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Short selling came onto the centre stage during the recent financial crisis when the collapse in price of financial listed securities after the demise of Lehman Brothers led to the introduction of a number of temporary short selling bans. In Europe however it was the commencement of the recent European sovereign debt crisis that was the true stimulus for proposing new short selling rules, the culmination of which was the introduction of the European Short Selling Regulation (the 'Regulation'). The thesis asks whether the Regulation is a justifiable response to the concerns posed by short selling. Such issues are measured against the relevant economic literature that almost overwhelmingly demonstrates that short selling contributes to market efficiency, that restrictions generally make markets less efficient and that constraints do not achieve the desired objective of stabilising prices. The thesis then analyses the political economy and backdrop to the Regulation’s introduction that largely dictated the shape of the final rules. The precise legislative choices made by Europe, including with respect to sovereign credit default swaps, are analysed, and (where relevant) there is a comparative element with a consideration of the US short sale regulations. These rules are used as a contrast and as a means of commenting more effectively on the European provisions. The doctorate concludes that the Regulation is not a justifiable response to policymakers' concerns and that the rules have suffered from the politicisation of the legislative process. The thesis suggests that short-term political point scoring has triumphed over the long-term benefits of market efficiency and that short sellers are now the subjects of highly technical rules that will negatively impair on market efficiency. Although, with time, parties may learn to use the new rules to their advantage, this does not justify the introduction of unreasonable rules in the first place.

Bitcoin and the other cryptocurrencies spawned by the innovation of blockchain programming have exploded in prominence, both in gains of massive market value and in dramatic market losses, the latter most notably seen in connection with the failure of the FTX cryptocurrency exchange in November 2022. After years of investment and speculation, however, something crucial has faded: the original use case for Bitcoin as a system of payment. Can cryptocurrency-as-a-payment-system be saved, or are day traders and speculators the actual cryptocurrency future? This article suggests that cryptocurrency has been hobbled by a lack of foundational commercial and consumer-protection law that enabled the rise of other noncash payment systems, such as credit cards. The original payment system purpose of Bitcoin and its progeny is at a legal fork and is, at this moment, eminently savable because of the presence of two uniform acts that are ripe for enactment by the states. First, the 2022 amendments to the Uniform Commercial Code, which add new Article 12, fill in commercial law gaps for cryptocurrency that give it transactional certainty on a par with traditional checks and payment cards. Second, the Uniform Regulation of Virtual Currency Businesses Act creates crucial consumer protection for users of third-party digital wallets, transforming a technical convenience into a safer interface for mainstream users. If proponents of cryptocurrency wish to see it thrive as a mainstream payment system, then they would do well to press for enactment of the 2022 UCC Amendments and the URVCBA. Otherwise, the future of blockchain is likely to be dominated by a potentially endless series of speculative bubbles rather than as acceptance as a payment system.

Recent years have witnessed the near total triumph of market efficiency as a regulatory goal. Policymakers regularly proclaim their devotion to ensuring efficient capital markets. Courts use market efficiency as a guiding light for crafting legal doctrine. And scholars have explored in great depth the mechanisms of market efficiency and the role of law in promoting it. There is strong evidence that, at least on some metrics, our capital markets are indeed more efficient than they have ever been. But the pursuit of efficiency has come at a cost. By focusing our attention narrowly on economic efficiency concerns—such as competition, friction, and transaction costs—we have lost sight of other, deeper values within our economic system, including wider conceptions of duty, fairness, and morality. And while regulators sometimes pay lip service to these values, they often treat them as merely a subset of efficiency: the best way to treat investors fairly, to promote equality, and to prevent immoral, exploitative behavior, in this view, is simply to create an efficient market. We have seen the consequences of this emphasis play out in spectacular fashion in the last decade. New market structures and technologies—from special purpose acquisition companies to social-media oriented trading apps to cryptocurrencies—have emerged to eliminate barriers to trade and compete with institutional incumbents. These strategies may well lead to more efficient markets insomuch as they facilitate access to capital, but they also have the side effect of placing unsophisticated individuals into complex contractual arrangements with sophisticated market actors. The result is an “efficient” market, but one with steep moral and social costs. This Article examines the limits of market efficiency as a regulatory goal and suggests a set of structural and substantive reforms aimed at better balancing efficiency with the other goals of markets. It concludes that regulators, courts, and scholars alike need to adopt a more comprehensive understanding of the proper ends of market regulation, one that emphasizes the purpose and spirit of finance over the false promise of efficiency.

Constant cyber threats result in: intellectual property loss; data disruption; ransomware attacks; theft of valuable company intellectual property and sensitive customer information. During March 2022, The Securities and Exchange Commission (SEC) issued a proposed rule addressing Cybersecurity Risk Management, Strategy, Governance, and Incident Disclosure, which requires: 1. Current reporting about material cybersecurity incidents; 2. Periodic disclosures about a registrant’s policies and procedures to identify and manage cybersecurity risks; 3. Management’s role in implementing cybersecurity policies and procedures; 4. Board of directors’ cybersecurity expertise, if any, and its oversight of cybersecurity risk; 5. Registrants to provide updates about previously reported cybersecurity incidents in their periodic reports; and 6. Cybersecurity disclosures to be presented in Inline eXtensible Business Reporting Language (“Inline XBRL”).To paraphrase Lord Kelvin’s famous observation, “you can’t manage what you don’t measure.” How then does the Securities and Exchange Commission (SEC) craft a disclosure regime that captures in a structured data format all those measurable components of costs that allows management and investors to better understand the true costs incurred in cyber defense and breach mediation? This inquiry logically dovetails into the broader question of externality costs associated with cyberattack that, when ignored by industry, are placed as additional burdens upon government and other institutions (such as municipalities, school systems and universities) and customer citizens when their identity data is stolen and fraud committed against them. SEC chair Gary Gensler states, “The economic cost of cyberattacks is estimated to be at least in the billions, and possibly in the trillions, of dollars. Hackers have attacked broker-dealers, governmental agencies, meat processors, and pipelines. These attacks can take many forms from denials-of-service to malware to ransomware.” By now, a broad understanding of the pervasive threat of cyberattack from international criminal organizations, nation states, and even poorly capitalized criminal elements are legion. We will not replicate that discussion here, except to briefly mention several recent attacks to illustrate some of the difficulties and challenges in capturing accurate aggregate cost data.We commend the SEC for their March 2022 issuance of a proposed rule addressing Cybersecurity Risk Management, Strategy, Governance, and Incident Disclosure. In the following pages we recommend that the SEC build upon the March 2022 proposed rule by creating a Cyber Data Disclosure Commission to be comprised of relevant stakeholder groups to investigate and promulgate suggestions for a standardized disclosure regime for cyber data. Our task of creating a template that will define and capture those measurable costs that are necessarily required for a meaningful analysis is multifaceted. Just a few of the many complex issues include: 1. What cybersecurity disclosure information is useful to investors?;2. What investments in cyber defense are period costs?; 3. Which costs should appropriately be capitalized such as secondary data recovery centers (if any) and amortized over what period of time (for reporting purposes)?;4. How do we measure known losses? 5. Which imputed costs (if any), such as lost sales, are appropriate for inclusion in our measurement?6. Can agreement be reached about how reputational costs associated with cyber breaches should be measured (imputed)?Our paper proceeds in seven parts. First, we provide a brief discussion about the difficult challenges associated with capturing cyber threat data. Second, is a brief history of the SEC disclosure regime. Third, we address the economics of cybersecurity. Fourth, we provide a proposed schematic for composition and workflow for an SEC Cyber Data Disclosure Commission. Fifth, we highlight the important implications of this study for the preservation of U.S. national security interests. The American business community is a critical link in the national cyber security equation. Any weak link in the system constitutes an unacceptable vulnerability for all citizens. Sixth, we recommend the Commission consider asking Congress to pass legislation creating a Public Company Cybersecurity Oversight Board for publicly-traded companies similar to the PCAOB. And last, we conclude. We believe this proposal is significant and represents a timely contribution in fostering better cooperation between all interested stakeholders in cyber hygiene and security.

