Securities Regulation

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AALS2018(SHProposalPanel)

Last week, I had the privilege of attending and participating in the 2018 annual meeting of the Association of American Law Schools (#aals2018).  I saw many of you there.  It was a full four days for me.  The conference concluded on Saturday with the program captured in the photo above–four of us BLPB co-bloggers (Stefan, me, Josh, and Ann) jawing about shareholder proposals–as among ourselves and with our engaged audience members (who provided excellent questions and insights).  Thanks to Stefan for organizing the session and inspiring our work with his article, The Inclusive Capitalism Shareholder Proposal.  I learned a lot in preparing for and participating in this part of the program.

Earlier that day, BLPB co-blogger Anne Tucker and I co-moderated (really, Anne did the lion’s share of the work) a discussion group entitled “A New Era for Business Regulation?” on current and future regulatory and de-regulatory initiatives.  In some part, this session stemmed from posts that Anne and I wrote for the BLPB here, here, and here.  I earlier posted a call for participation in this session.  The conversation was wide-ranging and fascinating.  I took notes for two essays I am writing this…

The Oklahoma Law Review recently published an article I wrote for a symposium the law review sponsored last year at The University of Oklahoma College of Law.  The symposium, “Confronting New Market Realities: Implications for Stockholder Rights to Vote, Sell, and Sue,” featured a variety of presentations from some really exciting teacher-scholars, some of which resulted in formal published pieces.  The index for the related volume of the Oklahoma Law Review can be found here.  I commend these articles to you.

The abstract for my article, “Selling Crowdfunded Equity: A New Frontier,” follows.

This article briefly offers information and observations about federal securities law transfer restrictions imposed on holders of equity securities purchased in offerings that are exempt from federal registration under the CROWDFUND Act, Title III of the JOBS Act. The article first generally describes crowdfunding and the federal securities regulation regime governing offerings conducted through equity crowdfunding — most typically, the offer and sale of shares of common or preferred stock in a corporation over the Internet — in a transaction exempt from federal registration under the CROWDFUND Act and the related rules adopted by the U.S. Securities and Exchange Commission. This regime includes restrictions on transferring…

The title of this post is hyperbole on some level.  But with Halloween being tomorrow, I couldn’t resist the temptation to use a festive greeting to introduce today’s post.  And there is a bit of a method to my titling madness . . . .

I admit that I do feel a bit tricked by the removal of the Leidos, Inc. v. Indiana Public Retirement System case (about which co-blogger Ann Lipton and I each have written–Ann most recently here and I most recently here) from the U.S. Supreme Court’s calendar.  It was original scheduled to be heard a week from today.  Apparently, based on the related filings with the Court, the parties are documenting a settlement of the case.  Kevin LaCroix offers a nice summary here.  How cunning and skillful!  Just when I thought resolution of important duty-to-disclose issues in Section 10(b)/Rule 10b-5 litigation was at hand . . . .

Indeed, I had hoped for a treat.  What pleasure it would have given me to see this matter resolved consistent with my understanding of the law!  The issue before the Court in Leidos is somewhat personal for me (in a professional sense) for a simple reason–a…

My UT Law colleague Jonathan Rohr has coauthored (with Aaron Wright) an important piece of scholarship on an of-the-moment topic–financial instrument offerings using distributed ledger technology.  Even more fun?  He and his co-author are interested in aspects of this topic at its intersection with the regulation of securities offerings.  Totally cool.

Here is the extended abstract.  I cannot wait to dig into this one.  Can you?  As of the time I authored this post, the article already had almost 700 downloads . . . .  Join the crowd!

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Blockchain-Based Token Sales, Initial Coin Offerings, and the Democratization of Public Capital Markets

Jonathan Rohr & Aaron Wright

Best known for their role in the creation of cryptocurrencies like bitcoin, blockchains are revolutionizing the way tech entrepreneurs are financing their business enterprises. In 2017 alone, over $2.2 billion has been raised through the sale of blockchain-based digital tokens in what some are calling initial coin offerings or “ICOs,” with some sales lasting mere seconds. In a token sale, organizers of a project sell digital tokens to members of the public to finance the development of future technology. An active secondary market for tokens has emerged, with tokens being bought and sold…

From our friend and BLPB colleague, Anne Tucker, following is nice workshop opportunity for your consideration: 

Dear Colleagues,

We (Rob Weber & Anne Tucker) are submitting a funding proposal to host a works-in-progress workshop for 4-8 scholars at Georgia State University College of Law, in Atlanta, Georgia in spring 2018 [between April 16th and May 8th].  Workshop participants will submit a 10-15 page treatment and read all participant papers prior to attending the workshop.  If our proposal is accepted, we will have funding to sponsor travel and provide meals for participants. Interested parties should email amtucker@gsu.edu on or before November 15th with a short abstract (no more than 500 words) of your proposed contribution that is responsive to the description below. Please include your name, school, and whether you will require airfare, miles reimbursement and/or hotel. We will notify interested parties in late December regarding the funding of the workshop and acceptance of proposals.  Please direct all inquiries to Rob Weber (mailto:rweber@gsu.edu) or Anne Tucker (amtucker@gsu.edu).

