Attorneys face significant liability exposure under the state securities laws, and they can be held primarily liable when they are "sellers" of securities, or under some state statutes, like California, when they are experts. Depending on the applicable jurisdiction and counsel's status relative to the subject client, secondary liability may be incurred. In a number of states, counsel has liability exposure based on materially aiding the primary violator with the requisite intent. This article surveys and analyzes attorney liability under state securities law. After presenting a succinct overview of applicable state law in Part II, the article then provides a more in-depth analysis of attorney liability exposure under these state statutes in Part IIl. The article concludes in Part IV with separate treatment of two frequently invoked state statutes-those of California and Texas.
{"title":"Attorney Liability Under the State Securities Laws: Landscapes and Minefields","authors":"Marc I. Steinberg, Christopher Claassen","doi":"10.15779/Z38H874","DOIUrl":"https://doi.org/10.15779/Z38H874","url":null,"abstract":"Attorneys face significant liability exposure under the state securities laws, and they can be held primarily liable when they are \"sellers\" of securities, or under some state statutes, like California, when they are experts. Depending on the applicable jurisdiction and counsel's status relative to the subject client, secondary liability may be incurred. In a number of states, counsel has liability exposure based on materially aiding the primary violator with the requisite intent. \u0000This article surveys and analyzes attorney liability under state securities law. After presenting a succinct overview of applicable state law in Part II, the article then provides a more in-depth analysis of attorney liability exposure under these state statutes in Part IIl. The article concludes in Part IV with separate treatment of two frequently invoked state statutes-those of California and Texas.","PeriodicalId":10000,"journal":{"name":"CGN: Securities Regulation (Sub-Topic)","volume":"53 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2005-12-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"81543638","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Public companies face new and aggressive SEC enforcement practices in response to profound patterns of corporate fraud, the Sarbanes-Oxley Act, and enlarged compliance expectations under revised Federals Sentencing Guidelines. In a determined enforcement agenda, the SEC brought more than 1,300 civil cases and has obtained orders for disgorgement and penalties in excess of $5 billion between 2004 and 2005.During the same time period, the SEC sued approximately 100 chief executive officers of public companies and the Department of Justice has initiated criminal cases alleging securities related misconduct by more than 500 defendants. The wide scope of these actions marks a new world of expected corporate conduct that demands careful attention of management and counsel.In its charging and sanctioning decisions, as well as decisions not to charge and not to sanction, the SEC explicitly recognizes efforts by companies to police themselves, report problems to the government and establish a solid culture of compliance. The SEC specifically targeted the "hearts and minds of senior executives" with penalties of $750 million against WorldCom, $250 million against Qwest, $100 million against Bristol-Myers Squibb or $100 million against Alliance Capital as "serious, real-world consequences."Through its new enforcement regime, the SEC has radically reshaped the rewards and consequences for prompt and cooperative action by companies discovering misconduct or facing enforcement actions. This paper will identify different elements of the SEC’s new expectations and practices through significant cases and SEC statements.
