What is known as the "sophisticated investor doctrine" as a defense poses significant challenges: it is subjective, ambiguous and in many instances irrelevant to the complaint against which it is offered as a defense. Unlike arbitration, the sophisticated investor defense is generally unavailing in federal securities litigation because the antifraud provisions of federal securities laws are construed objectively and "as a general matter, the securities laws do not distinguish between sophistication and unsophisticated investors; both are entitled to protection, of disclosure and antifraud provisions." In addition, "the Act[s] does not speak in terms of sophisticated as opposed to unsophisticated people dealing in securities. The rules when the giants play are the same as when the pygmies enter the market." This article explains why use of the defense should be challenged in any securities arbitration of a unsuitability claim.
{"title":"Is the 'Sophisticated Investor' Theory Still Relevant?","authors":"Edward G. Pekarek, Christian Obremski","doi":"10.2139/ssrn.1974301","DOIUrl":"https://doi.org/10.2139/ssrn.1974301","url":null,"abstract":"What is known as the \"sophisticated investor doctrine\" as a defense poses significant challenges: it is subjective, ambiguous and in many instances irrelevant to the complaint against which it is offered as a defense. Unlike arbitration, the sophisticated investor defense is generally unavailing in federal securities litigation because the antifraud provisions of federal securities laws are construed objectively and \"as a general matter, the securities laws do not distinguish between sophistication and unsophisticated investors; both are entitled to protection, of disclosure and antifraud provisions.\" In addition, \"the Act[s] does not speak in terms of sophisticated as opposed to unsophisticated people dealing in securities. The rules when the giants play are the same as when the pygmies enter the market.\" This article explains why use of the defense should be challenged in any securities arbitration of a unsuitability claim.","PeriodicalId":431402,"journal":{"name":"LSN: Securities Law: U.S. (Topic)","volume":"2018 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-02-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125895723","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}
Securities lending agreements and forward contracts — both standard investment techniques — can be combined to create a derivative product known as a prepaid variable forward contract ("PVFC"). PVFCs allow investors to significantly defer capital gains taxes on dispositions of large amounts of stock. Essentially, a PVFC replicates the economic substance of a current sale without triggering a tax event. Structured with tax deferral purposes in mind, PVFCs became wildly popular with ultra-wealthy investors during the late 1990's and early 2000's. The use of PVFCs, however, has gone largely unnoticed by the public. In 2007 the Internal Revenue Service caught on and began attacking these complex derivatives. The first of these cases, Anschutz v. Commissioner, involved the use of a PVFC to defer over one hundred million dollars in capital gains taxes. This Note analyzes the Tax Court's use of section 1058 of the Internal Revenue Code to strike down the tax deferral scheme. While supporting the Tax Court's efforts in preserving the fiscal health of the Treasury, this Note proposes that the Tax Court's use of section 1058 may have raised more questions than it has answered regarding the tax consequences of these complex derivative products. Additionally, the court's opinion may have placed unnecessary strain on the securities lending industry, hampering economic growth.
{"title":"Anschutz v. Commissioner: Integration of Prepaid Variable Forward Contracts and Share Lending Agreements under Internal Revenue Code Section 1058","authors":"Waseem Barazi","doi":"10.2139/SSRN.2177672","DOIUrl":"https://doi.org/10.2139/SSRN.2177672","url":null,"abstract":"Securities lending agreements and forward contracts — both standard investment techniques — can be combined to create a derivative product known as a prepaid variable forward contract (\"PVFC\"). PVFCs allow investors to significantly defer capital gains taxes on dispositions of large amounts of stock. Essentially, a PVFC replicates the economic substance of a current sale without triggering a tax event. Structured with tax deferral purposes in mind, PVFCs became wildly popular with ultra-wealthy investors during the late 1990's and early 2000's. The use of PVFCs, however, has gone largely unnoticed by the public. In 2007 the Internal Revenue Service caught on and began attacking these complex derivatives. The first of these cases, Anschutz v. Commissioner, involved the use of a PVFC to defer over one hundred million dollars in capital gains taxes. This Note analyzes the Tax Court's use of section 1058 of the Internal Revenue Code to strike down the tax deferral scheme. While supporting the Tax Court's efforts in preserving the fiscal health of the Treasury, this Note proposes that the Tax Court's use of section 1058 may have raised more questions than it has answered regarding