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When was the last time you sat in a classroom for 6 hours a day learning material that you weren’t sure that you would use on a daily basis for your job? I’m not talking about attending a CLE or an academic conference where you pick what you want to learn and from whom. I’m talking about taking notes, doing homework everyday, and being called on— you know, like we do with our students. 

 

Well I’ve just finished this experience and it will change how I teach from now on. Since mid June, I’ve taken 90 hours of immersive Spanish classes—30 hours through weekend work at the University of Miami and 60 hours through Habla Ya in Panama for two weeks. I did this while teaching a transactional drafting course online (asynchronously), which required me to hold individual video conferences with my 16 students and markup and review drafts. I also worked on a time consuming project for a client. This was no vacation. At times, it was pure hell. 

Here’s what I learned. 

  1. The teacher really does matter. I often hear my students saying “I just can’t learn from Professor X.” I always thought it was a lame

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A new paper from a powerhouse trio just hit SSRN.  Steve Choi, Adam Pritchard, and Jessica Erickson teamed up to take a look at attorneys’ fees in securities class actions.  Erickson announced it earlier today with some quick summary tweets:

They collected data on over 1,700 settlements to examine how high and low value settlements differ from each other and whether judges treat the high-value cases differently than the low value ones.   Interestingly, they found some evidence that attorneys may engage in some make-work in high-value cases in order to justify collecting big fees. With all of the data they collected, we’ll likely see many more papers coming out of this set. 

Hopefully, the data will help courts make better decisions when scrutinizing fee requests in mega-settlements.  One challenge will be getting the information before courts reviewing settlements.  The attorneys representing parties generally have little incentive to police…

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On Thursday, the Commodity Futures Trading Commission (CFTC) held an open meeting to consider:

Supplemental Proposal on Exemption from Derivatives Clearing Organization Registration

Proposed Rule on Registration with Alternative Compliance for Non-U.S. Derivatives Clearing Organizations

Proposed Rule on Customer Margin Rules relating to Security Futures

In Special Report: CFTC advances two proposals amending oversight of non-U.S. clearinghouses, the FIA noted:

…the five members of the U.S. Commodity Futures Trading Commission voted unanimously to release a proposed rulemaking designed to create a less burdensome regulatory regime for foreign clearinghouses that clear swaps for U.S. customers…

A related proposal fared less well, however.  The agency’s two Democratic commissioners strongly objected to a supplemental proposal to exempt foreign clearinghouses from U.S. regulation if they are subject to regulation in their home countries that is comparable to the U.S….Despite the objections, the supplemental proposal passed by a vote of three to two and will be published for public comment. 

As I’ve noted, the regulation of derivatives clearing has been a source of conflict between international policymakers, particularly since the financial crises of 2007-08 and the subsequent global clearing mandates.  An article in the FT, CFTC agrees to rein in rules for…

I just recently came across the Ninth Circuit’s decision in In re Atossa Genetics Inc Securities Litigation, 868 F.3d 78 (9th Cir. 2017), and it struck me because it highlights an ongoing tension between the reliance/materiality distinction in fraud-on-the-market cases in general, and in the Supreme Court’s jurisprudence in particular.

And I’ll say up front that a lot of what I’m about to discuss in this post is stuff I’ve laid out in more detail in my essay, Halliburton and the Dog that Didn’t Bark.  The Atossa case is just a nice demonstration of the issue.

And hey, this got long, so – more after the jump.

William & Mary’s Kevin Haeberle has a new paper entitled Information Asymmetry and the Protection of Ordinary Investors.  It takes a close look at the degree to which the core securities laws designed to reduce information asymmetry actually protect ordinary investors in the stock market.  Haeberle explains how market makers adjust prices to manage the costs information asymmetry imposes on them.  He focuses on how this response creates illiquidity in the market.  But then he explains that while this illiquidity hurts many investors, it also helps others—namely, longer-term investors. Thus, reducing information asymmetry will affect different investors in different ways, turning on the time horizon of their investment. 

His  key takeaway is then that securities laws reducing information asymmetry impose a long-overlooked cost on at least buy-and-hold ordinary investors (including both those who trade directly and those who invest through mutual funds), while conferring only limited benefits to those investors. Accordingly, whatever it does for society, an excessive focus on stopping some investors from making “unfair” gains based on superior information may actually  be a bad thing for ordinary investors.

Haeberle closes out the paper by pointing out that the SEC would likely be more effective in protecting ordinary investors…

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In reading Izabella Kaminska’s Why dealing with fintechs is a bit like dealing with pirates [FT Alphaville is free, but registration is required], I thought of two points from past blogs.  First, the critical, controversial issue of who should have access to an account at a central bank.  The article notes China’s decision to require “domestic fintechs like Alipay and WeChat…[to] hold their customer deposits on a full reserve basis at the central bank directly,” and also points to Governor Mark Carney’s recent discussion of permitting fintech companies to deposit funds at the Bank of England.  Second, the strategic point of recognizing when change is inevitable, and proactively helping to shape it.  Kaminska seems to suggest that a potential reason for this expansion in central bank account access is recent power shifts in the area, and central bankers’ desire to proactively shape the inevitable changes on the horizon in financial markets.  As is generally the case, Kaminska’s piece is a worthwhile read.      

When I was in practice, I worked on a number of cases alleging violations of Section 11 of the Securities Act, but none that had been filed in state court.  (For which I was profoundly grateful; I was always bemused by the fact that I needed to get pro hac’d into federal courts around the country but I was vastly more familiar with their rules and practices than with those of the New York State courts, notwithstanding my admission to the New York State bar).

So, to be honest, I never had any strong feelings about whether plaintiffs should have the right to pursue Section 11 class actions in state court, or whether the Securities Litigation Uniform Standards Act should be interpreted to permit defendants to remove such cases.  And I didn’t spare much attention when the Supreme Court recently held in Cyan, Inc. v. Beaver County Employees Retirement Fund that defendants cannot remove them.

But Michael Klausner, Jason Hegland, Carin LeVine, and Sarah Leonard just posted a short empirical analysis of state Section 11 class actions, and the results have captured my interest.  First, they find – unsurprisingly – there has been an increase in state Section 11…

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