Special Purpose Acquisition Companies (SPACs) are simply enterprises that raise money from the public with the intention of purchasing an existing business and becoming publicly traded in the securities markets. If the SPAC is successful in raising money and the acquisition takes place, the target company takes the SPAC’s place on a stock exchange in a transaction that resembles a public offering. Also known as “blank-check” or “reverse merger” companies, this process avoids many of the pitfalls of a traditional initial public offering. During late 2020 and 2021 an unprecedented surge in the popularity and issuance of Special Purpose Acquisition Companies (SPACSs) took place. John Coates, the SEC’s Acting Director of the Division of Corporation Finance, observed, “Concerns include risks from fees, conflicts, and sponsor compensation, from celebrity sponsorship and the potential for retail participation drawn by baseless hype, and the sheer amount of capital pouring into the SPACS, each of which is designed to hunt for a private target to take public.” We discuss this popular approach to capital formation within the context of the securities issuance process and examine the robust market for SPAC issuance during 2020 and 2021. Financial reporting and auditing considerations are examined, along with regulatory concerns. Several examples of these offerings are provided. We believe this paper adds to the discussion and understanding of this widely employed financing mechanism.

Non-fungible tokens—or NFTs, as they are better known—have taken the world by storm. The idea behind an NFT is that by owning a certain thing (specifically, a digital token that is tracked on a blockchain), one can hold property rights in something else (either a real or intangible asset). In the early part of 2021, NFTs for items ranging from a gif of a pop-tart cat with a rainbow tail, to Twitter CEO Jack Dorsey’s first tweet, to a New York Times column (about NFTs!) have sold for millions of dollars over the internet. Promoters assert that NFTs are the “future of digital property,” and that they herald a day when “government will lose its unique power to mint currency and protect property.” And these promoters reach beyond the typical crypto crowd. Giants of finance and industry are promising to extend the use of NFTs to securities, industrial assets, and real estate in the coming years. Moreover, this crypto token craze comes at a time when the American Law Institute and the Uniform Law Commission are in the midst of recommending revisions to U.S. commercial law to accommodate the digital age. In this Article, we take a more sober look at the tokenization phenomenon and, in doing so, describe what exactly it means when it comes to property rights. What can a purchaser of a token expect? How is a token actually connected to the underlying asset, if at all? What does the law—not the hype—have to say about it? We show that tokenization under the law actually has a long history, backed by practical economic considerations and animated by strong theoretical underpinnings. We also show that NFTs have neither of these attributes. Additionally, our Article surveys a dataset of terms of service from the most prominent NFT platforms in order to exploit both their disconnect from real legal effects and their puzzlingly contradictory promises about the relationships between buyers, seller, and the platform. Our project aims not only to inform current commercial law reform efforts, but it also offers a policy prescription for policing the NFT market.

Although the securities market in Korea has developed rapidly since 1950 after the Korean war, the Korean securities market regulation to prevent market manipulation began in earnest with the enactment of the Financial Investment Services and Capital Markets Act of Korea in the 2000s, although the market in Korea has developed rapidly since 1950 after the Korean war. The Securities laws and regulations of Korea are very similar to that of the U.S. However, the enforcement against market manipulation heavily relies on criminal enforcement. This prioritization of criminal prosecution over administrative and civil enforcement makes it difficult for Korea to protect investors, especially in the post-Morrison world where market manipulation may migrate from foreign markets to Korea. Is future reformation of market manipulation law needed in Korea? Historically, the model of Korean securities laws is Japan’s, and the Japanese securities law benchmarked the U.S securities law. Therefore, the core anti-market manipulation law of Korea is almost identical to the U.S securities laws. However, substantial differences between the markets and enforcement history made Korean enforcement quite different. In Korea, the securities law’s primary enforcement tool is criminal prosecution. Civil enforcement by securities market regulators is scarce in Korea, and a class action by private investors is tough to bring. Using this criminal enforcement mechanism against foreign market manipulators is almost impossible in practice. The enforcement system, which heavily relies on criminal enforcement could be problematic, especially in the post-Morrison world. Cross-border consistency of civil, administrative, and criminal enforcement is critical to protect investors against the market manipulator who seeks enforcement arbitrage between countries after the U.S. Supreme Court Morrison decision applied U.S. securities laws only to transactions inside the U.S. This dissertation will examine various options for regulatory enforcement reform in Korea that would build on Korea's distinctive institutions and enhance administrative, civil, criminal securities regulation mechanisms against market manipulation.

Stakeholder capitalism conceives of capitalism with companies maximizing their long-term value, while considering in addition to the interests of their shareholders, also the interests of all their other stakeholders. Examples of such additional stakeholders include customers, employees, communities, creditors, competitors, society at large, and our planet. America today does not have stakeholder capitalism. Instead, America presently has shareholder capitalism, in which publicly held corporations only maximize their stock value to shareholders. This Essay analyzes proposals for the United States Securities Exchange Commission to require that all reporting companies make periodic mandatory Environmental, Social, and Governance (ESG) disclosures of comparable, standardized, and quantifiable metrics. These required, ongoing ESG report cards would measure the diversity, sustainability, and ethical impacts of companies on other stakeholders besides shareholders. In effect, this one simple regulatory change means that reporting companies effectively will maximize shareholder value subject to ESG constraints regarding other stakeholders’ interests, just as corporations now maximize profits subject to economic, legal, market, scientific, and technological constraints. This Essay analyzes how mandatory periodic ESG disclosures can realize diversity, sustainability, and stakeholder capitalism. This Essay explains why corporate greed as currently practiced under the notion of shareholder capitalism is a championed and cherished part of American popular culture. Finally, this Essay examines possible causes of the belief that corporate greed and individual greed are socially desirable and even somehow virtuous.

