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John P. Anderson

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Dean Anderson's scholarship focuses on securities enforcement, white-collar crime, and intersections of law and philosophy (e.g., business ethics, constitutionalism, problems of pluralism, and human rights).

His recent articles address the law and ethics of insider trading, the problem of how to build a just and enduring constitutional order in the face of increasing religious and cultural pluralism, and the theoretical underpinnings of our international human rights regime. Read More

Volume 14 of the William & Mary Business Law Review is currently accepting submissions for publication in 2022 and 2023. The Journal aims to publish cutting-edge legal scholarship and contribute to significant and exciting debates within the business community. Submissions for consideration can be sent via Scholastica, or if need be, via email to wm.blr.articlesubmission@gmail.com.

Thanks to Joan Heminway for kicking off our virtual symposium, here, where some of us will take a look at the recently released National Conference of Bar Examiners (NCBE) content summaries of the material planned for future bar exams in the Content Scope Outlines .  These comments relate to the “Business Associations & Relationships” portion. 

As a general matter, I have been growing increasingly skeptical of the bar exam and its role and purpose for the profession.  I very much believe we need to facilitate a process to help ensure clients are served by competent lawyers who have the skills necessary to serve clients.  However, I am more and more convinced that bar exam does an incomplete job of testing readiness for practice, potentially ingrains some bad practices, and continues to inappropriately limit access to the profession for women and minorities. Those issues, though, are for another time.   

Following are my initial thoughts on the Business Associations and Relationships portion of the Outlines:

In the area of “Partnerships,” under “Nature of general partnerships” and “Formation, the outline states: “This topic includes the de facto treatment of improperly created incorporated entities as general partnerships.”  Here, in place of…

The following comes to us from Professor Mike Guttentag in response to my recent post on his excellent and thought-provoking new article, Avoiding Wasteful Competition: Why Trading on Inside Information Should be Illegal. This is a worhy discussion I look forward to continuing–and I hope others will engage in the comments below. Now, here is Professor Guttentag’s response:

As always, I am honored and impressed by the seriousness and respect with which Professor Anderson approaches my work.  I would, however, take exception to the reasons he offers for rejecting my conclusions.

The debate about insider trading over the past five decades has suffered from limited evidence of either benefits or harms. Those who have objected to a strict insider trading prohibition have reasonably asked: what evidence is there that the harms of insider trading justify a broad prohibition?

In my article I believe I have answered that challenge.  First, I explain why there is a significant mismatch between private gains and social gains when trading on inside information. This mismatch arises both because of how inside information is produced (largely as a byproduct of other activities) and how trading on this information generates profits (at the expense of others). I…

For some time now, the insider trading enforcement regime in the United States has been criticized by market participants, scholars, and jurists alike as lacking clarity, theoretical integrity, and a coherent rationale. One problem is that Congress has never enacted a statute that specifically defines “insider trading.” Instead, the current regime has been cobbled together on an ad hoc basis through the common law and administrative proceedings. As the recent Report of the Bharara Task Force on Insider Trading puts it, the absence of an insider trading statute “has left market participants without sufficient guidance on how to comport themselves, prosecutors and regulators with undue challenges in holding wrongful actors accountable, those accused of misconduct with burdens in defending themselves, and the public with reason to question the fairness and integrity of our securities markets.”

Congress appears to be responding, and a number of bills that would define insider trading and otherwise reform the enforcement regime are receiving bipartisan support. But it would be a mistake to pass new legislation without first taking the time to get clear on the economic and ethical reasons for regulating insider trading. This is particularly true in light of the fact that the general…

The Law and Economics Center at the George Mason University Antonin Scalia School of law is hosting a Research Roundtable on Capitalism and the Rule of Law this week in Destin, Florida. My co-author, Professor Jeremy Kidd (Drake University School of Law) and I are honored to present a draft of our current work-in-progress, “Market Failure and Censorship in the Marketplace of Ideas,” at tomorrow’s (March 5, 2022) session. We look forward to receiving feedback from all the brilliant scholars in attendance. Here’s an abstract of the current draft. We look forward to sharing a link to the full draft soon:

As one author notes, the familiar metaphor of the exchange of ideas as a “marketplace” has “permeate[d] the Supreme Court’s first amendment jurisprudence.” If the test for efficiency in the marketplace for goods is wealth maximization, the test for efficiency in the marketplace of ideas has historically been understood in terms of its ability to reliably arrive at truth, or at least the most socially beneficial ideas within the grasp of a community of discourse. And consistent with economic free-market advocates, the received expectation in Western liberal democracies has been that “a process of robust debate, if uninhibited by…

With a recent poll showing that 76 percent of voters think members of Congress have an “unfair advantage” in stock trades, I argued in my last post that Congress should adopt a broad rule against trading in individual stocks by sitting cogresspersons (and perhaps their spouses, children, and staff). I argued that such a move would go a long way toward restoring the perception that members of Congress are public servants, as opposed to the current perception shared by many voters that they are public parasites. In addition to restoring public confidence in the legislative branch, I argued adopting such a prophylactic against insider trading would also help improve public confidence in the integrity of our securities markets—a goal Congress has touted repeatedly for almost a century.

