Investor Skepticism v. Investor Confidence: Why the New Research Analyst Reforms Will Harm Investors

Part I of this Article provides an overview of research analysts and their basic functions, including a discussion of sell-side analysts\u27 role in the market\u27s recent boom and bust. Part II examines the conflicts of interest that have plagued sell-side research, and Part III reviews the Regulatory Actions that are meant to address these conflicts. In Part IV, the author will make the case for encouraging, rather than lessening, investor skepticism in sell-side research and will explain why the Regulatory Actions are not likely to improve the performance of sell-side analysts. Finally, Part V will offer a simpler proposal to address the sell-side analyst issue. While there may not be a solution to the maybe not problem, the information gap between institutional investors and retail investors regarding the weaknesses of sell-side research can be eliminated, which would allow retail investors to benefit from the value of sell-side research while also granting them the opportunity to properly protect themselves from its weaknesses. Akin to the Surgeon General\u27s warning for cigarette manufacturers, this Article proposes that sell-side analysts and their firms be required to prominently include, with all research, a short and clear warning from the United States Securities and Exchange Commission ( SEC ), regarding the historical weaknesses of sell-side research

Using Valuation-Based Decision Making to Increase the Efficiency of China\u27s Patent Subsidy Strategies

[Excerpt] “The Chinese government has grown concerned that its patent fee subsidy programs have not funded the most deserving patents, and thus they no longer wish to spend public resources to promote low-value patents. Instead, the government would prefer subsidy programs that encourage the most deserving patents. The Patent Strategy reflects this desire, as the fourth strategic focus of the Patent Strategy recognizes the need to “[o]ptimize [China’s] patent subsidy policy and further define the orientation to enhance patent quality.”19 This Article explains how a disciplined and transparent valuation-based decision making process can help the Chinese government design patent fee subsidy programs that allocate funds more consistently to deserving patents. In addition, this Article offers the outline of a practical valuation model the Chinese government could use to filter patent fee subsidy requests.

The Case Against Exempting Smaller Reporting Companies from Sarbanes-Oxley Section 404: Why Market-Based Solutions are Likely to Harm Ordinary Investors

Section 404 is arguably the most controversial provision of Sarbanes-Oxley (“SOX”). The controversy focuses on whether Section 404’s substantial compliance costs exceed the statute’s benefits, with no consensus on Section 404’s cost-effectiveness. If Section 404 turns out to be cost-ineffective, the companies that are most threatened are smaller companies, as cost-ineffective regulations tend to disproportionately harm smaller companies. This Article considers whether Congress and the SEC should exempt smaller reporting companies from Section 404 compliance, as that would allow for a market-based resolution to the uncertain value of Section 404 for smaller reporting companies. Smaller reporting companies would be relieved from mandatory compliance, but would retain the ability to voluntarily choose to comply with Section 404 if they found it to be cost-effective. Rather than debate the cost-effectiveness of Section 404, Section 404 relief proposals appear to provide a definitive mechanism for answering the cost-benefit question by allowing investors to express their demand (or lack of demand) for the services provided by Section 404 through the price they pay for securities. While empowering smaller reporting companies with such market-based regulatory solutions might seem appealing at first glance, this Article explains why structural factors within the public securities markets for smaller reporting companies will prevent such market-based proposals from accurately determining the net effect of Section 404. Instead, exempting smaller reporting companies from Section 404 is likely to significantly increase the information asymmetry between smaller reporting companies and their investors. This outcome would be particularly problematic since ordinary shareholders (rather than institutional shareholders) are the predominant external shareholders for smaller reporting companies and have historically demonstrated themselves to be vulnerable to just this type of information asymmetry. This Article constructs a model for analyzing the probable impact of granting Section 404 relief to smaller reporting companies and concludes that making Section 404 voluntary for smaller reporting companies would almost certainly guarantee an insufficient amount of investment by those companies in their “internal control over financial reporting” (“ICFR”), with the cost for that insufficient dedication of resources to ICFR being borne primarily and unknowingly by unsophisticated ordinary investors

Improving the Efficiency of the Angel Finance Market: A Proposal to Expand the Intermediary Role of Finders in the Private Capital Raising Setting

