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

Law Professor Comment Letter on Harmonization of Private Offering Rules

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”)

One Right Answer?: The Meta Edition

Legal philosophers concerned with the nature of law have focused much of their attention to the relationships between law and morality. Much less attention has been paid to the question of the relationship between law and politics. In this essay I examine this question by comparing the way the relationship between law and politics is understood in two legal systems usually thought to be fairly similar - the American and the British. I argue, first, that this relationship is understood in fundamentally different ways in the two legal systems; second, that this difference is reflected in the legal philosophers of (British) H.L.A. Hart and (American) Ronald Dworkin; and third and most important, that these differences pose a challenge to attempts to identify the nature of law through a priori conceptual analysis. This last point depends on showing that there are different prevailing understandings of politics, and that these different understandings of politics lead, through the interaction of law with politics, to different understandings of what law is. If, plausibly, there is no right answer to the question of the nature of politics, the link between law and politics suggests there is also no right answer to the question of the nature of law. I conclude, however, on a more positive note suggesting tentatively that there might be a different way of thinking about the nature of law: not through a priori reflection on law, but through a posteriori investigation of human nature and its potential implications for law