This is not your grandfather’s SEC anymore. Rapid technological change has resulted in novel regulatory issues and challenges, as law and policy struggles to keep pace. The U.S. Securities and Exchange Commission (SEC) reports that “the U.S. capital markets are the deepest, most dynamic, and most liquid in the world. They also have evolved to become increasingly fast and extraordinarily complex. It is our job to be responsive and innovative in the face of significant market developments and trends.” With global markets increasingly interdependent and interconnected and, “as technological advancements and commercial developments have changed how our securities markets operate, our ability to remain an effective regulator requires us to continuously monitor the market environment and, as appropriate, adjust and modernize our expertise, rules, regulations, and oversight tools and activities.” The success or failure of our society, jobs of a global workplace, and the ability of families everywhere to feed, clothe, and house themselves depends on the success of the SEC in providing fair and open access to capital through efficient markets. Our paper proceeds in eight parts. First, we explain the genesis and role of the Securities and Exchange Commission (SEC). Second, the definition of and what exactly constitutes a “security” is provided. Third, the securities issuance process is discussed. Fourth, we focus our discussion on The Division of Enforcement. Fifth, we discuss corporate governance and the SEC. Sixth, we explore the difficult task of governing during times of rapid technological change. Seventh, we examine contemporary issues that face the Commission. And last, we conclude.

Litigants spend immense time and money fighting over procedure. That fact is especially true for procedural rules concerning where a case may be heard—which, in the context of class actions, can determine the viability of claims almost regardless of their underlying merit. The potential for class certification, which tends to be greater in state than in federal courts, can transform claims that alone are too small to even justify suing into threats so large that defendants routinely use the words “judicial blackmail” to describe them. This paper focuses on a growing conflict between federal statutory removal provisions that arises in alleged class actions involving the initial sale of securities, like cryptocurrencies, that are not sold on public exchanges. In this category of cases, the Securities Act of 1933 strictly prohibits removal to federal courts, while the Class Action Fairness Act appears to broadly allow it. Thus, courts have determined the two statutes are “irreconcilable.” This article disagrees with the growing trend to hold CAFA prevails and allows removal, but it first pushes back against the conclusion that the two statutes must be irreconcilable. It illustrates how CAFA could be read to exclude cases alleging claims solely under the 1933 Act, which would avoid the potential for conflict altogether. It then analyzes, in the alternative, why the Supreme Court’s 2018 decision in Cyan Inc. v. Beaver County Employees Retirement Fund1 suggests that the 1933 Act should prevail. After Cyan, filings of securities class actions have increased dramatically, meaning understanding the interplay between these two statutes will become increasingly important.

One of the most written-about and important topics in corporate law is the fiduciary obligations of corporate directors. Increasingly, critics of American capitalism have urged that corporations, and implicitly, corporate directors, act in a more socially responsible fashion and thus eschew the notion that shareholder primacy is the exclusive guide to a director’s fiduciary duty. Under this view, directors must consider the effect of their actions on “stakeholders” other than shareholders and be guided by morality—doing the right thing—when making business judgments. When directors move away from shareholder primacy, however, decision-making becomes more difficult and problematic. This article analyzes the arguments that underpin a rejection of shareholder primacy, alternatives to shareholder primacy, and the utility of morality as a guide for directors making business judgments.

The promise of financial technology (“fintech”) and artificial intelligence (“AI”) in broadening access to financial products and services continues to capture the imagination of policymakers, Wall Street, and the public. This has been particularly true in the realm of fintech credit where platform companies increasingly provide online loans to consumers, students, and small businesses by harnessing AI underwriting and alternative data. In 2019 alone fintech lenders represented nearly 50% of total non-credit card, unsecured consumer loan balances in the United States. One of the most prevalent ways fintech credit firms operate is by securitizing the online loans they help originate. In doing so, fintech lenders are able to access the capital markets and further the spread of borrowed capital and credit risk. Against this backdrop of increasing institutional investment in fintech securitized assets, this Article reveals how consumer finance law is playing a subtle but increasingly important role in commercial financial transactions. I do this by exploring how structured finance has come to operate in the fintech credit marketplace and by comparing it to pre-2008 securitization activity in the home mortgage context. In doing so, I critique algorithm-driven credit securitization and point out certain economic and legal risks that make it similar to pre-2008 mortgage securitization, as well as other risks that are unique to fintech finance. These pertain to, among other things, the opacity of loans underwritten through the use of alternative data and machine learning, the untested efficacy of such underwriting techniques, and the ways consumer finance laws—such as licensing, usury, and standards-based regulation—and the growth of nonbank finance companies intersect with the securitization process. The paper concludes by offering policy recommendations for addressing these future risks.

In January, 2020, the Delaware Supreme Court handed down its decision in Salzberg v. Sciabacucchi, upholding a provision in a certificate of incorporation that designated the federal courts as the exclusive jurisdiction for the litigation of claims under the federal Securities Act of 1933. The inclusion of these provisions in Delaware charters and bylaws – often referred to as “Federal Forum Provisions” or FFPs – raised important questions as to the reach of the internal affairs doctrine. This doctrine provides that the jurisdiction of incorporation regulates the internal affairs of its corporations: the relationship among and between the corporate officers, directors and shareholders. Although, strictly speaking, the Court left this definition of internal affairs untouched, the practical effect of the decision was, perhaps, to expand the reach of state corporate law by expanding the kinds of provisions that a corporation may include in its charter and bylaws. This article explores the effect of Salzberg on that doctrine.

Policymakers need to rediscover the organizational form of business entity as a tool of financial regulation. Recent and classic scholarship has produced evidence that financial institutions organized as alternative entity forms – including investment bank partnerships and banks and insurance companies organized as mutual or cooperatives – tend to take less risk, exploit customers/consumer less, or commit less misconduct compared to counterparts organized as investor-owned corporations. This article builds off the work of Hill and Painter on investment banks organized as partnerships, Hansmann on the history and economics of banks and insurance companies organized as mutuals and cooperatives, and other scholars. Encouraging either financial institutions to convert to alternative entity forms or more capital and business to flow to these firms can mitigate systemic risk, dampen risk-taking, and further consumer protection. Systemic risk can also be mitigated by organizing firms across a financial industry in an entity that mutualizes risk and encourages firms to police one another’s conduct. Omarova’s and Saguato’s work in this vein recalls the bank clearinghouse of the 19th century. The entity form furthers these policy objectives without the need for policymakers to specify standards for conduct. Instead, alternative entity forms work by changing the relationships among various claimants on the firm and the firm’s management. Beyond control and liability rules, alternative organizational forms affect manager behavior by changing the identity of the residual claimant on the firm. Management behavior shifts because they are not responsive to investors whose principal interest is maximizing their return on capital. Alternative entity forms may come with agency costs, as the residual claimants face difficulty in organizing collectively to monitor and discipline management. However, evidence from mutual insurance companies suggests that agency costs are not severe. Other costs associated with partnerships, mutuals, and collectives include limitations on the ability of firms to raise capital. However, this drawback has the benefit of creating an embedded check on the size and complexity of financial firms and providing an alternative to breaking up large financial conglomerates for too-big-to-fail and other concerns. Similarly, alternative entities better serve the interests of residual claimants when those claimants have homogenous interests, creating disincentives for firms to expand across business lines. Policymakers could encourage financial firms to convert their organizational form or promote more capital or business flowing to alternative entities by providing or restoring historical tax incentives or creating regulatory preferences in the policy areas in which alternative entities outperform investor-owned corporations. In some cases, such as risk-adjusted deposit insurance premiums, regulators may be required to provide this treatment. Regulators and prosecutors should consider requiring financial institutions that have committed serious violations of laws to convert to an alternative organizational form as an alternative to imposing fines or revoking a charter or license.