{"title":"Shifting Legal Sands: Growing Pressure on Early Cooperation, Settlement and Waiver in SEC Enforcement Actions","authors":"Carl B. Wilkerson","doi":"10.2139/SSRN.2365899","DOIUrl":"https://doi.org/10.2139/SSRN.2365899","url":null,"abstract":"Public companies face new and aggressive SEC enforcement practices in response to profound patterns of corporate fraud, the Sarbanes-Oxley Act, and enlarged compliance expectations under revised Federals Sentencing Guidelines. In a determined enforcement agenda, the SEC brought more than 1,300 civil cases and has obtained orders for disgorgement and penalties in excess of $5 billion between 2004 and 2005.During the same time period, the SEC sued approximately 100 chief executive officers of public companies and the Department of Justice has initiated criminal cases alleging securities related misconduct by more than 500 defendants. The wide scope of these actions marks a new world of expected corporate conduct that demands careful attention of management and counsel.In its charging and sanctioning decisions, as well as decisions not to charge and not to sanction, the SEC explicitly recognizes efforts by companies to police themselves, report problems to the government and establish a solid culture of compliance. The SEC specifically targeted the \"hearts and minds of senior executives\" with penalties of $750 million against WorldCom, $250 million against Qwest, $100 million against Bristol-Myers Squibb or $100 million against Alliance Capital as \"serious, real-world consequences.\"Through its new enforcement regime, the SEC has radically reshaped the rewards and consequences for prompt and cooperative action by companies discovering misconduct or facing enforcement actions. This paper will identify different elements of the SEC’s new expectations and practices through significant cases and SEC statements.","PeriodicalId":10000,"journal":{"name":"CGN: Securities Regulation (Sub-Topic)","volume":"53 1-2 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2005-05-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"85434272","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The debate over hedge fund regulation suffers from several shortcomings. One is that the opponents to regulating such private investment companies have stuck steadfastly to a short list of polished communications ‘talking points’. One is that hedge funds are beneficial because they disperse risk in the financial system. Two, they are beneficial because they provide liquidity to financial markets. Three, bank and other regulated financial firms will discipline hedge fund their role of prime brokers. While such sound-bites may be good for improving public relations, they often do not provide legitimate content for an informed public debate. This policy brief evaluates these talking points.
{"title":"Hedge Fund Regulation","authors":"R. Dodd","doi":"10.2139/SSRN.1652502","DOIUrl":"https://doi.org/10.2139/SSRN.1652502","url":null,"abstract":"The debate over hedge fund regulation suffers from several shortcomings. One is that the opponents to regulating such private investment companies have stuck steadfastly to a short list of polished communications ‘talking points’. One is that hedge funds are beneficial because they disperse risk in the financial system. Two, they are beneficial because they provide liquidity to financial markets. Three, bank and other regulated financial firms will discipline hedge fund their role of prime brokers. While such sound-bites may be good for improving public relations, they often do not provide legitimate content for an informed public debate. This policy brief evaluates these talking points.","PeriodicalId":10000,"journal":{"name":"CGN: Securities Regulation (Sub-Topic)","volume":"78 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2004-05-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"86139063","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
With substantial inquiry concerning what individual Enron directors and officers knew, or what they should have known based on what they knew, little attention has been directed to examining the institutional structure at Enron that may have spawned the unethical behavior and to assessing responsibility for that structure. By institutional structure, I refer to Enron's ethical climate which is a manifestation of its culture. Corporate culture is defined as a complex set of common beliefs and expectations held by members of the organization which are based on shared values, assumptions, attitudes and norms. The corporation's ethical climate refers to the ethical meaning attached by employees to organizational policies, practices and procedures. These policies, practices and procedures influence moral awareness, the criteria used in decision making, whether morals will have priority over other values, and moral behavior. Important to ascertaining corporate culture are the employees' perceptions of the corporation's values as reflect by the corporation's mission statement and code of ethics, the criteria for business decisions, the words and actions of leaders, the handling of conflicts of interest, the reward system, the guidance provided to employees concerning dealing with ethical issues, and the monitoring system. This article is a preliminary examination of the factual predicates for placing responsibility on the corporation and its directors and officers for a corporate climate that encourages and supports unethical and illegal behavior. This article explores (1) whether climates contribute to illegal behavior within corporations, (2) whether corporate climates can be ascertained, (3) whether some corporate climates can be identified that have a greater