Call for Proposals: Organizing, Deploying & Regulating Capital in the U.S.

Our topic description is intentionally broad reflecting our different areas of focus, and hoping to…

Earlier this week, I had the pleasure of hearing a talk about universal proxies from Scott Hirst, Research Director of Harvard’s Program on Institutional Investors.

By way of background, last Fall under the Obama Administration, the SEC proposed a requirement for universal proxies noting:

Today’s proposal recognizes that few shareholders can dedicate the time and resources necessary to attend a company’s meeting in person and that, in the modern marketplace, most voting is done by proxy.  This proposal requires a modest change to address this reality.  As proposed, each party in a contest still would bear the costs associated with filing its own proxy statement, and with conducting its own independent solicitation.  The main difference would be in the form of the proxy card attached to the proxy statement.  Subject to certain notice, filing, form, and content requirements, today’s proposal would require each side in a contest for the first time to provide a universal proxy card listing all the candidates up for election.

The Council of Institutional Investors favors their use explaining, “”Universal” proxy cards would let shareowners vote for the nominees they wish to represent them on corporate boards. This is vitally important in proxy contests, when…

Yesterday, Professor Bainbridge posted “Is there a case for abolishing derivative litigation? He makes the case as follows: 

A radical solution would be elimination of derivative litigation. For lawyers, the idea of a wrong without a legal remedy is so counter-intuitive that it scarcely can be contemplated. Yet, derivative litigation appears to have little if any beneficial accountability effects. On the other side of the equation, derivative litigation is a high cost constraint and infringement upon the board’s authority. If making corporate law consists mainly of balancing the competing claims of accountability and authority, the balance arguably tips against derivative litigation. Note, moreover, that eliminating derivative litigation does not eliminate director accountability. Directors would remain subject to various forms of market discipline, including the important markets for corporate control and employment, proxy contests, and shareholder litigation where the challenged misconduct gives rise to a direct cause of action.

If eliminating derivative litigation seems too extreme, why not allow firms to opt out of the derivative suit process by charter amendment? Virtually all states now allow corporations to adopt charter provisions limiting director and officer liability. If corporate law consists of a set of default rules the parties generally should be

…

Last Thursday, Jay Brown filed an amicus brief with the U.S. Supreme Court coauthored by him, me, Jim Cox, and Lyman Johnson.  The brief was filed in Leidos, Inc., fka SAIC, Inc., Petitioners, v. Indiana Public Retirement System, Indiana State Teachers’ Retirement Fund, and Indiana Public Employees’ Retirement Fund, an omission case brought under Section 10(b) of and Rule 10b-5 under the Securities Exchange Act of 1934, as amended.   An abstract of the brief follows.

This Amicus Brief was filed with the U.S. Supreme Court on behalf of nearly 50 law and business faculty in the United States and Canada who have a common interest in ensuring a proper interpretation of the statutory securities regulation framework put in place by the U.S. Congress. Specifically, all amici agree that Item 303 of the Securities and Exchange Commission’s Regulation S-K creates a duty to disclose for purposes of Rule 10b-5(b) under the Securities Exchange Act of 1934.

The Court’s affirmation of a duty to disclose would have little effect on existing practice. Under the current state of the law, investors can and do bring fraud claims for nondisclosure of required information by public companies. Thus, affirming the existence of…

My latest paper, The Inclusive Capitalism Shareholder Proposal, 17 U.C. Davis Bus. L.J. 147 (2017), is now available on Westlaw. Here is the abstract:

When it comes to the long-term well being of our society, it is difficult to overstate the importance of addressing poverty and economic inequality. In Capital in the Twenty-First Century, Thomas Piketty famously argued that growing economic inequality is inherent in capitalist systems because the return to capital inevitably exceeds the national growth rate. Proponents of “Inclusive Capitalism” can be understood to respond to this issue by advocating for broadening the distribution of the acquisition of capital with the earnings of capital. This paper advances the relevant discussion by explaining how shareholder proposals may be used to increase understanding of Inclusive Capitalism, and thereby further the likelihood that Inclusive Capitalism will be implemented. In addition, even if the suggested proposals are rejected, the shareholder proposal process can be expected to facilitate a better understanding of the strengths and weaknesses of Inclusive Capitalism, as well as foster useful new lines of communication for addressing both poverty and economic inequality.

I have been at the Southeastern Association of Law Schools (SEALS) conference all week.  As usual, there have been too many program offerings important to my scholarship and teaching.  I have participated in and attended so many things.  I am exhausted.

But I know that all of this activity also energizes me.  Once I am back at home tomorrow night and get a good night’s sleep, I will be ready to rock and roll into the new academic year (which starts for us at UT Law in a few weeks).  I use the SEALS conference as this bridge to the new year every summer.

One of my favorite discussion groups at the conference was the White Collar Crime discussion group that John Anderson and I organized.  A number of us focused on insider trading law this year.  John, for example, shared his preliminary draft of an insider trading statute.  I asked folks to ponder the result under U.S. insider trading law of a tipping case with the following general facts:

  • A person with a fiduciary duty of trust and confidence to a principal conveys material nonpublic information obtained through the fiduciary relationship to a third person;
  • The recipient of the

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