the tax consequences of these complex derivative products. Additionally, the court's opinion may have placed unnecessary strain on the securities lending industry, hampering economic growth.","PeriodicalId":431402,"journal":{"name":"LSN: Securities Law: U.S. (Topic)","volume":"68 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-01-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121744840","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 Securities and Exchange Commission (SEC) in the United States mandated a new digital reporting system for US companies in late 2008. The new generation of information provision has been dubbed by Chairman Cox, ‘interactive data’ (SEC, 2006). Despite the promise of its name, we find that in the development of the project retail investors are invoked as calculative actors rather than engaged in dialogue. Similarly, the potential for the underlying technology to be applied in ways to encourage new forms of accountability appears to be forfeited in the interests of enrolling company filers.We theorise the activities of the SEC and in particular its chairman at the time, Christopher Cox, over a three year period, both prior to and following the ‘credit crisis’. We argue that individuals and institutions play a central role in advancing the socio-technical project that is constituted by interactive data. We adopt insights from ANT (Callon, 1986; Latour, 1987, 2005b) and governmentality (Miller, 2008; Miller and Rose, 2008) to show how regulators and the proponents of the technology have acted as spokespersons for the interactive data technology and the retail investor. We examine the way in which calculative accountability has been privileged in the SEC’s construction of the retail investor as concerned with atomised, quantitative data (Kamuf, 2007; Roberts, 2009; Tsoukas, 1997). We find that the possibilities for the democratising effects of digital information on the internet has not been realised in the interactive data project and that it contains risks for the very investors the SEC claims to seek to protect.
2008年底，美国证券交易委员会(SEC)要求美国公司采用新的数字报告系统。新一代的信息提供被Cox主席称为“交互式数据”(SEC, 2006)。尽管它的名字很有希望，但我们发现，在项目的发展中，散户投资者被称为算计的参与者，而不是参与对话。同样，在鼓励新形式的问责制方面应用基础技术的潜力，似乎也会因为公司注册的利益而丧失。我们将美国证券交易委员会的活动，特别是当时的主席克里斯托弗·考克斯(Christopher Cox)在“信贷危机”之前和之后的三年时间里的活动理论化。我们认为，个人和机构在推进由交互式数据构成的社会技术项目中发挥着核心作用。我们采用ANT的见解(Callon, 1986;拉图尔，1987,2005b)和治理(米勒，2008;Miller and Rose, 2008)，以展示监管机构和技术支持者如何充当交互式数据技术和散户投资者的代言人。我们研究了计算问责制在SEC对散户投资者的构建中享有特权的方式，因为它涉及原子化的定量数据(Kamuf, 2007;罗伯茨,2009;Tsoukas, 1997)。我们发现，互联网上数字信息的民主化效应的可能性尚未在交互式数据项目中实现，而且它对美国证券交易委员会声称寻求保护的投资者也存在风险。
{"title":"Calculative Technologies and Accountability: The SEC’s Interactive Data Project","authors":"A. Lowe, J. Locke, A. Lymer","doi":"10.2139/ssrn.1714495","DOIUrl":"https://doi.org/10.2139/ssrn.1714495","url":null,"abstract":"The Securities and Exchange Commission (SEC) in the United States mandated a new digital reporting system for US companies in late 2008. The new generation of information provision has been dubbed by Chairman Cox, ‘interactive data’ (SEC, 2006). Despite the promise of its name, we find that in the development of the project retail investors are invoked as calculative actors rather than engaged in dialogue. Similarly, the potential for the underlying technology to be applied in ways to encourage new forms of accountability appears to be forfeited in the interests of enrolling company filers.We theorise the activities of the SEC and in particular its chairman at the time, Christopher Cox, over a three year period, both prior to and following the ‘credit crisis’. We argue that individuals and institutions play a central role in advancing the socio-technical project that is constituted by interactive data. We adopt insights from ANT (Callon, 1986; Latour, 1987, 2005b) and governmentality (Miller, 2008; Miller and Rose, 2008) to show how regulators and the proponents of the technology have acted as spokespersons for the interactive data technology and the retail investor. We examine the way in which calculative accountability has been privileged in the SEC’s construction of the retail investor as concerned with atomised, quantitative data (Kamuf, 2007; Roberts, 2009; Tsoukas, 1997). We find that the possibilities for the democratising effects of digital information on the internet has not been realised in the interactive data project and that it contains risks for the very investors the SEC claims to seek to protect.","PeriodicalId":431402,"journal":{"name":"LSN: Securities Law: U.S. (Topic)","volume":"25 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-11-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131253323","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 securitization of subprime mortgage loans is widely viewed as a root cause of the financial crisis. This lecture balances the costs and benefits of securitization, focusing on what went wrong and on what needs to be fixed to curtail securitization's abuses and make it viable again as an important financing tool. Finally, the lecture examines alternatives to securitization, focusing on covered bonds and comparing and contrasting covered bonds and securitization.
