Exploring New Approaches to Unsettled Legal Questions

Tag: Irving R. Kaufman Memorial Securities Law Competition

Greenwashing and Section 11: Why Current Securities Laws Are Ill-Equipped to Handle Environmental Claims

by Christo­pher Menen­dez*

Sec­tion 11 of the Secu­ri­ties Act of 1933 impos­es lia­bil­i­ty on issuers of secu­ri­ties for state­ments that are found to be mate­ri­al­ly mis­lead­ing, which are state­ments con­tain­ing the type of infor­ma­tion a rea­son­able investor would find sig­nif­i­cant when mak­ing an invest­ment deci­sion. In con­junc­tion with the ris­ing salience of cli­mate issues and con­cern about “green­wash­ing,” there has been a push by some investors to bring sec­tion 11 claims based on the pro­fessed, but ulti­mate­ly unsuc­cess­ful, com­mit­ments of com­pa­nies to com­bat cli­mate change. How­ev­er, these claims are unlike­ly to be suc­cess­ful in com­bat­ting green­wash­ing, as sus­tain­abil­i­ty issues are not nor­mal­ly the sort of infor­ma­tion that courts pre­sume investors con­sid­er mate­r­i­al. This Con­tri­bu­tion argues that sec­tion 11 is ill-suit­ed to address cli­mate-based mis­state­ments and encour­ages the adop­tion of rules the Secu­ri­ties and Exchange Com­mis­sion has recent­ly pro­posed to more effec­tive­ly cov­er cli­mate disclosures.

Applicability of the PSLRA Automatic Discovery Stay in State Courts

by Cather­ine Willis*

The Pri­vate Secu­ri­ties Lit­i­ga­tion Reform Act (“PSLRA”), 15 U.S.C. § 77z‑1(b)(1), pro­vides that dis­cov­ery should be auto­mat­i­cal­ly stayed in Secu­ri­ties Act actions at the motion to dis­miss stage. Though Secu­ri­ties Act claims may be brought in either state or fed­er­al courts, courts are divid­ed over whether the PSLRA dis­cov­ery stay applies in both state and fed­er­al court or sole­ly applies in fed­er­al court. This Con­tri­bu­tion argues that the PSLRA dis­cov­ery-stay pro­vi­sion should apply in any action under the Secu­ri­ties Act, regard­less of venue.

Gatekeepers or Not Gatekeepers? A Simple, Coherent Approach to Assigning Underwriter Liability to Financial Advisors in Direct Listings

by Gra­ham Ellis*

Sec­tion 11 of the Secu­ri­ties Act impos­es lia­bil­i­ty for dam­age caused by untrue or mis­lead­ing infor­ma­tion in Resale Reg­is­tra­tion State­ments on under­writ­ers. The exact scope of the statu­to­ry def­i­n­i­tion of under­writer, par­tic­u­lar­ly its cat­e­go­ry of “par­tic­i­pants,” is sub­ject to a cir­cuit split. Thus, whether finan­cial advi­sors in direct list­ings are liable is an open ques­tion. In this Con­tri­bu­tion, Gra­ham Ellis (’22) argues that the courts should not adopt a cat­e­gor­i­cal rule of inclu­sion or exclu­sion relat­ed to finan­cial advi­sor under­writer sta­tus, but instead, should for­mu­late an ad hoc analy­sis that empha­sizes Congress’s ini­tial pur­pose of assign­ing lia­bil­i­ty to ‘gate­keep­ers’ in secu­ri­ties trans­ac­tions. This test should inquire into whether the finan­cial advi­sor to the trans­ac­tion act­ed as a con­duit between the issu­ing com­pa­ny and the invest­ing pub­lic, and whether the finan­cial advi­sor pub­licly vouched for the accu­ra­cy of the reg­is­tra­tion statement.