Startup companies can now legally sell shares of stock, bonds, or other securities to the broad public using equity crowdfunding, a new type of online capital market modeled on Kickstarter and other reward crowdfunding websites. Through equity crowdfunding, entrepreneurs can go directly to the broad public (the “crowd”) for investment, without having to go through the usual (and costly) process of an initial public offering (IPO). Equity crowdfunding thus offers a chance for all entrepreneurs, regardless of their physical location, gender, or anything else, to solicit investors and raise capital. In 2012, new federal legislation—the Jumpstart Our Business Startups (JOBS) Act—amended the original Securities Act of 1933 to allow for equity crowdfunding. Three years later, in late 2015, the Securities and Exchange Commission (SEC) promulgated a set of rules and regulations that companies must follow, known as “Regulation Crowdfunding,” and a corresponding official form through which offerings are filed (Form C). Equity crowdfunding officially commenced in America in May 2016. Which types of companies—“issuers” in the parlance of securities law—are actually using Regulation Crowdfunding? Are they early-stage startups or more mature issuers? What is their legal form? How many of them are women-led? Where are they based? Using an original data set collected by the author and his research assistant from all of the Forms C filed with the SEC from 2016 to 2018, this Article provides answers to these questions and more. According to our data, crowdfunding issuers are overwhelmingly early-stage companies with just a couple of employees and little to no revenue or assets. Most are corporations, though many are LLCs, and almost none are public benefit corporations. There is significant geographic diversity among the issuers, although California and New York still lead the pack. Finally, but perhaps most significantly, we found that twenty-eight percent of equity crowdfunding issuers have a woman on their executive team, a much higher percentage than in the traditional forms of startup finance, namely venture capital and angel investing.

The Mandatory Bid Rule (MBR) requires a bidder who acquires control over a firm to make a general offer to all remaining shareholders to purchase their residual shares. It is the most powerful institution that requires controlling shareholders to share the control premium with other shareholders in a control transaction. The MBR is considered to be a key method of protection for minority shareholders, but nevertheless faces strong criticism over high implementation costs and an on-going debate over its effectiveness in practice. From a utilitarianism perspective, the paper shows the relevance between the MBR and the effectiveness of minority shareholder protection mechanisms in a jurisdiction of legal transplantation. Using Mainland China as the test sample where the MBR was adopted, removed then re-introduced, the paper employs the empirical research methodology to highlight market reactions when the rule is removed. The paper analyses the efficiency of the MBR and outlines the types of environments and jurisdictional specifications where the MBR can operate at an optimal level, and alternatively, where the MBR will not be value-maximizing. It offers ideal legislation suggestions for similar jurisdictions considering transplanting MBR.

Comment letter filed on Sept. 24, 2019. "File No. S7-08-19" "We are fifteen law professors whose scholarship and teaching focuses on securities regulation. We appreciate the opportunity to comment on the U.S. Securities and Exchange Commission’s (“SEC” or the “Commission”) Concept Release on Harmonization of Securities Offering Exemptions (the “Concept Release”)."

Mandatory disclosure—the idea that companies must be legally required to disclose certain, specified information to public investors—is the first principle of modern securities law. Despite the high costs it imposes, mandatory disclosure has been well defended by legal scholars on two theoretical grounds: ‘Agency costs’ and ‘information underproduction.’ While these two concepts are a good fit for secondary markets (where investors trade securities with one another), this Article shows that they are largely irrelevant in the context of primary markets (where companies offer securities directly to investors). The surprising result is that primary offerings—such as an IPO—may not require mandatory disclosure at all. This profound insight calls into question the fundamental premises of the Securities Act of 1933 and similar laws governing primary offerings around the world. Reform of these rules could lead to a new age of simplified, low-cost primary offerings to the public, something that is already happening in New Zealand through its equity crowdfunding market.

There has been an explosion in new types of startup finance instruments. Whereas twenty years ago preferred stock dominated the field, startup companies and investors now use at least eight different instruments—six of which have only become widely used in the last decade. Legal scholars have yet to reflect upon the proliferation of instrument types in the aggregate. Notably missing is a way to organize instruments into a common framework that highlights their similarities and differences. This Article makes four contributions. First, it catalogues the variety of startup investment forms. I describe novel instruments, such as revenue-based financing, which remain understudied within law and entrepreneurship. Second, this Article shows the limitations of the debt vs. equity distinction as a classification method for startup financial contracts. Reliance on this traditional distinction obscures understanding of how instruments function. Third, the Article proposes a “new typology” to classify investment instruments based upon their economic, control, time, and regulatory dimensions. Three new broad categories— Payouts, Lock-in, and Park-n-ride—provide an insightful way to group these contracts. And fourth, the new typology explains how an expansion in instrument types creates complex capital structures which increase horizontal conflicts among startup investors. Further, new instruments increasingly place investors into a non-shareholder role that is outside the boundaries of corporate law’s protections. As early-stage investors increasingly fall outside the protections of corporate law, a greater burden shifts to contract law to resolve disputes arising from divergent investor interests.

Determining whether, for securities law purposes, a misrepresentation or omission is material raises interesting questions. The Court of Appeals in SEC v. Texas Gulf Sulphur Co. provided some guidance on materiality, and the U.S. Supreme Court has weighed in several times in the past 50 years. This article first discusses what Texas Gulf Sulphur contributed to the doctrine of materiality, then briefly considers other dimensions of the doctrine, and finally moves to its thesis: The doctrine of materiality should take into account important psychological insights and heuristics that may affect the way that a fact finder decides whether a misrepresentation or omission is material. In that regard, this article draws heavily on the work of a Nobel Prize winning psychologist, Daniel Kahneman, and his influential book, Thinking, Fast and Slow.

A central feature – if not the central feature – of legal scholarship today is analysis across divides.It is surprising, then, how little has been written across the divide that separates administrative law and financial regulation. That is perhaps especially so, given the modest nature of the relevant divide: one that is intra- rather than interdisciplinary, one that operates within rather than across geographic boundaries, and one that involves no temporal dimension but operates entirely within current-day law.For all the proximity in their interests, targets of study, and even analytical tools, however, scholars of administrative law and of financial regulation (including securities regulation, in particular) have shown strikingly little interest in one another: scholars of each discipline rarely read one another, cite one another, or even talk to one another.To engage this peculiar lacuna in the legal literature, this brief essay proceeds in four stages. First, I review the history of the divide, as well as recent efforts to bridge it. Second, I outline core characteristics of the divide: the two fields’ distinct motivations, divergent assumptions about the market, and particular limitations. With a clearer picture of the nature of the divide, I suggest some of the insights that might be gained from engagement across it. Finally, I conclude by acknowledging the challenges attendant to writing across the administrative law/financial regulation divide – while also highlighting the need to overcome those challenges.