{"title":"Leverhulme Lecture: The Future of Securitization","authors":"S. Schwarcz","doi":"10.2139/ssrn.1707053","DOIUrl":"https://doi.org/10.2139/ssrn.1707053","url":null,"abstract":"The securitization of subprime mortgage loans is widely viewed as a root cause of the financial crisis. This lecture balances the costs and benefits of securitization, focusing on what went wrong and on what needs to be fixed to curtail securitization's abuses and make it viable again as an important financing tool. Finally, the lecture examines alternatives to securitization, focusing on covered bonds and comparing and contrasting covered bonds and securitization.","PeriodicalId":431402,"journal":{"name":"LSN: Securities Law: U.S. (Topic)","volume":"19 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-11-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131368642","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 paper advocates a takeover-neutral legal framework for shareholding disclosure. After showing how the laws on securities custody may affect shareholding disclosure, it summarises the state of the art of shareholder identification and ownership disclosure in some major jurisdictions. Next, it considers the features that should qualify an effective regulatory system of shareholding disclosure and sketches how the applicable rules could be designed with a view to ensure that regulation is takeover-neutral: in particular, the extent to which issuers should be left free to devise their own tailored regime is investigated. Then, the issue of how (supra-national) harmonisation can play a role in this area is discussed. The paper argues for a harmonised policy solution which, while guaranteeing a sufficient degree of standardisation (and, consequently, limited adaptation and compliance costs), also allows for a flexible implementation through a system of centralised default rules and opting in/out choices both at the Member States’ and at the issuers’ level.
{"title":"Mandatory and Contract-Based Shareholding Disclosure","authors":"L. Enriques, Matteo Gargantini, V. Novembre","doi":"10.1093/ULR/15.3-4.713","DOIUrl":"https://doi.org/10.1093/ULR/15.3-4.713","url":null,"abstract":"This paper advocates a takeover-neutral legal framework for shareholding disclosure. After showing how the laws on securities custody may affect shareholding disclosure, it summarises the state of the art of shareholder identification and ownership disclosure in some major jurisdictions. Next, it considers the features that should qualify an effective regulatory system of shareholding disclosure and sketches how the applicable rules could be designed with a view to ensure that regulation is takeover-neutral: in particular, the extent to which issuers should be left free to devise their own tailored regime is investigated. Then, the issue of how (supra-national) harmonisation can play a role in this area is discussed. The paper argues for a harmonised policy solution which, while guaranteeing a sufficient degree of standardisation (and, consequently, limited adaptation and compliance costs), also allows for a flexible implementation through a system of centralised default rules and opting in/out choices both at the Member States’ and at the issuers’ level.","PeriodicalId":431402,"journal":{"name":"LSN: Securities Law: U.S. (Topic)","volume":"11 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126449307","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}
According to van Marrewijk (2003), there is a small but essential distinction between corporate social responsibility and sustainability: corporate social responsibility relates to stakeholder dialogue and sustainability reporting, while the focus of corporate sustainability is on value creation and environmental management (as cited in Ciliberti et al., 2008, p. 89). This distinction implies that corporate sustainability is more internally focused and related to running the business, and that corporate social responsibility is more related to selling a business to external parties. However, if sustainability reporting is used for both external and internal purposes, the sustainability reporting process can be transformed to become more related to running the business (Leibs, 2007, December 1). This can occur if sustainability reports yield both external and internal reporting benefits. Effective internal sustainability reporting may be achieved, perhaps at a relatively low cost, via real-time reporting and data reuse made possible by extensible business reporting language (XBRL). Currently, most corporations just concentrate on financial health as expressed through their profit and loss statements and balance sheets (“How accountants,” 2002, October 22). XBRL was originally developed to help process financial information (“Tag,” 2007, May) and was designed to properly associate business reporting data with externally focused financial reporting taxonomies (Garbellotto, 2006). However, XBRL may become even more significant for sustainability reporting than for financial reporting (Baue, 2007, April 16). Financial reporting is legally required for publicly traded companies, which means they do it universally (Baue, 2007, April 16). But sustainability reporting is mostly voluntary, which means XBRL may become a driving force in corporate sustainability reporting (Baue, 2007, April 16). XBRL’s use in sustainability reporting may help accelerate the combination of financial and sustainability data in a single annual report (Leibs, 2007, December 1). Therefore, more widespread use of sustainability reports may very well be linked to more widespread corporate adoption of XBRL for both financial and sustainability reporting purposes. It is also likely that sustainability reporting will be more widespread if sustainability reports are used for both external and internal purposes, thereby making sustainability reporting more related to running the business and value creation. This would cause the emphasis of sustainability reporting to move away from corporate social responsibility and toward corporate sustainability.