The angel finance market is of critical importance to the financing and creation of rapid-growth start-ups, whose continuous creation plays a substantial role in the success of the U.S. economy. Unfortunately, the angel finance market suffers from systematic problems, including information and agency problems and high transaction costs, that limit its ability to adequately finance these rapid-growth start-ups. One reason for the angel market\u27s inefficiency is the lack of meaningful financial intermediaries that operate in the market. One logical group that could serve a meaningful intermediary role in the angel market is finders. The current regulatory treatment of finders, however, substantially limits their ability to take on a meaningful intermediary role. While finders are currently tolerated by the existing regulatory regime, their use can raise serious problems if the finder\u27s role is deemed to be that of a “broker-dealer,” which would subject the finder to a substantial array of federal and state securities regulations. This Article examines the role of finders in the private capital setting and considers the impact of allowing them to operate under a reduced regulatory burden with the assumption that they will play a more meaningful role in private capital raising. This Article concludes that the potential benefits of an empowered class of finders for the private capital raising process outweigh the potential problems. This leads to the main proposal of this Article: rather than regulate finders who assist private companies to obtain start-up capital as a sub-category of broker-dealers, this Article proposes a new class of federally registered “finders” whose activities would be exempt from federal and state broker-dealer regulations. This tailored regulatory regime for finders in the private capital raising setting would be aimed at expanding their use based on a principle of improving the efficiency of the private capital markets. Specifically, the focus of the regulatory treatment of these finders should be to encourage their ability to reduce market problems (e.g., information and agency problems and high transaction costs) in the private capital markets, while discouraging their ability to increase existing, or create new, market problems (e.g., commit fraud). By improving the market efficiency of the private capital markets (with a particular focus on the angel market) in such a manner, this approach should improve the allocation of resources that are dedicated to creating and nurturing rapid-growth start-ups, while not exposing less sophisticated investors to undue investing dangers

Valuing Young Startups is Unavoidably Difficult: Using (and Misusing) Deferred-Equity Instruments for Seed Investing

In a well-functioning market, reasonable investors are less likely to invest in companies when they cannot confidently value the opportunity. This presents a serious problem for young startups because they are unavoidably difficult to value. Partly in response to the valuation challenge, specialized startup investors evolved how they contract for young-startup investments. Around 2005 they began using deferred-equity instruments (first convertible notes, and later safes and the KISS). Deferred-equity instruments offer a partial solution to the valuation challenge by allowing specialized startup investors to thoughtfully invest in venture capital-eligible young startups without valuing them at the time of investment. Deferred-equity instruments have become an important financing tool for the traditional startup market and have positively contributed to the United States’ seed financing explosion over the last decade. This article explains how investors value startups, why the task is unavoidably difficult, and how deferred-equity instruments contractually deal with this otherwise intractable problem. If the story ended there, deferred-equity instruments would be a resounding success. However, they spread to the Regulation Crowdfunding (“Regulation CF”) market in 2016. To assess whether deferred-equity instruments are suitable for the Regulation CF market, this article examined the Regulation CF offerings on three popular funding portals—Republic; StartEngine; and Wefunder—to get an informed picture of Regulation CF deferred-equity offerings. The examination consisted of all the Regulation CF deals funded through those three portals during 2019. The study captured 205 funded deals, of which seventy-one were safe offerings and twenty-two were convertible note offerings. This article provides a detailed look at the issuers conducting Regulation CF deferred-equity offerings and the investment contracts they employ. Based on the study, this author draws several negative conclusions about the Regulation CF deferred-equity market and generally finds these offerings result in an improper risk transfer that is likely to harm public investors. To address the problem, this article recommends that the SEC or FINRA impose a suitability duty on funding portals that host Regulation CF deferred-equity offerings

The Weather Analysis Display (WAND) Tool: Developing a Meteorological Data Display Tool for Situational Awareness During Day-Of-Launch of Space Launch Vehicles Using Python