I have since posted a short paper on SSRN, Time for a Broad Prophylactic against Congressional Insider Trading, that develops these arguments. Part I offers a brief summary of the current state of insider trading laws, with a special focus on their application to Congress. Part II surveys some of the proposed insider trading reform bills under consideration. Part III argues that, given congresspersons’ unique role vis-à-vis securities markets, a broad prophylactic…

In 2011, Peter Schweizer published a book, Throw Them All Out, in which he exposed some questionable means by which (according to one study) politicians manage to increase their personal wealth 50% faster than the average American.

According to Schweizer, trading on material nonpublic information appears to be a popular method among congresspersons for achieving outsized returns on their investments. He cites one study finding:

  • The average American investor underperforms the market.
  • The average corporate insider, trading his own company’s stock, beats the market by 7% a year.
  • The average senator beats the market by 12% a year.

Schweitzer’s book was followed by a feature story on the CBS News show, 60 Minutes, highlighting some dubious stock trades by leaders of both political parties. These stories got the public’s attention and spurred Congress to act—adopting the Stop Trading on Congressional Knowledge (STOCK) Act in April of 2012.

The STOCK Act made explicit what many already understood as implicit—that congressional trading based on material nonpublic information acquired by virtue of their position as a public servant was a breach of their fiduciary duties and would therefore violate Section 10b of the Securities Exchange Act of 1934. The Act…

We just wrapped up a fascinating discussion group titled “A Very Online Economy: Meme Trading, Bitcoin, and the Crisis of Trust and Value(s)–How Should the Law Respond?” as part of the AALS 2022 Annual Meeting. I co-moderated the group with Professor Martin Edwards (Belmont University School of Law). Here’s the description:

Emergent forces emanating from social and financial technologies are challenging many underlying assumptions about the workings of markets, the nature of firms, and our social relationship with our economic institutions. Blockchain technologies challenge our assumptions about the need for centralization, trust, and financial institutions. Meme trading puts pressure on our assumptions about economic value and market processes. Environmental and social governance initiatives raise important questions about the relationship between economic institutions and social values. These issues will certainly drive policy debates about social and economic good in the coming years.

The group gathered some amazing presenters and commentators for the discussion, including:

…

It is an exciting time for insider trading law. BLPB coblogger Joan MacLeod Heminway and I will be moderating a discussion group, New Challenges for Insider Trading Compliance,  at the upcoming Southeastern Law Schools (SEALS) Annual Conference (July 27-August 3, 2022). The conference is scheduled to be held in person in Sandestin, Florida. Here’s the description for our discussion group:

Insider trading law in the United States is in a state of flux and uncertainty. In May of 2021, the House of Representatives passed the Insider Trading Prohibition Act. If this bill becomes law, it will impose an entirely new statutory regime for civil and criminal enforcement. Moreover, Securities and Exchange Commission (SEC) Chairman Gary Gensler recently directed the staff to present recommendations to “freshen up” and tighten the operative provisions in Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. In response, in August of 2021, the SEC’s Investor Advisory Committee proposed extensive new restrictions on the use of 10b5-1(c) trading plans as an affirmative defense for insider trading. Meanwhile, prosecutors and regulators continue to employ novel theories of liability in insider trading enforcement actions. Criminal enforcement actions under 18 U.S.C. § 1348 and civil enforcement…

I was recently honored to be invited to join a panel at the 16th Annual Meeting of the American College of Business Court Judges (ABCBJ), which was held in Jackson, Mississippi, on October 27-29. The meeting was hosted by Chancellor Denise Owens (the current president of the ACBCJ) in association with the Law & Economics Center (LEC) at George Mason University Antonin Scalia School of Law.

Chancellor Owens kicked off the event and introduced the keynote speaker, Haley Barbour (former Governor of Mississippi). Governor Barbour gave an excellent talk about the ways in which Mississippi’s musical traditions have helped to improve race relations over the past century.

The meeting panels covered a broad array of topics, including:

  • Ownership, Transfer and Trading of Intellecual Property Rights.
  • The Cost of Truth, Can You Afford It?
  • Artificial Intelligence, Machine Learning, and Algorithms: Studies in Law, Economics, and Racial Bias
  • Thriving Post Pandemic – Private Practice and Expanding Regulatory Authority After COVID-19.

I joined Professors Todd Zywicki and Donald Kochan on a panel moderated by Judge Elihu Berle (Los Angeles Superior Court). The panel was entitled, Shareholder Wealth Maximization versus ESG and the Business Roundtable: The Growing Debate Over Corporate Purpose. I…