Determining the Scope of Primary Liability in Securities Fraud Litigation

by Charles Bloom*

For decades, the pri­vate right of action for secu­ri­ties fraud has been nar­rowed, both by Con­gress and in the courts. In this Con­tri­bu­tion, Charles Bloom (’21) con­sid­ers the extent to which the Supreme Court’s most recent deci­sion in a secu­ri­ties fraud case revers­es that trend. Ulti­mate­ly, this Con­tri­bu­tion will argue that the Court has per­mis­si­bly expand­ed pri­vate lia­bil­i­ty for secu­ri­ties fraud, clos­ing cer­tain loop­holes cre­at­ed by its ear­li­er precedents.

Necessary or Sufficient? The Applicability of the Exchange Act to Domestic Securities Transactions Under Morrison v. National Australia Bank Ltd.

by William Bris­tow*

Do Sec­tion 10(b) the Exchange Act and SEC Rule 10b‑5 apply to secu­ri­ties trans­ac­tions entered into in the Unit­ed States where the secu­ri­ty is not sold on a nation­al exchange and is val­ued based on the price of a dif­fer­ent secu­ri­ty not sold with­in the Unit­ed States? In this Con­tri­bu­tion, William Bris­tow (’21) dis­cuss­es the impli­ca­tions of Mor­ri­son v. Nation­al Aus­tralia Bank Ltd., where the Supreme Court held that the Exchange Act does not apply extrater­ri­to­ri­al­ly and thus only applies to domes­tic secu­ri­ties trans­ac­tions. This Con­tri­bu­tion argues that Morrison’s “trans­ac­tion­al test” estab­lish­es a suf­fi­cient con­di­tion for the appli­ca­tion of the Exchange Act, not a nec­es­sary condition.

Just How Extra? The Case for Clear Guidelines to Apply Section 10(b) Extraterritorially

By Math­ews R. de Car­val­ho*         

When does the use of the Exchange Act cross the line into for­bid­den extrater­ri­to­ri­al­i­ty? In this con­tri­bu­tion, Math­ews R. de Car­val­ho (’19) exam­ines recent fed­er­al court deci­sions which try to devel­op a body of law under which Sec­tion 10(b) might be applied to par­ties out­side the Unit­ed States with­out con­tra­ven­ing the pre­sump­tion against extrater­ri­to­ri­al­i­ty. This Con­tri­bu­tion argues that one approach tak­en by cir­cuit courts – the irrev­o­ca­ble lia­bil­i­ty test – rep­re­sents the most faith­ful appli­ca­tion of the Supreme Court’s dic­tates in Mor­ri­son v. Nation­al Aus­tralia Bank Ltd.

Fitting Administrative Law Judges into Appointments Clause Jurisprudence (and Determining the Proper Forum to Do So)

by Jor­dan Gary*

Are Admin­is­tra­tive Law Judges (ALJs) infe­ri­or offi­cers of the Unit­ed States under the Appoint­ments Clause of the Con­sti­tu­tion, ren­der­ing the Secu­ri­ties and Exchange Com­mis­sion’s (SEC) pro­ce­dure for appoint­ing ALJs uncon­sti­tu­tion­al? Pro­ce­du­ral­ly, how could a respon­dent in an SEC admin­is­tra­tive action make such a chal­lenge? Jor­dan Gary (’17) explores this ques­tion, as pre­sent­ed in the 2016 Kauf­man Moot Court Com­pe­ti­tion at Ford­ham Law School. Supreme Court doc­trine places a demand­ing bur­den on plain­tiffs seek­ing to cir­cum­vent SEC admin­is­tra­tive process­es. Addi­tion­al­ly, the SEC is nei­ther bound by, nor required to defer to, ini­tial ALJ deter­mi­na­tions in reach­ing its ulti­mate deter­mi­na­tion with­in a pro­ceed­ing. As a result, this Con­tri­bu­tion argues that, as a mat­ter of both law and pol­i­cy, Arti­cle III dis­trict courts should not have sub­ject-mat­ter juris­dic­tion over con­sti­tu­tion­al claims chal­leng­ing SEC admin­is­tra­tive pro­ce­dure, and that SEC ALJs do not con­sti­tute infe­ri­or offi­cers under the Appoint­ments Clause of the Constitution.

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