Atmospheric conditions are an important driver in the design and operation of space launch vehicles. The Profile Envision and Splicing Tool (PRESTO) was developed by NASAs Marshall Space Flight Center (MSFC) Natural Environments Branch (NE) to generate vertically complete atmospheric profiles from various data sources at NASAs Kennedy Space Center (KSC), co-located on the United States Air Force (USAF) Eastern Range (ER), for NASAs Space Launch System (SLS) day-of-launch (DOL) loads and trajectory analysis. PRESTO was designed solely to generate a vertically complete atmospheric profile (Orcutt et al., 2017). However, NE has also been tasked to provide a quality assessment of meteorological data examined on DOL, which goes beyond PRESTOs utility. Thus, NE developed the Weather Analysis Display (WAND) to visualize data from all available observation systems in conjunction with climatological databases. WAND can display data from various sources in multiple ways, including Skew-T Log-P plots, time-height cross sections, and time series. WAND was developed in Python 3 taking advantage of common packages, such as NumPy for data handling, SciPy for mathematical functions, Matplotlib for data visualization, and Tkinter for the execution of the Graphical User Interface (GUI)

The Quality Control Algorithms Used in the Process of Creating the NASA Kennedy Space Center Lightning Protection System Towers Meteorological Database

The methodology and the results of the quality control (QC) process of the meteorological data from the Lightning Protection System (LPS) towers located at Kennedy Space Center (KSC) launch complex 39B (LC-39B) are documented in this paper. Meteorological data are used to design a launch vehicle, determine operational constraints, and to apply defined constraints on day-of-launch (DOL). In order to properly accomplish these tasks, a representative climatological database of meteorological records is needed because the database needs to represent the climate the vehicle will encounter. Numerous meteorological measurement towers exist at KSC; however, the engineering tasks need measurements at specific heights, some of which can only be provided by a few towers. Other than the LPS towers, Tower 313 is the only tower that provides observations up to 150 m. This tower is located approximately 3.5 km from LC-39B. In addition, data need to be QC'ed to remove erroneous reports that could pollute the results of an engineering analysis, mislead the development of operational constraints, or provide a false image of the atmosphere at the tower's location

The Quality Control Algorithms Used in the Creation of NASA Kennedy Space Center Lightning Protection System Towers Meteorological Database

No abstract availabl

Climate and Ecological Change in Oligo-Miocene Mammals

xiii, 198 p. : ill. (some col.)Whether or not a causal relationship exists between climate and mammal body size is one of the longest-standing and most intractable questions in ecology. The classic model of body size evolution (Bergmann's Rule) holds that body size is driven by temperature, but more recent hypotheses have suggested that other climatic variables or biotic interactions may play a more important role. The use of paleoecological data to address this question allows variables that are tightly correlated in modern ecosystems to be teased apart and allows body size patterns to be observed through time, adding an extra dimension to analyses. This dissertation details the findings of two paleoecological tests of Bergmann's Rule in the Oligo-Miocene (30-5 Ma), one tracking body size and climate through time in the northwestern United States and another tracking geographic body size trends through time along the west coast of North America. In both cases, body size was analyzed in three representative families of mammals: equids, canids, and sciurids. Such large-scale analyses are dependent on fossils that can be placed in a reliable taxonomic, geologic, and temporal context, and this dissertation also focuses on a reevaluation of the canid fauna of Oregon's Juntura Formation that places a critically important Late Miocene carnivore fauna in just such a context. Two genera of canids - Epicyon and Carpocyon - are described from the fauna for the first time, with important implications for regional biostratigraphy. The body size analyses show no consistent relationship between body size and any climatic variable. Further, body size patterns vary widely between taxa at several levels, suggesting that one universal driver of body size evolution does not exist. Not only is there no evidence for Bergmann's Rule in Oligo-Miocene mammals, but comparative analyses of geographic body size patterns in the modern genera Odocoileus, Canis, and Spermophilus fail to show the latitudinal gradients upon which Bergmann's Rule is predicated. The apparent existence of such trends in some taxa may be the result of anthropogenic extirpation at low latitudes, further underscoring the importance of including paleontological data when formulating models predicting the response of biotic variables to environmental change.Committee in charge: Dr. Samantha Hopkins， Chair； Dr. Gregory Retallack， Member； Dr. Rebecca Dorsey， Member； Dr. Stephen Frost， Outside Membe