Risk-shifting Through Issuer Liability and Corporate Monitoring

This article explores how issuer liability re-allocates fraud risk and how risk allocation may reduce the incidence of fraud. In the US, the apparent absence of individual liability of officeholders and insufficient monitoring by insurers under-mine the potential deterrent effect of securities litigation. The underlying reasons why both mechanisms remain ineffective are collective action problems under the prevailing dispersed ownership structure, which eliminates the incentives to moni-tor set by issuer liability. This article suggests that issuer liability could potentially have a stronger deterrent effect when it shifts risk to individuals or entities holding a larger financial stake. Thus, it would enlist large shareholders in monitoring in much of Europe. The same risk-shifting effect also has implications for the debate about the relationship between securities litigation and creditor interests. Credi-tors’ claims should not be given precedence over claims of defrauded investors (e.g., because of the capital maintenance principle), since bearing some of the fraud risk will more strongly incentivise large creditors, such as banks, to monitor the firm in jurisdictions where corporate debt is relatively concentrated

Selection of biocatalysts for chemical synthesis

To determine whether microbial chemosensors can be used to find new or better biocatalysts, we constructed Escherichia coli hosts that recognize the product of a biocatalytic conversion through the transcriptional activator NahR and respond by expression of a lacZ or tetA reporter gene. Equipped with a benzaldehyde dehydrogenase (XylC from Pseudomonas putida), the lacZ-based host responded to the oxidation of benzaldehyde and 2-hydroxybenzaldehyde to the corresponding benzoic acids by forming blue colonies, whereas XylC(−) cells did not. Similarly, the tetA-based host was able to grow under selective conditions only when equipped with XylC, enabling selection of biocatalytically active cells in inactive populations at frequencies as low as 10(−6)