Patching a Hole in the JOBS Act: How and Why to Rewrite the Rules that Require Firms to Make Periodic Disclosures

Provisions in the Jumpstart Our Business Startups Act of 2012 have made it much easier for firms to avoid federal periodic disclosure obligations, but these provisions were enacted based upon a virtually nonexistent legislative record and upended rules established only after careful consideration almost fifty years earlier. Determining when firms should be required to comply with federal periodic disclosure requirements is best done in the context of a broader understanding of the history and economics of periodic disclosure regulation. This Article provides such an understanding. The history of periodic disclosure regulation in the United States is traced back to its origins in the eighteenth century, and the economic analysis of periodic disclosure regulation is updated and refined to incorporate recent findings. Building on this historical and economic understanding of periodic disclosure regulation, I identify a flaw in the underlying structure of the rules currently used to determine when firms must make periodic disclosures. To rectify this structural problem, I conclude that firms with a market capitalization of less than $35 million or fewer than one hundred beneficial shareholders should be granted an automatic exemption from periodic disclosure requirements. All other firms should be provided a choice between: (1) complying with federal periodic disclosure obligations, or (2) implementing measures that would mitigate the need for periodic disclosure regulation, such as severely restricting the tradability of the firm’s shares or committing to an acceptable alternative disclosure regime

Law and Surplus: Opportunities Missed

Surplus is a ubiquitous feature of economic activity. The ubiquity of surplus challenges us to find fair and efficient ways to share resources. This is the surplus problem. This Article documents the miscues and mistaken assumptions that have left research on how legal rules can address the surplus problem woefully underexplored. Three missed opportunities are particularly noteworthy. First, scholars studying “rent-seeking” mistakenly limit their investigation of links between surplus and wasteful competition to situations involving grants of government privilege. Second, law and economics scholars incorrectly assume that a laissez-faire approach is presumptively the best way to address the surplus problem. Finally, consumer law scholars fail to recognize how central solving the surplus problem is to providing a sound economic justification for consumer protection law. Collectively, these case studies illustrate how law’s role in addressing the surplus problem has been shunted to the periphery of legal scholarship rather than placed at the center of legal discourse where it rightly belongs

Is There a Law Instinct?

The widely held view is that legal systems develop in response to purposeful efforts to achieve economic, political, or social objectives. An alternative view is that reliance on legal systems to organize social activity is an integral part of human nature, just as language and morality now appear to be directly shaped by innate predispositions. This Article formalizes and presents evidence in support of the claim that humans innately turn to legal systems to organize social behavior

Avoiding Wasteful Competition: Why Trading on Inside Information Should Be Illegal

This article offers a new and compelling reason to make all trading based on inside information illegal. The value realized by trading on inside information is unusual in two respects. First, inside information is produced at little or no incremental cost and is nevertheless quite valuable. Second, profits made from trading on inside information come largely at the expense of others. When the value of something exceeds the cost to produce it, a wasteful race to be the first to capture the resulting surplus is likely to ensue. Similarly, resources expended solely to take something of value from others are wasted from an overall social welfare perspective. Thus, both at its source and in its use inside information invites wasteful competition. A law prohibiting insider trading is the best way to avoid this wasteful competition. Previous scholarship misses this obvious conclusion because of its reliance on one of three assumptions. First, wasteful competition is assumed to be a problem that markets can rectify. Second, private ordering solutions are assumed to be available even when market mechanisms fail to address this problem. Third, a wasteful race to acquire and use inside information is viewed as otherwise unavoidable. None of these assumptions is correct. The findings here have immediate policy implications. First, insider trading legislation should be enacted that bans all insider trading and not just trading based on wrongfully acquired information. Second, there is no reason to require proof that a tipper received a personal benefit to prosecute someone for tipping inside information. Third, the possession and not the use of inside information should be enough to trigger a trading prohibition

Braving difficult choices alone: children's and adolescents' medical decision making.