Securities “crowdfunding” — the sale of unregistered securities over the internet to large numbers of investors, each of whom contributes only a small amount — is a new concept that comes in at least three types: (1) retail crowdfunding under Title III of the federal JOBS Act of 2012; (2) accredited crowdfunding under Title II of the JOBS Act, which is legally restricted to accredited investors; and (3) intrastate crowdfunding under state law. Which of these three types — all at the dawn of their existence — holds the most promise? Without claiming to finally resolve the issue, this Article adds the following point: Retail crowdfunding is the most inclusive form of securities crowdfunding, in the sense that everyone is invited regardless of who they are. Inclusivity is core to the nature of crowdfunding as a distinct form of capital raising, and it holds a special value in terms of law, politics and economic prosperity. And retail crowdfunding, compared with the other two types, is clearly the most inclusive. Accredited crowdfunding is legally limited to “accredited” (wealthy) investors; intrastate crowdfunding is limited to one state’s companies and investors. Retail crowdfunding, by contrast, will be inclusive and open to all Americans, rich and poor, young and old, from coast to coast. This inclusive nature of retail crowdfunding provides an advantage that the other forms necessarily lack.

In recent years, securities law scholars have either renewed an old attack on mandatory issuer disclosure or questioned the effectiveness of securities disclosure in the context of modern financial instruments. Some scholars argue that mandatory disclosure rules prove ineffective because investors suffer from “information overload.” Others claim that securities disclosure cannot describe adequately the complexity of modern firms and finance. These academic criticisms of mandatory securities disclosure provide some of the intellectual underpinnings for recent efforts to roll back some mandatory securities disclosure rules, such as the SEC’s Disclosure Effectiveness initiative. This Article questions these critiques of securities disclosure, including their empirical foundations and their validity given the Efficient Markets Hypothesis. It describes how disclosure must grapple with three types of complexity: contractual complexity, which describes the intricate contractual terms or structural features that financial instruments may have; derivative complexity, which describes how certain securities derive their value from other assets or multiple layers of assets; and systemic complexity, which describes how the value and risks of any security may depend not only on underlying assets, but also on changes elsewhere in financial markets. This Article then investigates whether other SEC initiatives to use technology to improve securities disclosure (such as the XBRL rules and loan-level data tagging in securitizations) and more ambitious proposals (such as moving towards real time and interactive disclosure) can help investors navigate these three types of complexity without “overloading” them. The Article concludes that improving more “old-fashioned” disclosure on the purposes for certain securities issuances, the due diligence performed by issuers and intermediaries, and the incentives of those parties might have a far more profound effect on the understanding of investors and the disciplining of issuers and intermediaries than either rollbacks of disclosure regulations or hi-tech disclosure solutions.

This Article presents a simple theory and model of the effects of political uncertainty on the market for IPOs. Our model generates four central predictions: (i) increased political uncertainty reduces the frequency of IPOs; (ii) firms that choose to conduct an IPO during periods of political uncertainty are, on average, of higher quality and generate greater return on investment in the secondary market; (iii) political uncertainty increases the cost of capital for IPO firms; but (iv) underpricing is less pronounced during periods of heightened political uncertainty. We demonstrate that each of these predictions is consistent with available empirical evidence. Our model fills gaps in two related literatures. First, the literature on political uncertainty has, at present, largely ignored its impact on corporate finance decisions such as IPO activity. Second, the literature on IPO decision-making omits political uncertainty as a key determinant of firms’ financing decisions. We demonstrate that political uncertainty acts independently of the extant theories of the going-public decision. Finally, our model illustrates that there are both costs and benefits to political uncertainty. Its net impact on the market for IPOs is thus an empirical question, not an a priori conclusion.

Did Congress do the right thing when it attempted to revise Regulation A through Title IV of the J.O.B.S. Act or was their legislative effort an exercise in futility?On April 4 2012, President Obama signed into law the J.O.B.S. (Jumpstart Our Business Startups) Act. The Act’s intent is to ease the regulatory burden on smaller companies when issuing securities in both private and public offerings. This paper’s specific focus is on the Act’s Title IV. Title IV makes revisions to Regulation A, a private securities offering exemption promulgated under the Securities Act of 1933.A big problem with Regulation A historically is that the provisions were burdensome, costly, and time consuming. In addition to a Federal component that required the issuer to file an offering statement with the Securities and Exchange Commission, Regulation A also requires that the issuer meet filing requirements within each state jurisdiction in which the issuer planned on offering its securities. The heavy compliance burden was coupled with the fact that the most you could raise through a Regulation A offering was $5 million. As a result, Regulation A has historically been all but dormant in use. The J.O.B.S. Act’s Title IV has sought to remedy this by making several changes to Regulation A; the most noteworthy of which involves raising the offering ceiling from $5 million to $50 million. The question then is will this be enough to offset the compliance burdens that historically have kept issuers from using Regulation A. This paper takes a critical look at the changes to Regulation A mandated under the J.O.B.S. Act and concludes that Congress missed the mark yet again with its Regulation A revisions.Congress should have left Regulation A alone as a poorly conceived regulation that was flawed at its initial inception. Not quite an exposé, this paper calls to task Congress’ legislative thought process in the area of securities offering exemptions and seeks to hold them accountable for creating a revised offering exemption without regard for its potential end users.

In the popular imagination, legal proceedings and their rules of law are thought of as paths to unalloyed truth. Both practitioners and scholars know this is often not the case because the law is, as are other domains, riddled with fictions. Indeed, the law sometimes borrows fictions from other domains to help it achieve results that would otherwise be unobtainable. One such place is securities law, in which courts in the United States have borrowed the concept of the ‘efficient market’ from economics to make fraud class actions possible. But that concept is—if not wholly—at least in good measure fictional.

Securities crowdfunding — the sale of unregistered securities to the public over the Internet — has come under attack before it has even begun. Legal scholars in particular have expressed concern that investors will lose any money they invest in crowdfunding companies. Even assuming that this may be true from a purely financial perspective, these critics are missing an important point: Crowdfund investors with negative returns will not simply have lost their money, but rather they will have spent it (at least in part) on nonpecuniary benefits, including entertainment, political expression and community building. These nonfinancial returns of crowdfunding are readily apparent in the donation and reward context, and this sentiment may well carry over to the emergent context of securities crowdfunding where, on top of nonpecuniary benefits, the investors might even earn a financial return.

