FEATURED ESSAY • SECURITIES & FINANCIAL REGULATION
CAN SECTION 11 BE SAVED?: “TRACING” A PATH TO ITS SURVIVAL
John C. Coffee, Jr. & Joshua Mitts
Last term, a unanimous Supreme Court held in Slack Techs. v Pirani that purchasers of securities must “trace” their shares to the registration statement that contains the alleged misstatement or omission in order to be able to assert a claim under Section 11 of the Securities Act of 1933. Lawyers and law firms on both sides of the case agreed (with differing emotions) that the decision eclipsed Section 11, which had been the federal securities laws’ strongest litigation remedy for investors. We disagree with this conclusion that Section 11 is doomed, but we recognize the danger. Both in an amicus brief we filed with the Court and now in this article, we show how tracing can be performed and thus Section 11 preserved.
SECURITIES & FINANCIAL REGULATION
INSIDER TRADING BY OTHER MEANS
Sureyya Burcu Avci, Cindy A. Schipani, H. Nejat Seyhun, & Andrew Verstein
For more than thirty years, perhaps the most prevalent strategy for insider trading has gone undetected and unaddressed. This Article uncovers the techniques by which executives and directors sell overvalued stock worth more than $100 billion per year, shifting losses to ordinary investors.
TECHNOLOGY & INNOVATION
ENDING THE CRYPTO TAX HAVEN
Noam Noked
There is growing global concern regarding the use of crypto for tax evasion and financial crimes. To address this problem, over sixty jurisdictions have recently committed to implement the Crypto-Asset Reporting Framework (CARF). CARF transposes the Common Reporting Standard (CRS)—designed for the traditional financial industry—onto the crypto industry.
CORPORATE LAW & GOVERNANCE
LOCAL FIRM GOVERNANCE
Anne M. Choike
Since the turn of the millennium, diverse cities—large and small, red and blue—have undertaken initiatives aimed at the governance of firms. These novel initiatives aim to constrain executive compensation, require board diversity, promote stakeholder governance, support the establishment of worker cooperatives, and beyond. These developments mean we must add localities to the conventional framework of firm governance.
CONSUMER PROTECTION
“PRICE DISCRIMINATION” DISCRIMINATION
Talia B. Gillis
Credit price personalization, where lenders set prices based on individual borrower and loan characteristics, is a common practice across many loan types, with conventional accounts of its harms focusing on the ways in which risk-based pricing, or setting prices based on borrowers’ credit risk, can lead to disparities for protected groups like racial minorities and women.
HUMAN RIGHTS & LABOR
SHOULD LABOR ABANDON ITS CAPITAL? A REPLY TO CRITICS
David H. Webber
Several recent works have sharply criticized public pension funds and labor union funds (“labor’s capital”). These critiques come from both the left and right. Leftists criticize labor’s capital for undermining worker interests by funding financialization and the growth of Wall Street. Laissez-faire conservatives argue that pension underfunding threatens taxpayers. The left calls for pensions to be replaced by a larger social security system. The libertarian right calls for them to be smashed and scattered into individually managed 401(k)s.
ENTREPRENUERSHIP & STARTUPS
DO FOUNDERS CONTROL START-UP FIRMS THAT GO PUBLIC?
Brian Broughman & Jesse M. Fried
Black & Gilson (1998) argue that an IPO-welcoming stock market stimulates venture deals by enabling VCs to give founders a valuable “call option on control.” We study 18,000 startups to investigate the value of this option. Among firms that reach IPO, 60% of founders are no longer CEO. With little voting power, only half of the others survive three years as CEO. At initial VC financing, the probability of getting real control of a public firm for three years is 0.4%.