OBJECTIVE: What role should minors play in making medical decisions? The authors examined children's and adolescents' desire to be involved in serious medical decisions and the emotional consequences associated with them. METHODS: Sixty-three children and 76 adolescents were presented with a cover story about a difficult medical choice. Participants were tested in one of four conditions: (1) own informed choice; (2) informed parents' choice to amputate; (3) informed parents' choice to continue a treatment; and (4) uninformed parents' choice to amputate. In a questionnaire, participants were asked about their choices, preference for autonomy, confidence, and emotional reactions when faced with a difficult hypothetical medical choice. RESULTS: Children and adolescents made different choices and participants, especially adolescents, preferred to make the difficult choice themselves, rather than having a parent make it. Children expressed fewer negative emotions than adolescents. Providing information about the alternatives did not affect participants' responses. CONCLUSIONS: Minors, especially adolescents, want to be responsible for their own medical decisions, even when the choice is a difficult one. For the adolescents, results suggest that the decision to be made, instead of the agent making the decision, is the main element influencing their emotional responses and decision confidence. For children, results suggest that they might be less able than adolescents to project how they would feel. The results, overall, draw attention to the need to further investigate how we can better involve minors in the medical decision-making process

Sources of pro-cyclicality in east Asian financial systems

Procyclicality is a normal feature of economic systems, but financial sector weaknesses can exacerbate it sufficiently to pose a threat to macroeconomic and financial stability. These include shortcomings in bank risk management and governance, in supervision and in terms of dependence on volatile sources of funds. The paper tests econometrically for the importance of such features leading to pro-cyclicality in the financial systems of 11 East Asian countries. This analysis makes it possible to identify specific policy measures for East Asian countries that could limit the extent to which financial systems exacerbate pro-cyclicality

Inhibition of Dermatophyte Fungi by Australian Jarrah Honey.

Superficial dermatophyte infections, commonly known as tineas, are the most prevalent fungal ailment and are increasing in incidence, leading to an interest in alternative treatments. Many floral honeys possess antimicrobial activity due to high sugar, low pH, and the production of hydrogen peroxide (H2O2) from the activity of the bee-derived enzyme glucose oxidase. Australian jarrah (Eucalyptus marginata) honey produces particularly high levels of H2O2 and has been found to be potently antifungal. This study characterized the activity of jarrah honey on fungal dermatophyte species. Jarrah honey inhibited dermatophytes with minimum inhibitory concentrations (MICs) of 1.5-3.5% (w/v), which increased to ≥25% (w/v) when catalase was added. Microscopic analysis found jarrah honey inhibited the germination of Trichophyton rubrum conidia and scanning electron microscopy of mature T. rubrum hyphae after honey treatment revealed bulging and collapsed regions. When treated hyphae were stained using REDOX fluorophores these did not detect any internal oxidative stress, suggesting jarrah honey acts largely on the hyphal surface. Although H2O2 appears critical for the antifungal activity of jarrah honey and its action on fungal cells, these effects persisted when H2O2 was eliminated and could not be replicated using synthetic honey spiked with H2O2, indicating jarrah honey contains agents that augment antifungal activity

The Rho Pathway Mediates Transition to an Alveolar Type I Cell Phenotype During Static Stretch of Alveolar Type II Cells

Stretch is an essential mechanism for lung growth and development. Animal models in which fetal lungs have been chronically over or underdistended demonstrate a disrupted mix of type II and type I cells, with static overdistention typically promoting a type I cell phenotype. The Rho GTPase family, key regulators of cytoskeletal signaling, are known to mediate cellular differentiation in response to stretch in other organs. Using a well-described model of alveolar epithelial cell differentiation and a validated stretch device, we investigated the effects of supraphysiologic stretch on human fetal lung alveolar epithelial cell phenotype. Static stretch applied to epithelial cells suppressed type II cell markers (SP-B and Pepsinogen C, PGC), and induced type I cell markers (Caveolin-1, Claudin 7 and Plasminogen Activator Inhibitor-1, PAI-1) as predicted. Static stretch was also associated with Rho A activation. Furthermore, the Rho kinase inhibitor Y27632 decreased Rho A activation and blunted the stretch-induced changes in alveolar epithelial cell marker expression. Together these data provide further evidence that mechanical stimulation of the cytoskeleton and Rho activation are key upstream events in mechanotransduction-associated alveolar epithelial cell differentiation