Many public companies have shed takeover defenses in recent years, on the theory that such defenses reduce share price. Yet new data presented here shows that practically all new public companies--those launching their initial public offering (IPO)--go public with powerful takeover defenses in place. This behavior is puzzling because the adoption of takeover defenses presumably lowers the price at which the pre-IPO shareholders can sell their own shares in and after the IPO. Why would founders and early investors engage in this seemingly counterproductive behavior? Building on prior attempts to solve this mystery, this Article claims that IPO firms adopt takeover defenses, at least in part, so that they can remain independent indefinitely and create corporate legacies that last for generations. Throughout human history, people have sought to overcome the human condition and achieve the only form of immortality reasonably available to us: a legacy that "lives on" after we are gone. Legacies can be established in countless ways, including art (Leonardo da Vinci), literature (William Shakespeare), and athletics (Babe Ruth). The corporate form, though not previously recognized as such, can likewise serve as a vehicle for achieving an enduring legacy because corporations are endowed by the law with "perpetual existence." Publicly traded corporations in particular are well suited for this purpose, given the significant social and cultural role they play. Once a company goes public in an IPO, however, it suddenly becomes vulnerable to takeovers, which can end its corporate existence and thereby any hope of an enduring legacy. This unwelcome fate can be avoided, however, if a company goes public with powerful takeover defenses in place--which practically all do, according to the data. Mature public companies, by contrast, are controlled by people who joined the board long after the IPO. These directors lack the same passion for the company's independent existence because, unlike the pre-IPO shareholders, their legacy is not tied to the company. Accordingly, a mature public company may be amenable to abandoning its takeover defenses.

Crowdfunding, a new Internet-based securities market, was recently authorized by federal and state law in order to create a vibrant, diverse, and inclusive system of entrepreneurial finance. But will people really send their money to strangers on the Internet in exchange for unregistered securities in speculative startups? Many are doubtful, but this Article looks to first principles and finds reason for optimism. Well-established theory teaches that all forms of startup finance must confront and overcome three fundamental challenges: uncertainty, information asymmetry, and agency costs. This Article systematically examines this “trio of problems” and potential solutions in the context of crowdfunding. It begins by considering whether known solutions used in traditional forms of entrepreneurial finance — venture capital, angel investing, and public companies — can be borrowed by crowdfunding. Unfortunately, these methods, especially the most powerful among them, will not translate well to crowdfunding. Finding traditional solutions inert, this Article presents five novel solutions that respond directly to crowdfunding’s distinctive digital context: (1) wisdom of the crowd; (2) crowdsourced investment analysis; (3) online reputation; (4) securities-based compensation; and (5) digital monitoring. Collectively, these solutions provide a sound basis for crowdfunding to overcome the three fundamental challenges and fulfill its compelling vision.

An influential literature in economics explores the phenomenon of “safe assets” – when participants across financial markets act “as if” certain debt is risk free – as well as its role in the global financial crisis and its implications for post-crisis reform. We highlight the role of private ordering in constructing safe assets. Private ordering, including contractual devices and transaction structures, contributes to the creation of these debt contracts, to their collective treatment in financial markets as low risk investments, and to the making of deep and liquid markets in them. These contracts and transaction structures also provide a template for understanding the role of government regulation in constructing safe assets. Safe asset supply and demand does not occur organically. Rather, whether through private or public ordering, three types of legal tools operate to construct safe assets: 1. Making Assets Safe: one set of tools contributes to the production of safe assets by regulating the cash flows into and out of an issuer of safe assets to increase the likelihood of full and prompt payment to investors. These tools might take the form of: engineering the asset side of an issuer’s balance sheet to reduce the risk of inputs in safe assets; engineering the liability side of an issuer’s balance sheet to give holders of safe assets priority over other claimants on the issuer; or creating and regulating the secondary market for safe assets. 2. Labeling Assets Safe: another set of legal tools focuses on the demand for safe assets by granting special status to these contracts when held on the books of investors. These tools create liquid markets for certain assets by either: signaling the low risk of default by issuers of those assets; or coordinating the collective treatment of those assets as having low risk and high liquidity. 3. Guaranteeing Asset Safety: financial intermediaries and governments can also guarantee the performance of safe assets, putting their own credit on the line. Guarantees may be ex ante or ex post, explicit or implicit. A comparison of private and public ordering in safe asset markets reveals how difficult it is to separate the two. Indeed, much of private ordering relies on statute and regulation. Public ordering succeeds at creating safe assets when it enables private ordering and herding by investors into safe asset markets. Understanding this complex interplay between public and private tools becomes vital for understanding how safe asset markets operate, how they fail, and how they must be reformed. The Article concludes with two lessons. First, it deconstructs the notion that there is purely private or public ordering in safe asset markets. Second, it underscores a kind of first law of thermodynamics for safe assets: neither private nor public ordering can banish risk altogether from safe asset markets or financial markets in general. They merely move risk around or, worse, obscure risk until it rematerializes.

Teenage startups are in the public interest and should be encouraged, yet the federal CARD Act of 2009 eliminated credit card financing for many such companies, cutting off an important source of early-stage business capital for teenage entrepreneurs. Since then, however, Congress passed the CROWDFUND Act of 2012 which will allow teenagers to raise early-stage financing through Internet crowdfunding. Teens, being masters of the Internet, are well positioned to exploit this new opportunity, with the upshot being that securities crowdfunding may become an important way for youthful entrepreneurs to fund their business dreams.

The analysis herein arises from the collision course between the sweeping reforms mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and a single sentence of the U.S. Code, adopted nearly fifteen years earlier and largely forgotten ever since. Few were likely thinking of Section 106 of the National Securities Market Improvement Act when the Dodd-Frank Act was enacted on July 21, 2010. As applied by the D.C. Circuit less than a year later in Business Roundtable v. SEC, however, that provision’s peculiar requirement of cost-benefit analysis could prove the new legislation’s undoing.To help navigate this potential impasse, the Article that follows suggests the need to more carefully analyze the function and form of the cost-benefit analysis mandate in Section 106 and develops a generally applicable framework for doing so. Discussions of cost-benefit analysis have traditionally approached it as a fairly singular phenomenon — with broad aspirations of “efficiency” as its purpose and with its application in environmental and risk regulation understood to capture its form. In reality, cost-benefit analysis is both more ad hoc — and more systematically varied — than this account suggests.The framework proposed herein thus makes an important contribution to our understanding of the complexities and varieties of cost-benefit analysis generally. In the particular case of Section 106, meanwhile, it counsels a distinct function and particular characteristics of form that will better direct its application — both to the myriad regulations mandated by the Dodd-Frank Act and beyond. Properly understood, Section 106 is designed to encourage SEC attention to substantive considerations that might otherwise be neglected, given the Commission’s traditional focus on investor protection. As to form, Section 106 constitutes a true mandate and one properly subject to judicial review. Contrary to the analysis in Business Roundtable, however, that mandate is procedural rather than substantive in nature. By comparison with formal cost-benefit analysis, it is less rigidly quantitative. It does, however, demand careful attention to the distributional impacts of relevant rulemaking. To such particularized ends and in such tailored form, ultimately, cost-benefit analysis has the potential to generate significant insight — both under Section 106 and for financial regulation as a whole.