likelihood of fostering illegal conduct than others, and (4) whether climates can either be modified to encourage and support legal behavior or, if not, whether steps can be taken to decrease the likelihood of illegal behavior in such climates. Ultimately, the questions concerning Enron are: What was its corporate climate and did that climate contribute to the unethical behavior of its employees? If so, what was the responsibility of Enron and its officers and directors to ascertain, monitor, and modify that climate? This article will respond to the call by the Advisory Group to the U.S. Sentencing Commission to consider whether the Federal Sentencing Guidelines should encourage organizations to "foster ethical cultures" to ensure compliance with the intent as well as the letter of the law, and if so, to consider how an organization's performance in this regard can be measured or evaluated. This article will also consider the effectiveness of provisions of the Sarbanes-Oxley Act of 2002 that require the SEC to promulgate rules and regulations requiring corporations to disclose whether or not they have a code of ethics for senior financial officers, and any waivers of such code, and provisions o
{"title":"A Preliminary Inquiry into the Responsibility of Corporations and Their Directors and Officers for Corporate Climate: The Psychology of Enron's Demise","authors":"Lynne L. Dallas","doi":"10.2139/ssrn.350341","DOIUrl":"https://doi.org/10.2139/ssrn.350341","url":null,"abstract":"With substantial inquiry concerning what individual Enron directors and officers knew, or what they should have known based on what they knew, little attention has been directed to examining the institutional structure at Enron that may have spawned the unethical behavior and to assessing responsibility for that structure. By institutional structure, I refer to Enron's ethical climate which is a manifestation of its culture. Corporate culture is defined as a complex set of common beliefs and expectations held by members of the organization which are based on shared values, assumptions, attitudes and norms. The corporation's ethical climate refers to the ethical meaning attached by employees to organizational policies, practices and procedures. These policies, practices and procedures influence moral awareness, the criteria used in decision making, whether morals will have priority over other values, and moral behavior. Important to ascertaining corporate culture are the employees' perceptions of the corporation's values as reflect by the corporation's mission statement and code of ethics, the criteria for business decisions, the words and actions of leaders, the handling of conflicts of interest, the reward system, the guidance provided to employees concerning dealing with ethical issues, and the monitoring system. This article is a preliminary examination of the factual predicates for placing responsibility on the corporation and its directors and officers for a corporate climate that encourages and supports unethical and illegal behavior. This article explores (1) whether climates contribute to illegal behavior within corporations, (2) whether corporate climates can be ascertained, (3) whether some corporate climates can be identified that have a greater likelihood of fostering illegal conduct than others, and (4) whether climates can either be modified to encourage and support legal behavior or, if not, whether steps can be taken to decrease the likelihood of illegal behavior in such climates. Ultimately, the questions concerning Enron are: What was its corporate climate and did that climate contribute to the unethical behavior of its employees? If so, what was the responsibility of Enron and its officers and directors to ascertain, monitor, and modify that climate? This article will respond to the call by the Advisory Group to the U.S. Sentencing Commission to consider whether the Federal Sentencing Guidelines should encourage organizations to \"foster ethical cultures\" to ensure compliance with the intent as well as the letter of the law, and if so, to consider how an organization's performance in this regard can be measured or evaluated. This article will also consider the effectiveness of provisions of the Sarbanes-Oxley Act of 2002 that require the SEC to promulgate rules and regulations requiring corporations to disclose whether or not they have a code of ethics for senior financial officers, and any waivers of such code, and provisions o","PeriodicalId":10000,"journal":{"name":"CGN: Securities Regulation (Sub-Topic)","volume":"15 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2002-10-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"90844113","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This article considers whether parties should be permitted to waive coverage of the securities laws. Several securities law scholars have called for selective securities law deregulation. The article examines these proposals from both theoretical and practical perspectives. The thesis of this article is that the reform initiatives present more than a choice of rules over standards, certainty over flexibility, and law over facts--they present a choice of values. The article also challenges the premise that bright-line rules, such as opting out by entity type or waiver, promote fairness, equity, equality, predictability, efficiency, and utility better than the current regulatory regime. Finally the article questions whether we should permit parties to waive their rights and bargain away their statutory protections. Particularly, since the reform initiatives would result in the adoption of industry-protective terms that indivdual investors would have little or no power to change.
