SECURITIES REGULATION I. Introduction ............................................................................................

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A. B. C. D. A. B. C. D.
1. 2. 3. 1. 2. 3. 1. 2. 3. 1. 2. 3. 4. 5. 6. 7. 8.

Applicable Statutes..............................................................................................3 Filings Throughout a Corporation’s Public Existence .....................................3 Materiality .............................................................................................................3 Market Efficiency .................................................................................................4 § 11 Liability .........................................................................................................5 § 5 Liability ...........................................................................................................6 What Is a “Public Offering”?...............................................................................7 Public Offerings Process—Three Periods.........................................................7
Pre-Filing Period.........................................................................................................8 Waiting Period ............................................................................................................9 Post-Effective Period ...............................................................................................10 S-3 .............................................................................................................................. 11 Shelf Registration.....................................................................................................11 Well-Known Seasoned Issuer (WKSI).....................................................................12 “Investment Contracts” ...........................................................................................12 Notes as Securities ..................................................................................................14 Derivative Securities and Synthetic Investments..................................................14 Exempt Securities ....................................................................................................15 Private Offerings.......................................................................................................15 Employee Benefit Plans...........................................................................................18 Intrastate Offerings ..................................................................................................18 Regulation A Mini-Offerings ....................................................................................18 Offerings Not Involving an Issuer, Underwriter, or Dealer ...................................18 Integration .................................................................................................................18 Liability in Exempt Offerings...................................................................................19

II. The ’33 Act: The Public Offering ...........................................................4

E. Disclosure for Seasoned Issuers .....................................................................11

F. What Is a “Security”? ........................................................................................12

G. Exempt Offerings ...............................................................................................15

H. Secondary Distributions and Resale ...............................................................19
1. The Role of Underwriters.........................................................................................19 2. Exemption of (Secondary) Offerings Not Involving an Issuer, Underwriter, or Dealer ............................................................................................................................... 20 3. Rule 144 Safe Harbor—Restrictions on Resales of Control Shares and Restricted Securities ......................................................................................................22 4. Rule 144A Safe Harbor—Qualified Institutional Buyers .......................................22 5. The § 4(1½) Exemption for Resale to Sophisticated Investors ............................23

I.

Recapitalizations, Reorganizations, and Acquisitions...................................23

III. Financial Reporting ..............................................................................27
A. The Disclosure Requirements of Public Companies......................................27 B. The “Fairly Presents” Requirement .................................................................28
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.........................................48 2 .......................40 V....................................................... Materiality of the Fraud .................................37 Face-to-Face Transactions ......... § 16(b) Liability..........................38 a) Reliance..............33 A..........................40 Control Person and Respondeat Superior Liability ........42 VI............. 1.................................................................................................................................. 1............................... The SEC and Corporate Governance...............................................................................................................................................................38 2.........................................................38 D................................................................................................................................................................................................. Responsibilities of Brokers to Their Customers ............................................................................................................................................................28 1.......................43 VII......................... Reliance and Causation ................ 2..........................................C....39 Aiding and Abetting ................................................... Lawyers’ Liability and Ethics .....................................................................................38 b) Causation .................... Forward-Looking Information......................................... International Scope of Regulation .......................41 E.............................................. Heightened Pleading ....................................... Disclosure of Corporate Governance................................................................................ Tippers and Tippees ........................................34 C............................................................. Litigation Reform: PSLRA.....................40 Primary Participants....35 Lead Plaintiff ...34 B..................................................38 a) Reliance...............31 IV...... 2.......................46 B...................................... Who’s Liable? Primary and Secondary Liability...................................................... The Affirmative Duty to Disclose........................... 3...................................................................................................................... 2.35 1........ Damages....................................28 D.....47 IX..........................38 b) Loss Causation ..........36 Safe Harbor for Forward-Looking Information .. Private Enforcement of the 34 Act: Rule 10b-5 Litigation ...................................................................................................................................37 SLUSA ........................................... Mergers and Acquisitions ............. 10b-5 Liability ........... Open Market Frauds: The Fraud on the Market Theory......29 Disclosure of Corporate Misconduct...........................................31 SEC Enforcement ...................................... 3.................................................................................................... 3........................46 C...................... 4...........................................39 3......................................................................... Insider Trading ..............................................44 VIII.......................................................................46 A....

