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Marcia Narine Weldon

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Professor Narine Weldon is the director of the Transactional Skills Program, Faculty Coordinator of the Business Compliance & Sustainability Concentration, Transactional Law Concentration, and a Lecturer in Law.

She earned her law degree, cum laude, from Harvard Law School, and her undergraduate degree, cum laude, in political science and psychology from Columbia University. After graduating, she worked as a law clerk to former Justice Marie Garibaldi of the Supreme Court of New Jersey, a commercial litigator with Cleary, Gottlieb, Steen and Hamilton in New York, an employment lawyer with Morgan, Lewis and Bockius in Miami, and as a Deputy General Counsel, VP of Global Compliance and Business Standards, and Chief Privacy Officer of Ryder, a Fortune 500 Company. In addition to her academic position, she serves as the general counsel of a startup and a nonprofit.  Read More

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The North American Securities Administrators Association just released proposed model whistleblower legislation.  At first glance, the legislation looks similar to the federal whistleblower bounty program enacted as a part of Dodd-Frank, only at the state level:

Among other provisions, the proposed model act provides a state’s securities regulator with the authority to make monetary awards to whistleblowers based on the amount of monetary sanctions collected in any related administrative or judicial action, up to 30 percent of the amount recovered. The model act also would protect whistleblower confidentiality, prohibit retaliation by an employer against a whistleblower, and create a cause of action and provide relief for whistleblowers retaliated against by their employer.

NASAA seeks comments by June 30, 2020.  Hopefully, they’ll get plenty of insightful comments informed by studying the flaws with the SEC’s bounty program. 

As Andrew Jennings pointed out to me, the language seems to track the federal language.  This may generate some of the the same difficulties for internal reporters.  At the federal level, whistleblowers who try to work within the organization to fix a problem do not receive the same protection from retaliation as those that go directly to the SEC. 

Although federal law may…

States are struggling to figure out the right approach to administering bar exams in the middle of a pandemic.  Nevada has proposed moving to an online bar exam over the summer.  You can find the Nevada proposal and my comment letter here.  There are thoughtful comments from law professors including Claudia Angelos (NYU), Judith Wegner (UNC & Carnegie Report), Debby Merritt (OSU), Andi Curcio (GSU), Carol Chomsky (MN), Sara Berman (now AccessLex), and Eileen Kaufman (Touro), Steven Silva (TMCC), and Lori Johnson (UNLV).  Hopefully we can find a way to administer a fair exam without putting anyone at undue risk.

But I wanted to flag another issue about the Nevada bar exam, one near and dear to Joshua Fershee‘s heart.  Nevada’s official subject matter outline for the Nevada bar calls for exam takers to know about “Limited Liability Corporations.”  It’s listed as a subheading within “Corporations.” I checked the Nevada corporation code, and no such entity exists.  The closest we get is Chapter 86 for limited liability companies.  As Fershee has explained again and again and again and again and again, limited liability companies are not corporations.  There is not real difference between saying “corporation” and “limited…

The AALS Section on Professional Responsibility invites papers for its program “Professional Responsibility 2021Works In Progress Workshop” at the AALS Annual Meeting in San Francisco. Two papers will be selected from those submitted.

WORKSHOP DESCRIPTION:

This workshop will be an opportunity to test ideas, work out issues in drafts and interrogate a paper prior to submission. It will pair each work in progress scholar with a more senior scholar in the field who will lead a discussion of the piece and provide feedback. Successful papers should engage with scholarly literature and make a meaningful original contribution to the field or professional responsibility or legal ethics.

ELIGIBILITY:

Full-time faculty members of AALS member law schools are eligible to submit papers. Preference will be given to junior scholars focusing their work in the area of professional responsibility and legal ethics. Pursuant to AALS rules, faculty at fee-paid law schools, foreign faculty, adjunct and visiting faculty (without a full-time position at an AALS member law school), graduate students, fellows, and non-law school faculty are not eligible to submit. Please note that all faculty members presenting at the program are responsible for paying their own annual meeting registration fee and travel expenses.

PAPER SUBMISSION…

A few securities industry groups hired Gibson Dunn to petition the SEC to abandon its share-class disclosure initiative.  The petition argues that the initiative should have been rolled out as a rule proposal through the notice and comment process instead of simply being announced by the Commission.

The share-class disclosure initiative explained that the SEC had “filed numerous actions in which an investment adviser failed to [disclose] its selection of mutual fund share classes that paid the adviser . . . [12b-1 fee] when a lower-cost share class for the same fund was available to clients.”   The SEC asked advisers to plainly disclose when they put client assets in higher-fee share classes when lower-fee share classes were available.

Let’s pause for a second here.  All the SEC has asked for is disclosure.  It has not asked firms to stop this practice.  It just wants fiduciaries to disclose when they do it.  

Many dually-registered investment advisers have operated this way for years, collecting enormous fees from investors who likely do not understand the conflict.  Nicole Boyson has a fascinating paper on how large, dual-registered investment advisers routinely operate with staggering conflicts.  We talked about an earlier draft of the paper…

In recent years, investment funds have shifted more assets to private market securities.  This can make it much more difficult to figure out how much a particular investment is worth.  The SEC has proposed a new rule for valuing these sorts of investments.  Comments on it will be due on July 21, 2020.