{"title":"Sustainability Reporting and XBRL","authors":"Jon A. Baumunk","doi":"10.2139/ssrn.1620567","DOIUrl":"https://doi.org/10.2139/ssrn.1620567","url":null,"abstract":"According to van Marrewijk (2003), there is a small but essential distinction between corporate social responsibility and sustainability: corporate social responsibility relates to stakeholder dialogue and sustainability reporting, while the focus of corporate sustainability is on value creation and environmental management (as cited in Ciliberti et al., 2008, p. 89). This distinction implies that corporate sustainability is more internally focused and related to running the business, and that corporate social responsibility is more related to selling a business to external parties. However, if sustainability reporting is used for both external and internal purposes, the sustainability reporting process can be transformed to become more related to running the business (Leibs, 2007, December 1). This can occur if sustainability reports yield both external and internal reporting benefits. Effective internal sustainability reporting may be achieved, perhaps at a relatively low cost, via real-time reporting and data reuse made possible by extensible business reporting language (XBRL). Currently, most corporations just concentrate on financial health as expressed through their profit and loss statements and balance sheets (“How accountants,” 2002, October 22). XBRL was originally developed to help process financial information (“Tag,” 2007, May) and was designed to properly associate business reporting data with externally focused financial reporting taxonomies (Garbellotto, 2006). However, XBRL may become even more significant for sustainability reporting than for financial reporting (Baue, 2007, April 16). Financial reporting is legally required for publicly traded companies, which means they do it universally (Baue, 2007, April 16). But sustainability reporting is mostly voluntary, which means XBRL may become a driving force in corporate sustainability reporting (Baue, 2007, April 16). XBRL’s use in sustainability reporting may help accelerate the combination of financial and sustainability data in a single annual report (Leibs, 2007, December 1). Therefore, more widespread use of sustainability reports may very well be linked to more widespread corporate adoption of XBRL for both financial and sustainability reporting purposes. It is also likely that sustainability reporting will be more widespread if sustainability reports are used for both external and internal purposes, thereby making sustainability reporting more related to running the business and value creation. This would cause the emphasis of sustainability reporting to move away from corporate social responsibility and toward corporate sustainability.","PeriodicalId":431402,"journal":{"name":"LSN: Securities Law: U.S. (Topic)","volume":"14 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2009-12-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127833455","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}
Pub Date : 2009-04-02DOI: 10.1108/15285810910971300
Matthew A. Zolnor
The Sarbanes-Oxley Act (SOX) was enacted in 2002 in response to the collapse of several previously highly regarded firms, including Enron and Worldcom. The goal of SOX was to increase investor confidence in financial markets. However, there has been much debate about whether the costs of compliance with SOX outweigh the benefits it produces, particularly with respect to its internal control reporting (ICR) requirements under section 404. After a brief introduction in Part I, Part II of the paper discusses the Coase Theorem, which posits that economic regulation serves no purpose in the absence of transaction costs. The Coase framework is then applied to financial markets in the abstract and it is explained how ICR regulation can, in fact, expand total output. Part III then analyzes the efficacy of the various ICR regulations, both pre- and post-SOX, and determines that Section 404 of SOX is an example of over-regulation. The paper then closes by explaining how the lessons learned from SOX's shortcomings and Section 404 in particular are relatable to our current economic crisis.