(The only defense is if you can show that all buyers knew that what was in the sm was false. the law firm faces a huge malpractice suit o Underwriter Due Diligence Defense (§ 11(b)) o Everyone other than issuer has due diligence defense. Majority of directors must sign (but all directors liable anyway). bad things happen to the issuer and various other parties associated with the transaction.” Burden of proof of showing the disconnect is on Δ.)  For example. if not. requires geologist. 1999) (p. if doing oil. This is very conducive to class actions. § 11 if a rescissionary measure of damages. then it wasn’t material. etc. (There is no burden on Π to show causation. and if there was. etc. in WorldCom. o Directors (of issuer) o Accountants/Other Experts  S-1 requires audited financials. o This is strict liability with few defenses o Remedy—Can get damages between price at which you purchased stock and current market price. upon showing there was a material misstatement or omission. 482): Πs bought stock in secondary market subject to registration statement.. Can buy in second market and still have standing to sue. Any material misstatement or omission. thereby had standing under § 11 Who Can Be Sued? (§ 11 gives a list)—they all have joint (not several) liability. There is list in order for this to be accepted. everyone can rely on their work.)  If you’re representing issuer. 5   . nonexpertised section. so the consequence of a successful suit is usually bankruptcy—draconian consequences o Who has standing to bring suit? Any person who has bought stock in PO issued pursuant to a registration statement. then your entire case is going to be showing that there wasn’t a misstatement. Everyone who bought has right to money back. market conditions.A. but everyone except the issuer can avoid liability through due diligence o Issuer  No defenses. etc. Rescissionary measure. can recover damages. but this is an impossible burden.  Corp usually doesn’t have enough money to pay damages. Subject to strict liability. but this had to do with competition. “Negative Causation. § 11 Liability  § 11: If there is a material misrepresentation or omission in registration statement when it goes effective. o Omission—leave something out necessary for reasonable investor to understand the registration statement. and that is what drove them to bankruptcy. This is powerful.  There is NO reliance requirement—don’t have to have read registration statement  There is a tracing requirement—must have bought shares issued pursuant to the registration sm  Hertzberg v. o Varies depending on whether it is expertised vs. their lawyers would be trying to show that it went into bankruptcy.  Negative Causation (Qualifier). CFO. but this amount may be reduced or eliminated if Δ proves that the stock price drop had nothing to do with the misstatement of omission. Dignity Partners (9th Cir. o Signatory of registration statement  Only those who have to sign for SEC to accept:  CEO. (and then other people can rely on those results)  Law firms do most of the due diligence work (even UWs hire their own law firms)— if they do investigation well.

so they turn non-legally binding Ks into legally binding Ks ASAP by accepting investors’ standing offers § 5 mandates that you deliver the final prospectus to the investor o OLD RULE—NO LONGER APPLIES: Prospectus must be delivered to investors at the earliest of these 3 times:  1) the date confirmation of the sale is sent to the investor (UWs like to confirm orally. o Big change was allowing UW to use preliminary prospectus in first days after the effective date. 3. o SEC used to demand a price before it would go effective. and closing takes place just afteronly after closing and effective date is there a legally binding K under which UWs buy secs from issuer o In the US. Alloyd Co. 522): “prospectus” refers to a document that describes a public offering of secs by an issuer or controlling SH. at which UWs buy secs from the issuer for the sales price. supplemented only by a one page sheet with pricing information. there are only fixed-price POS. for purposes of § 12 Pricing—this takes place minutes before the effective date.  meet the conditions so long as you file the story or verbatim transcript w/ the SEC w/in 4 days (we don’t want a 1A constraint)  There are virtually no limits to what constitutes a FWP. minus their fee (7%)UWs sell the secs ASAP b/c they want minimal risk. however. On the effective date. so that all buyers have to buy the secs at the set price and can’t negotiate o Issuer wants the highest price possible. but misstatements/omissions lead to:  If they’re in final sm§ 11 strict liability  If errors aren’t in final sm and are just in the marketing§ 12(a)(2) o When a person offers or sells a security by the se of an instrumentality of interstate commerce by means of a false or misleading prospectus or oral communication. (SCOTUS 1995) (p. then send written confirmation)  2) the date of physical delivery of the securities  3) the date any supplemental selling literature is used or an advertisement is made (not usually used) 10  . Post-Effective Period   Ban on sales disappears and selling begins. would not want to price before effective date. there is a closing. The UWs. § 12(a)(2) gives the remedy of rescission  Gustafson v. doesn’t include a contract of sale (doesn’t include private placements) (includes FWPs) o Defense: seller isn’t liable if he can prove due care (he didn’t know the truth and couldn’t reasonably discover the truth (not strict liability))  The issuer is the seller. but he has to align the price with demand o Pop—Price usually goes up as soon as there is a market. They accelerate when they are happy with you. which means that deals are always under-priced (unclear why this happens) Effective Date o Entirely in control of SEC staff.