Title III of the JOBS Act, known as the CROWDFUND Act, authorizes the “crowdfunding” of securities, defined as raising capital online from many investors, each of whom contributes only a small amount. The Act was signed into law in April 2012, and will go into effect once the Securities and Exchange Commission (“SEC”) promulgates rules and regulations to govern the new marketplace for crowdfunded securities. This Essay offers friendly advice to the SEC as to how to exercise its rulemaking authority in a manner that will enable the Act to achieve its goals of creating an ultralow-cost method for raising business capital and democratizing the market for speculative business investments. The whole crowdfunding project depends on a very simple and inexpensive process for offering securities, so it is vital that the SEC not burden the CROWDFUND Act with any more rules and regulations than are absolutely necessary. Rather, the SEC should rely primarily on the existing statutory scheme, especially the novel $5,000 aggregate annual cap on crowdfunded securities which acts as a structural protection against losing one’s life savings to a crooked crowdfunder.

A new federal statute authorizes the online "crowdfunding" of securities, a new idea based on the concept of "reward" crowdfunding practiced on Kickstarter and other websites. This method of selling securities had previously been banned by federal securities law but the new CROWDFUND Act overturns that prohibition. This Article introduces the CROWDFUND Act and explains that it can be expected to have two primary effects on securities law and capital markets. First, it will liberate startup companies to use peer networks and the Internet to obtain modest amounts of capital at low cost. Second, it will help democratize the market for financing speculative startup companies and allow investors of modest means to make investments that had previously been offered solely to wealthy, so-called "accredited" investors. This Article also offers two predictions as to how securities crowdfunding will play out in practice. First, it predicts that companies that sell equity via crowdfunding may find themselves the subject of hostile takeovers (though the founders of such companies can easily avoid that outcome if they act with a little foresight). Second, it predicts that issuers may prefer to crowdfund debt securities, such as bonds, rather than equity. The Article concludes with a few thoughts on the SEC's implementation of the Act in light of the potential for fraud.

One reason that economic development in rural America lags behind its urban counterpart is the persistent lack of venture capital for rural entrepreneurs. Geography deserves much of the blame, as angel investors and venture capitalists tend to live and work in metropolitan areas on the coasts, in places like Silicon Valley and Boston. Many rural areas are literally thousands of miles away, with the result that venture capital has rarely found its way to rural regions. Recent federal legislation, however, has the potential to change this dynamic. The JOBS Act authorizes the sale of securities over the Internet to large numbers of investors, each of whom only invests a small dollar amount. This "crowdfunding" of securities is a promising means for rural entrepreneurs, as well as farmers and others, to access venture and business capital.

Courts and commentators take for granted that the ultimate objective of a business corporation is long-run profitability, not immediate profits. But a corporation is a creature of statute, so a statutory source for this rule must be found--or it is not really a rule. Yet prior literature has not identified any such legal basis, leaving a gap in corporate theory. This Article fills that gap by showing that the modern corporation is obliged to act with a long-term view because it has "perpetual existence" under the law. This Article then explains that because they must plan for a perpetual future, corporations should invest like immortal entities, namely with a long time horizon and low discount rate. This method of "immortal investing" offers a number of fundamental advantages to the corporation, and is also in the public interest, as immortal investors can be expected to highly value the future and act as stewards for natural resources and other assets.

This Article advocates that securities regulators promulgate rules based upon taking into consideration their impacts upon investors' and others' affect, happiness, and trust. Examples of these impacts are consumer optimism, financial stress, anxiety over how thoroughly securities regulators deliberate over proposed rules, investor confidence in securities disclosures, market exuberance, social moods, and subjective well-being. These variables affect and are affected by traditional financial variables, such as consumer debt, expenditures, and wealth; corporate investment; initial public offerings; and securities market demand, liquidity, prices, supply, and volume. This Article proposes that securities regulators can and should evaluate rules based upon measures of affect, happiness, and trust in addition to standard observable financial variables. This Article concludes that the organic statutes of the United States Securities and Exchange Commission are indeterminate despite mandating that federal securities laws consider efficiency among other goals. This Article illustrates analysis of affective impacts of these financial regulatory policies: mandatory securities disclosures; gun-jumping rules for publicly registered offerings; financial education or literacy campaigns; statutory or judicial default rules and menus; and continual reassessment and revision of rules. These regulatory policies impact and are impacted by investors' and other people's affect, happiness, and trust. Thus, securities regulators can and should evaluate such affective impacts to design effective legal policy.

In this brief essay, prepared as part of a symposium on The New Federalism: Plural Governance in a Decentered World, I explore the regulatory dynamics at work: (1) in the operation of Securities Exchange Act Rule 14a-8, (2) in the interventions of then-Attorney General Eliot Spitzer in the national securities markets, and (3) in recent steps by the Securities and Exchange Commission to reconcile U.S. and international accounting standards. In each case, a distinct dynamic of regulatory interaction - what I term intersystemic governance - can be observed. In such cases, overlapping jurisdiction combines with various sources of interdependence to produce a regulatory scheme that goes beyond regulatory cooperation supporting each jurisdiction's pursuit of its own goals. Rather, it may produce something akin to joint, or intertwined, regulation of relevant individuals, institutions, or subject-matter. In such regimes, discrete sets of regulatory rules may collapse into a collective whole.

This article analyzes the effectiveness of proposed and actual securities, financial, and tax laws designed to prevent, or dampen the severity of asset price bubbles, including laws designed to mitigate excessive speculation. The article employs experimental asset market research to measure the effectiveness of these anti-bubble laws in correcting mispricings. Experimental asset markets represent complex simulations of stock markets in which subjects trade securities over a computer network. These markets allow scholars to test causal links between legal policies and market effects in ways that empirical research alone cannot. With these virtual markets, researchers can identify asset price bubbles - when prices of assets diverge from fundamental values - with a certainty that is beyond the capacity of empirical studies. The article places anti-bubble laws in the following template, which maps onto microeconomic (including behavioral finance) and macroeconomic research on bubble formation: (1) laws that aim to provide information to investors on fundamental value of assets: these laws require enhanced disclosure or investor education either to focus investor attention on information on fundamental value rather than noise or to remedy information asymmetries that lead to asset mispricing; (2) laws that attempt to short circuit positive feedback loops: these anti-bubble laws attempt to dampen the positive feedback created when investors chase rising asset prices and include transaction taxes, circuit breakers and laws that attempt to restrict access of investors to certain markets or channel less sophisticated investors to less risky assets; (3) removal of legal restrictions on arbitrage; and (4) laws that restrict credit to investors to curb speculation (e.g., margin regulations). Experimental (and empirical) evidence suggests the effectiveness of many laws in eliminating bubbles is weak. This article argues for greater use of experimental asset market research in corporate and securities law scholarship and provides a model for an analysis of the validity of experimental results.