Investment Companies have to tell investors how much their stake in the fund is worth.  Investments in public companies are  often easy to value.  The investment fund simply takes the market price of the security and uses that figure for valuation.  It can become more complicated if you take into account fundamental value, the size of the position, or the ability to sell it all at a particular price. For securities without readily available market prices, the Investment Company Act  calls for “using the fair value of that security, as determined in good faith by the fund’s board.”  

Yet how should an investment company board go about valuing its assets?  The new rule would put a framework in place for that process to create more consistency.

The proposal made me think of an article by Utah’s Jeff Schwartz.  He looked at how one mutual fund valued…

As the weeks pass, we move steadily closer and closer to the June 30th implementation date for Regulation Best Interest.  As I’ve written elsewhere, the new SEC rule does little actually help investors.  The new rule package may also do real harm by collapsing distinctions between brokerage firms and independent registered investment advisers.  In the headline quote for a new white paper from the Institute for the Fiduciary Standard, Professor Tamar Frankel explains how the new package erodes established fiduciary principles

Rostad and Fogarty tell the story that these standards deserve attention because they abandon decades of established principles. They then offer selected remedies to help investors manage in this new era. The Securities and Exchange Commission’s Regulation Best Interest ignores the brokers’ advisory sales-talk and waters-down significantly brokers’ fiduciary duties. In fact little remains. Hopefully, this rule will fail to achieve its purpose or is fixed before it brings true disasters on the securities markets. Otherwise, investors and the securities markets may pay the price.

As the SEC has altered investor protections, states have begun to put their own protections in place.  Nevada stands alone with the first state fiduciary statute.   New Jersey and Massachusetts also have…

Iowa’s Greg Shill has a new paper out on Congressional Securities Trading.  As a former congressional staffer, he brings a special appreciation to the issue.

Congressional securities trading has attracted a good bit of attention after controversial trades by Senators Burr and Loeffler.  The scrutiny has even drawn more attention to another surprisingly well-timed trade by Senator Burr.

In his essay, Shill takes up the issue from a policy perspective, looking at how we ought to regulate Congressional Securities Trading.  He draws from ordinary securities regulation and suggest pulling over the trading plan approach and short-swing profit prohibition we use for corporate executives.  This approach should help manage ordinary securities transactions by members of Congress and their staff.  He also advocates for limiting Congressional investing to U.S. index funds and treasuries.  This would reduce the incentive to favor one market participant over another.

The proposed reforms would be a substantial improvement over the status quo.  We should not have legislators with significant financial incentives to favor one company over another when making law and setting policy.  We should also not subsidize public service by tolerating Congressional trading on Congressional information.

Of course, we’ll still face some implementation challenges.

Although this is a little off-brand for the BLPB, I thought readers might appreciate a puppy break.  This is Lucky, the newest addition to the family.

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She’s excellent at giving me so much to worry about that I stop thinking about the pandemic!  But that does not mean that stuff stops happening!

Notably, FINRA has a rule proposal out to alter its exiting suitability standard in light of the SEC’s new Regulation Best Interest. FINRA summarized the proposal as doing two things:

  1. amend the FINRA and CAB suitability rules to state that the rules do not apply to recommendations subject to Regulation Best Interest (“Reg BI”), and to remove the element of control from the quantitative suitability obligation; and
  2. conform the rules governing non-cash compensation to Reg BI’s limitations on sales contests, sales quotas, bonuses and non-cash compensation.

Because Reg BI so closely resembles the FINRA Suitability Rule, firms may not have to do too much to comply with the text of the rule.  This leaves me wondering about guidance.  FINRA has many notices to members and other explanations available to give context to the suitability rule.  With regulation moving from the self-regulator to the regulator, will the guidance move…

FINRA Expungement Fee Change

FINRA has begun to move to address some of the concerns about abuse of its expungement process, which allows stockbrokers to wipe customer complaints and dispute information off their public records.  FINRA’s stated process calls for these requests for non-monetary relief to be heard by a panel of three arbitrators, requiring at least two of them to vote in favor of expungement.  

Yet some creative lawyers found a way to put expungement claims before a single arbitrator.  The “dollar-trick” arbitrations proceed by requesting $1 dollar of relief and expungement.  Because the case had a low monetary value, FINRA’s forum had had shunted these dollar trick claims to single-arbitrator panels.  As the PIABA Foundation reported, stockbrokers using this alternative process paid much less in fees, causing FINRA to miss out on $8,000 or more in revenue per case.  Brokers seeking expungement under this process also benefitted by only needing to convince one arbitrator to grant extraordinary relief rather than two.  If you’re wondering what happens to the claims for $1.00 in damages, the stockbroker usually drops the $1.00 claim at the hearing and simply focuses on his expungement request.

To address this, FINRA recently announced a…

Arizona State University’s Sandra Day O’Connor College of Law now has a new business law journal, the Corporate and Business Law Journal.  It’s stated mission is:

The Corporate and Business Journal is a forum for the publication and exchange of ideas and information about trends and developments within business and corporate law. The Journal publishes articles and comments on various topics, including corporate governance, securities regulation, capital market regulation, employment law, and the law of mergers and acquisitions. Historically, corporate and business law has been heavily influenced by east coast institutions and practitioners. Accordingly, CABLJ offers a unique opportunity for students, scholars, and the Arizona community as a whole to readily engage in the discourse surrounding these practice areas.

Congratulations to ASU on the launch of the new journal!

Interestingly, the Corporate and Business Law Journal also has a companion forum for short pieces running over 500 words in length:  http://cablj.org/blog/  It might be a great place for things that are too short to develop into a full essay or article.