Global Expansion of National Securities Laws: Extraterritoriality and Jurisdictional Conflicts

[Excerpt] “As securities fraud has grown increasingly transnational, it has become necessary to expand the reach of anti-fraud provisions to persons and entities participating in global securities markets. So far, however, no single antifraud provision exists to govern the entire global marketplace. Although each country strives to combat international securities fraud by using its own regulatory regime, problems can develop when extraterritorial application of national securities laws leads to regulatory overlapping or conflicts. In light of these problems, it is necessary to set forth clear guidelines for determining whether national securities laws can apply extraterritorially and, if so, how far they can extend. The U.S., in particular, has longstanding and extensive experience in seeking extraterritorial application of national securities laws. In doing so, the U.S. has developed several tests to justify extraterritoriality, and has bolstered a statutory basis for extraterritorial application of anti-fraud prohibitions in actions brought by the U.S. Securities and Exchange Commission (SEC) or the U.S. Department of Justice (DOJ).

Why Didn’t Subprime Investors Demand a (Much Larger) Lemons Premium?

The subprime crisis would never have occurred had investors not been such enthusiastic consumers of subprime securities. The investors now say, somewhat self-servingly (but probably correctly), that they did not understand the securities -- securities for which they were willing to pay very high prices. Investors\u27 willingness to purchase these securities on terms that were favorable to the sellers, and unfavorable to them, presents a considerable puzzle. Investors do not want to miss out on the next big thing

The Suitability Rule and Economic Theory

The published rules of both the National Association of Securities Dealers (NASD) and the Securities and Exchange Commission (SEC) provide that a broker or dealer in the securities market may recommend the purchase of a security only when there is a reasonable basis for believing that the security is suitable for the customer

Eligible central bank collateral in times of serious financial distress

On 15 October the ECB massively expanded the set of securities that it accepts as collateral. All securities should be accepted as collateral, given severe enough valuations and haircuts. The ECB should be more transparent in explaining how it values illiquid securities as collateral. The ECB could use a reverse auction to value securities but it should avoid outcomes with fire sale prices. Crisis conditions mean that the Eurosystem could need recapitalisation; an automatic arrangement to provide this should be in place

Securities Arbitration After McMahon

In Shearson/American Express, Inc. v. McMahon, the Supreme Court decided that federal securities claims under the Securities Exchange Act of 1934 (1934 Act or Exchange Act) are arbitrable. Since McMahon, there has been a flurry of activity in, and focus upon, the general area of arbitration of public securities disputes. This activity has generated particular interest in such subjects as: arbitration forums; pre-trial procedures and discovery; remedies and relief; composition of panels; training, background and evaluation of arbitrators; and the rendering of written opinions. In discussing many of these areas, this Article will track the history of securities arbitration before McMahon, analyze the McMahon decision, and explore possible solutions and alternatives which may help forge the pattern of securities arbitration in the future

Internet Securities Fraud: Old Trick, New Medium

Billions of securities are traded every day in public and private markets around the world. This practice is hundreds of years old and as long as securities have been traded, someone has tried to defraud the system to make a quick buck. With the advent of the Internet, new securities fraud schemes have appeared

Rethinking Janus: Preserving Primary-Participant Liability in SEC Antifraud Enforcement Actions

The Securities and Exchange Commission relies heavily on the securities laws’ antifraud provisions in fulfilling its role as watchdog of the U.S. securities markets. But the Supreme Court’s decision in Janus Capital Group, Inc. v. First Derivative Traders has frustrated the SEC’s efforts to keep fraud at bay. There the Court drastically narrowed the scope of actors who can qualify as primary participants in misrepresentations perpetrated in connection with the purchase or sale of securities under Rule 10b-5(b). This Note argues that Janus’s holding creates an incongruence in the SEC’s ability to enforce the securities laws’ misrepresentation provisions, with the SEC’s ability to prosecute misrepresentations now varying depending on the stage of securities dealings at which the misrepresentation occurred. This result runs counter to the SEC’s purpose in creating Rule 10b-5 and to Congress’s desire that the SEC enjoy broad authority to pursue fraudsters. This Note analyzes solutions for curing this incongruence, including the SEC’s recent bid for judicial deference to its interpretations of the relevant regulations and statutes

EU Cross-Border Securities Offerings: An Overview

This Essay gives a general overview of the EC securities regulations and their influence on the offerings of securities involving several EU markets, with a particular focus on the disclosure requirements and the registration of prospectuses. This Essay will also discuss some regulatory concerns regarding the use of licensed intermediaries and their role in organizing a multi-jurisdictional securities offering. Lastly, this Essay will examine the debate on the reconciliation of various accounting principles and disclosure standards, an issue that is presently regarded as a priority on regulators\u27 agenda, and one which will certainly affect the accounting practices adopted by global issuers of securities

Securities and Financial Regulation in the Second Circuit

The Second Circuit has long been the country’s preeminent court in the field of securities and financial regulation. The reputation of the Second Circuit in the realm of securities has been so great that other courts, including the Supreme Court, often mention by name the particular judges that decided a given Second Circuit precedent to justify their reliance on that decision. Many courts have long looked to its jurisprudence for guidance in deciding novel or complex securities law issues. This article tracks the Second Circuit’s significant role in developing civil enforcement mechanisms for federal securities laws and making criminal prosecution for corporate malfeasance a real weapon