While theories of regulation abound, woefully inadequate attention has been given to growing patterns of "intersystemic" and "dialectical" regulation in the world today. In this rapidly expanding universe of interactions, independent regulatory agencies, born of autonomous jurisdictions, nonetheless face a combination of jurisdictional overlap with, and regulatory dependence on, one another. Here, the cross-jurisdictional interaction of regulators is no longer the voluntary interaction embraced by transnationalists; it is, instead, an unavoidable reality of acknowledgement and engagement, potentially culminating in the integration of discrete sets of regulatory rules into a collective whole. Such patterns of regulatory engagement are increasingly evident, across an array of fields. Under the No Child Left Behind Act, federal and state education officials depend on one another's regulatory initiatives, mandates, and funding commitments in pursuit of their own education goals. Transnationally, the U.S. Comptroller of the Currency must necessarily rely on the initiatives of various transnational and foreign regulators to combat money laundering. Here, I emphasize the experience of the Securities and Exchange Commission in recent years, as it has been forced to engage closely with both its transnational and foreign counterparts, and sub-national regulators seeking to leave their mark on the markets - and perhaps to win their state governorship. For the most part, patterns of intersystemic and dialectical regulation have been resisted, both in the scholarly literature and in practice. This response is hardly surprising. It reflects some visceral sense of law's project as one of categorization, clear definition, and line-drawing. Justice Scalia has spoken of the "Rule of Law" as the "law of rules." The majority in New York v. United States, with its insistence on clear lines of federal and state accountability, spoke in a similar spirit. Yet such devotion to certainty and clarity - whatever its general utility - has minimized our appreciation, let alone embrace, of selective overlap and dependence in the interaction of regulatory entities across jurisdictional lines. While corporate and securities scholars have showered endless attention on the internal affairs doctrine - a doctrine whose essential function is to minimize regulatory overlap and dependence - they have had far less to say about the muddled reality of corporate and securities regulation in practice. In negotiating the overlap of regulatory authority across jurisdictional lines, the traditional lawyerly task has thus been one of line-drawing. A more resonant project might be that of the poet. This project lies not in line-drawing, distinguishing, or simplifying. To the contrary, it explores - and even encourages - overlap, interdependence, and attendant complexity. From this distinct perspective, the goal is not to identify the single regulatory actor best suited or most appropriately charged with responsibility for a given entity or subject matter. Rather, multiple regulators are embraced as having a shared - if both competing and cooperating - place in a more inclusive and all-encompassing regulatory regime.

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This article explores how speculative bubbles undermine the effectiveness of securities regulations and spawn epidemics of securities fraud. A brief historical survey demonstrates that stock market bubbles almost invariably coincide with epidemics of securities fraud, and provides a compelling argument that the outbreak of fraud in the Enron era did not stem merely from factors unique to the 1990s, but from the dynamics of an asset price bubble as well. Drawing on perspectives from securities law practice and economic theory, the article argues that bubbles dilute the deterrent effect of antifraud rules and promote deregulation. Both effects alter the calculus of securities law compliance for public companies and market intermediaries. In turn, diluted regulations and deregulation further fuel a bubble's expansion. The article creates a basic model for how bubbles promote deregulation. During the formation a bubble, three interrelated cycles - the business cycle, the cycle of investor confidence and the regulatory cycle - generate feedback for each other (by stimulating excessive economic growth, investor trust in the integrity of the market and deregulation). When a bubble bursts, these three cycles reverse and generate negative feedback (through recession, a collapse of investor trust and re-regulation). The interaction of these cycles creates the potential for a perverse pattern of under-regulation or deregulation as bubbles form - the moment when more oversight is needed - and re-regulation in the aftermath of a bubble - once the economy and investor trust have already been damaged. The article also explores how the dynamics of a bubble can undermine the deterrent effect of anti-fraud rules on securities issuers and market intermediaries by distorting the rational calculus of compliance, potentially exacerbating behavioral biases and raising information and agency costs.

Since the very moment of its adoption, the Sarbanes-Oxley Act of 2002 has been subject to a litany of critiques, many of them seemingly well-placed. The almost universal condemnation of the Act for its asserted 'federalization' of corporate law, by contrast, deserves short shrift. Though widely invoked - and blithely accepted - dissection of this argument against the legislation shows it to rely either on flawed assumptions or on normative preferences not ordinarily acknowledged (or perhaps even accepted) by those who criticize Sarbanes-Oxley for its federalization of state corporate law. Once we appreciate as much, we can begin by replacing the misleading rhetoric of 'federalization'. More importantly, we might begin to conceptualize a theory of corporate law that is both more effective in advancing our desired ends and perhaps closer to market realities than the competing paradigms presently in ascendance. In this spirit, I offer a model of jurisdictional redundancy - in which federal mandatory rules intertwine with state enabling rules, to create a more indeterminate regulatory regime than we might otherwise pursue. Such a scheme of 'mixed governance' may deprive legal scholars of the opportunity to draw clear distinctions, but may allow the regulation of corporate governance to operate more effectively, and to evolve more efficiently over time.

With regard to issuer purchases, some of the traditional policy rationales against insider trading do not apply or apply with less force. Nevertheless, courts, commentators, and the SEC have all stated or assumed that a public corporation violates rule 10b-5 by buying its own shares in the market based on material, nonpublic information. In rule 10b-5 cases involving face-to-face transactions, several circuit courts have ruled that the company may not purchase its own stock based on material information not known to the seller. No good reason exists not to apply these precedents to stock market trades by issuers, especially because block trades blur the distinction between face-to-face transactions and stock market trades. Some decisions involving face-to-face transactions have relied on a fiduciary duty running from the corporation to the seller. Although this duty has some appeal, it is unsupported by traditional state law fiduciary duty analysis. The company can act only through its board of directors, officers, employees, and other agents. These actors are obligated to act in the best interests of the corporation, which may not coincide with the best interests of an individual shareholder transacting business with the company. Under rule 10b-5, the most compelling reason for issuer insider trading liability may simply be that no strong reason exists to distinguish the corporation from a corporate "insider," i.e., an employee or independent contractor. Such an "insider" has a Chiarella/Dirks classical relationship with the innocent shareholder on the other side of the insider trade because of a mutual relationship with the issuer. When an issuer trades on material, nonpublic information, innocent shareholders have a "classical relationship" with the corporation because of their investment. In other words, the relationship between the issuer and one of its shareholders is, if anything, closer than the relationship between an employee/independent-contractor and a shareholder.

This Article critically analyzes the judicial decisions and reasoning of the United States Supreme Court and lower courts accepting certain defenses in securities fraud litigation. This Article develops how and why the core notions of materiality of information and the reasonable investor should be revised in light of recent empirical data, experimental evidence, and theoretical models of moody investing. This Article proposes modifying three recent developments in materiality doctrine to take into account moody investing. In particular, this Article argues that current judicial treatment of puffery is flawed because it neglects the power of puffery to alter moods. This Article also recommends modifying the judicial "total mix" analysis of the materiality of information to include a "total affect" analysis of information. Finally, this Article proposes refining the judicially created so-called "bespeaks caution" doctrine and statutory safe harbors codifying it to inquire whether so-called "meaningful cautionary language" is infused with affect.