{"title":"Internal Control Reporting Regulation: A Law and Economics Perspective","authors":"Matthew A. Zolnor","doi":"10.1108/15285810910971300","DOIUrl":"https://doi.org/10.1108/15285810910971300","url":null,"abstract":"The Sarbanes-Oxley Act (SOX) was enacted in 2002 in response to the collapse of several previously highly regarded firms, including Enron and Worldcom. The goal of SOX was to increase investor confidence in financial markets. However, there has been much debate about whether the costs of compliance with SOX outweigh the benefits it produces, particularly with respect to its internal control reporting (ICR) requirements under section 404. After a brief introduction in Part I, Part II of the paper discusses the Coase Theorem, which posits that economic regulation serves no purpose in the absence of transaction costs. The Coase framework is then applied to financial markets in the abstract and it is explained how ICR regulation can, in fact, expand total output. Part III then analyzes the efficacy of the various ICR regulations, both pre- and post-SOX, and determines that Section 404 of SOX is an example of over-regulation. The paper then closes by explaining how the lessons learned from SOX's shortcomings and Section 404 in particular are relatable to our current economic crisis.","PeriodicalId":431402,"journal":{"name":"LSN: Securities Law: U.S. (Topic)","volume":"2 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2009-04-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"120892749","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 Nation is now in the midst of one of the greatest financial crises in its history. Much of the blame for this condition is being placed on the bursting of the residential real estate bubble, which was fueled in large part by the reckless expansion of subprime mortgage lending. Those mortgages began defaulting in droves as the Federal Reserve Board drove up interest rates, causing massive losses at Bear Stearns, Lehman Brothers, Morgan Stanley, Citigroup, Wachovia, Washington Mutual, Countrywide Financial Group, American International Group and Merrill Lynch, to name a few. Those losses were shocking but paled in comparison to the failures of Lehman Brothers and Bear Stearns and the placing of Freddie Mac and Fannie Mae into conservatorship. Massive bailout packages for the financial service firms failed to restart lending, the country slipped into recession and unemployment soared. The subprime crisis had other ripple effects. The Dow Jones Industrial average was down 47 percent on February 19, 2009 from the high of 14,087 that was reached on October 1, 2007. This devastated retirement savings, college and other endowments, and every other investor in the market.On the other side of the equation were the subprime borrowers. They too were devastated by the subprime crisis as their adjustable rate mortgages (which had been originally issued at low "teaser" rates) reset at unaffordable levels. Foreclosures became an epidemic in many communities across the country, Florida being one of the worst centers for those sad events. Hispanics were also a particular target for subprime lenders. Hispanic homeownership in the United States grew by 47 percent between 2000 and 2007, compared to an overall homeownership increase of 8 percent. Tellingly, that growth was fueled by the fact that some 47 percent of mortgage loans to Hispanics were subprime and many of those loans are now being foreclosed. The African-American community has also been hard hit by the subprime crisis. Over one half of mortgage loans to African-Americans in 2006 were subprime, and they too are facing massive foreclosures. These problems have been blamed on flaws in the financial regulatory structure, and Congress has now begun the process of restructuring that regulation. This Article discusses the subprime mortgage market and the flaws in the financial system that led to the present crisis, and it will then provide some suggestions on regulatory reform.
{"title":"The Subprime Crisis - Some Thoughts on a 'Sustainable' and 'Organic' Regulatory System","authors":"J. Markham","doi":"10.25148/LAWREV.4.2.4","DOIUrl":"https://doi.org/10.25148/LAWREV.4.2.4","url":null,"abstract":"The Nation is now in the midst of one of the greatest financial crises in its history. Much of the blame for this condition is being placed on the bursting of the residential real estate bubble, which was fueled in large part by the reckless expansion of subprime mortgage lending. Those mortgages began defaulting in droves as the Federal Reserve Board drove up interest rates, causing massive losses at Bear Stearns, Lehman Brothers, Morgan Stanley, Citigroup, Wachovia, Washington Mutual, Countrywide Financial Group, American International Group and Merrill Lynch, to name a few. Those losses were shocking but paled in comparison to the failures of Lehman Brothers and Bear Stearns and the placing of Freddie Mac and Fannie Mae into conservatorship. Massive bailout packages for the financial service firms failed to restart lending, the country slipped into recession and unemployment soared. The subprime crisis had other ripple effects. The Dow Jones Industrial average was down 47 percent on February 19, 2009 from the high of 14,087 that was reached on October 1, 2007. This devastated retirement savings, college and other endowments, and every other investor in the market.On the other side of the equation were the subprime borrowers. They too were devastated by the subprime crisis as their adjustable rate mortgages (which had been originally issued at low \"teaser\" rates) reset at unaffordable levels. Foreclosures became an epidemic in many communities across the country, Florida being one of the worst centers for those sad events. Hispanics were also a particular target for subprime lenders. Hispanic homeownership in the United States grew by 47 percent between 2000 and 2007, compared to an overall homeownership increase of 8 percent. Tellingly, that growth was fueled by the fact that some 47 percent of mortgage loans to Hispanics were subprime and many of those loans are now being foreclosed. The African-American community has also been hard hit by the subprime crisis. Over one half of mortgage loans to African-Americans in 2006 were subprime, and they too are facing massive foreclosures. These problems have been blamed on flaws in the financial regulatory structure, and Congress has now begun the process of restructuring that regulation. This Article discusses the subprime mortgage market and the flaws in the financial system that led to the present crisis, and it will then provide some suggestions on regulatory reform.","PeriodicalId":431402,"journal":{"name":"LSN: Securities Law: U.S. (Topic)","volume":"37 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2009-03-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124931307","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 research report examines trading in securities on the NZDX, drawing from some key studies on secondary debt market liquidity in the US. Several key metrics are provided on the NZDX and indications are that the NZDX has become a viable channel for raising capital and providing investors with a transparent and accessible means of buying and selling debt and quasi-debt securities. In probing further into trading frequency and volume several variables are found to influence trading levels. Evidence in this report suggests that securities with a larger issue size, younger age, lower minimum holding, shorter maturity, classified as “bonds”, and issued by issuers that make more frequent announcements, tend to trade more and/or in greater volume.