{"title":"Freedom of Contract and the Securities Laws: Opting Out of Securities Regulation by Private Agreement","authors":"Elaine A. Welle","doi":"10.2139/ssrn.183354","DOIUrl":"https://doi.org/10.2139/ssrn.183354","url":null,"abstract":"This article considers whether parties should be permitted to waive coverage of the securities laws. Several securities law scholars have called for selective securities law deregulation. The article examines these proposals from both theoretical and practical perspectives. The thesis of this article is that the reform initiatives present more than a choice of rules over standards, certainty over flexibility, and law over facts--they present a choice of values. The article also challenges the premise that bright-line rules, such as opting out by entity type or waiver, promote fairness, equity, equality, predictability, efficiency, and utility better than the current regulatory regime. Finally the article questions whether we should permit parties to waive their rights and bargain away their statutory protections. Particularly, since the reform initiatives would result in the adoption of industry-protective terms that indivdual investors would have little or no power to change.","PeriodicalId":10000,"journal":{"name":"CGN: Securities Regulation (Sub-Topic)","volume":"45 4","pages":""},"PeriodicalIF":0.0,"publicationDate":"1999-11-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"72656895","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Costly bank failures in the past two decades have focused attention on the need to find ways to improve the performance of different countries' financial systems. Belief is overwhelming that financial systems can be improved but there is little empirical evidence to support any specific advice about regulatory and supervisory reform. With scant cross-country comparisons of financial regulatory and supervisory systems, economists cannot decide how to correct incentives and moral hazard problems in developing economies--whether, for example, to require higher (and more narrowly defined) capital-to-asset ratios, to mandate stricter definition and disclosure of non-performing loans, to require that subordinated debt be issued, or to install world-class supervision. Proposed reforms usually involve changes in financial regulations and supervisory standards, but many pressing questions about reform remain unanswered. Making use of a new database, the authors come up with brief answers to three key questions: Do countries with relatively weak governments and bureaucratic systems impose harsher regulatory restrictions on bank activities? Yes. Do countries with more restrictive regulatory regimes have poorly functioning banking systems. No--or at least the evidence is mixed. Do countries with more restrictive regulatory systems have less probability of suffering a banking crisis? No. In fact, the reverse is true. In countries where banks' securities activities are restricted, the likelihood of a banking crisis is greater, other things being equal.
{"title":"Financial Regulation and Performance: Cross-Country Evidence","authors":"James R. Barth, G. Caprio, Ross Levine","doi":"10.1596/1813-9450-2037","DOIUrl":"https://doi.org/10.1596/1813-9450-2037","url":null,"abstract":"Costly bank failures in the past two decades have focused attention on the need to find ways to improve the performance of different countries' financial systems. Belief is overwhelming that financial systems can be improved but there is little empirical evidence to support any specific advice about regulatory and supervisory reform. With scant cross-country comparisons of financial regulatory and supervisory systems, economists cannot decide how to correct incentives and moral hazard problems in developing economies--whether, for example, to require higher (and more narrowly defined) capital-to-asset ratios, to mandate stricter definition and disclosure of non-performing loans, to require that subordinated debt be issued, or to install world-class supervision. Proposed reforms usually involve changes in financial regulations and supervisory standards, but many pressing questions about reform remain unanswered. Making use of a new database, the authors come up with brief answers to three key questions: Do countries with relatively weak governments and bureaucratic systems impose harsher regulatory restrictions on bank activities? Yes. Do countries with more restrictive regulatory regimes have poorly functioning banking systems. No--or at least the evidence is mixed. Do countries with more restrictive regulatory systems have less probability of suffering a banking crisis? No. In fact, the reverse is true. In countries where banks' securities activities are restricted, the likelihood of a banking crisis is greater, other things being equal.","PeriodicalId":10000,"journal":{"name":"CGN: Securities Regulation (Sub-Topic)","volume":"56 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"1998-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"83548026","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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