, if you think their blog posts are good, you ought to see the incredible behind-the-scenes e-mail conversations we share. I have learned a lot from each of them. Believe it or not, I’ve only met two of them in person, but I’m happy to have all of them in my academic life.

Second, I’m thankful for my colleagues here at the University of Nebraska—well, most of them anyway. All of them are deserving of thanks—if for nothing else…

Last week was the 30th anniversary of the Delaware Supreme Court’s decision in Moran v. Household International, Inc., 500 A.2d 1346 (Del. 1985). In Moran, decided on Nov. 19, 1985, the Delaware Supreme Court upheld what has become the leading hostile takeover defensive tactic, the poison pill.

Martin Lipton, the primary developer of the pill, even makes an appearance in the case—and obviously a carefully scripted one: “The minutes reflect that Mr. Lipton explained to the Board that his recommendation of the Plan was based on his understanding that the Board was concerned about the increasing frequency of ‘bust-up’ takeovers, the increasing takeover activity in the financial sector industry, . . . , and the possible adverse effect this type of activity could have on employees and others concerned with and vital to the continuing successful operation of Household even in the absence of any actual bust-up takeover attempt.”

I’m not sure the takeover world would be that different today if Moran had rejected poison pills. I’m reasonably confident the Delaware legislature would have amended the Delaware statute to overturn the ruling, as they effectively did with another ruling decided earlier that same year, Smith v. Van Gorkom…

One final post on the SEC’s proposed changes to Rule 147 and I promise I’m finished—for now. Today’s topic is the effect the proposed changes will have on state crowdfunding exemptions. If the SEC adopts the proposed changes to Rule 147, many state legislatures will have to (or at least want to) amend their state crowdfunding legislation.

As I explained in my earlier posts here and here, the SEC has proposed amendments to Rule 147, currently a safe harbor for the intrastate offering exemption in section 3(a)(11) of the Securities Act. If the proposed amendments are adopted, Rule 147 would become a stand-alone exemption rather than a safe harbor for section 3(a)(11). There would no longer be a safe harbor for intrastate offerings.

That creates some issues for the states. Many states have adopted state registration exemptions for crowdfunded securities offerings that piggyback on the federal intrastate offering exemption. That makes sense, because, if the offering isn’t also exempted at the federal level, the state crowdfunding exemption is practically worthless. (An offering pursuant to the federal crowdfunding exemption is automatically exempted from state registration requirements, but these state crowdfunding exemptions provide an alternative way to sell securities through crowdfunding.)…

Once the SEC has created a safe harbor for a statutory exemption, can it ever really get rid of it? That’s one of the issues raised by the SEC’s proposed changes to Rule 147, which I considered in detail last week.

Rule 147 is currently a safe harbor for the intrastate offering exemption in section 3(a)(11) of the Securities Act. Section 3(a)(11) exempts from the Securities Act registration requirement

“Any security which is a part of an issue offered and sold only to persons resident within a single State or Territory, where the issuer of such security is a person resident and doing business within or, if a corporation, incorporated by and doing business within, such State or Territory.”

Rule 147 currently provides that an offering

“made in accordance with all of the terms and conditions of this rule shall be deemed to be part of an issue offered and sold only to persons resident within a single state or territory where the issuer is a person resident and doing business within such state or territory, within the meaning of section 3(a)(11) of the Act.”

In other words, if you meet the requirements of Rule 147, you are within…

Here’s something everyone who has ever taken Securities Regulation should know: Section 3(a)(11) of the Securities Act, the intrastate offering exemption, has a safe harbor, Securities Act Rule 147.

As Lee Corso would say, “Not so fast, my friend.”  The SEC is proposing to overturn that longstanding wisdom. If the SEC’s proposed changes to Rule 147 are adopted,Rule 147 would no longer be tied to section 3(a)(11) and section 3(a)(11) would no longer have a safe harbor. The intrastate nature of Rule 147 would be preserved, but the proposed changes would be adopted under the SEC’s general exemptive authority in section 28 of the Securities Act.

Here are the most significant changes that the SEC has proposed:

Tied to State Regulation

The premise of section 3(a)(11) and its Rule 147 safe harbor is to relegate purely intrastate offerings to state regulation. But there’s currently nothing in Rule 147 to enforce that premise; federal exemption does not depend on state regulation of the offering.

The SEC proposal would expressly tie the federal Rule 147 exemption to state regulation. An offering would qualify for the federal exemption only if it was (1) registered at the state level or (2) sold pursuant…