{"title":"The Determinants of Trading in NZDX Securities","authors":"C. Thomas","doi":"10.2139/ssrn.1982482","DOIUrl":"https://doi.org/10.2139/ssrn.1982482","url":null,"abstract":"This research report examines trading in securities on the NZDX, drawing from some key studies on secondary debt market liquidity in the US. Several key metrics are provided on the NZDX and indications are that the NZDX has become a viable channel for raising capital and providing investors with a transparent and accessible means of buying and selling debt and quasi-debt securities. In probing further into trading frequency and volume several variables are found to influence trading levels. Evidence in this report suggests that securities with a larger issue size, younger age, lower minimum holding, shorter maturity, classified as “bonds”, and issued by issuers that make more frequent announcements, tend to trade more and/or in greater volume.","PeriodicalId":431402,"journal":{"name":"LSN: Securities Law: U.S. (Topic)","volume":"63 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2008-12-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132864100","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}
On April 19, 2005, the United States Supreme Court rendered a unanimous decision in Dura Pharmaceuticals, Inc. v. Broudo, which had been described as “the most important securities case in a decade.” Simply put, the decision raises the pleading standard for Rule 10b-5 cases asserting fraud-onthe-market; instead of requiring a showing of ex ante losses, such as inflation at the time of purchase, Dura requires a showing of ex post losses, such as market decline resulting from a corrective disclosure. This paper assesses the decision’s practical implications by examining and empirically testing whether the Supreme Court’s enhanced pleading requirements have impacted the frequency and magnitude of post-Reform Act (PSLRA) class action securities cases. Specifically, this paper examines Dura’s effect on the filing and settling of cases, as well as on settlement amount. In particular, the results suggest that Dura, ceteris paribus, has had a statistically significant impact on both the filing and settlement of class actions, suggesting a reduction in frivolous litigation.
{"title":"Dura's Effect on Securities Class Actions","authors":"Scotland M. Duncan","doi":"10.5195/JLC.2008.11","DOIUrl":"https://doi.org/10.5195/JLC.2008.11","url":null,"abstract":"On April 19, 2005, the United States Supreme Court rendered a unanimous decision in Dura Pharmaceuticals, Inc. v. Broudo, which had been described as “the most important securities case in a decade.” Simply put, the decision raises the pleading standard for Rule 10b-5 cases asserting fraud-onthe-market; instead of requiring a showing of ex ante losses, such as inflation at the time of purchase, Dura requires a showing of ex post losses, such as market decline resulting from a corrective disclosure. This paper assesses the decision’s practical implications by examining and empirically testing whether the Supreme Court’s enhanced pleading requirements have impacted the frequency and magnitude of post-Reform Act (PSLRA) class action securities cases. Specifically, this paper examines Dura’s effect on the filing and settling of cases, as well as on settlement amount. In particular, the results suggest that Dura, ceteris paribus, has had a statistically significant impact on both the filing and settlement of class actions, suggesting a reduction in frivolous litigation.","PeriodicalId":431402,"journal":{"name":"LSN: Securities Law: U.S. (Topic)","volume":"5 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2008-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126621850","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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