G. o Congress has now addressed the issue:  First. Makes no sense. there is very little difference.  Swaps o Big corporations enter into large swap agreements to hedge risk by selling pieces of the risk. Exempt Offerings 1. but if there are a lot of speculators in the market. etc. Just a political issue. in response to conditions of the 1970s that made it unnecessarily difficult for small businesses to raise capital (b/c 33 Act regulations are very expensive) 15 2. But big difference under law. hence the economic meltdown right now.  Swaps that are specifically tied to a security are securities. o Credit default swap—a bank wants to shift its risk on bank loans/mortgages so that if the borrower goes bankrupt or defaults on credit. is this risk being sold to people who understand that they can tolerate this risk?  Is disclosure adequate?  It is fine if the risk is being spread to people in sufficiently opposite positions. thus distributing the risk of the swap. Private Offerings    .) o These are NOT securities and are completely unregulated. throw out the investment contract analysis. They parcel out/hedge the risk so that many smaller entities assume pieces of the risk. but don’t have to be registered. So no registration. (Insurance companies do something similar on a much smaller scale. what are the systemic consequences? Law on Derivatives. Options are covered under ’33 and ’34 Act. whereas a future is merely an agreement. A swap arrangement is not a security under Howey. and they guess wrong. o Who assumes the risk of the hedge? Hedge funds (pools of unregulated capital who can take as much risk as they want) and investment banks. Economically. Exemptions: o § 3(a)(2)—Government and municipal securities/bonds o § 3(a)(3)—Short-term note (less than 9 mths) o § 3(a)(4)—Charitable Organizations o § 3(a)(5)—Any Security Issued by or Guaranteed by a Bank § 4(2)—§ 5 doesn’t apply to non-public offerings TEST: Ralston-Purina (see above) (you want to protect those who need the protection of the securities law)—this left a broad framework. Exempt Securities   Exempt securities are securities. But futures have been given to the Commodities Futures Trading Association Commission. but solely for antifraud purposes (Rule 10b-5). which the SEC filled in the gaps of) SEC adopted Reg D to exempt more offerings. then someone else compensates the bank (someone who has assumed the risk of default) o Problems:  When selling off pieces.   The big difference between options and futures is that options give you a right to buy and sell.

NOT OK: stock price goes down and purchaser wants to sell)  2) Person who offers or sells for an issuer in connection with a distribution  Acting as an agent of the issuer o SEC v. in which i-banker agrees to purchase any of the offering’s shares that aren’t subscribed for by the existing SHs exercising their rights  2. Underwriter. and there is no minimum amount that must be sold as a condition to the deal closing  Mini/maxi best efforts UW: stipulated minimum amount of all the shares to be sold must be sold during a specific period of time before the offering can close  All or none UW: all secs must be sold before the deal is completed o Rights offering (type of PO): issuer’s existing SHs are granted the opportunity/right to purchase the new offering of shares. OR dealer (these are exempt offerings)§ 5 applies if you’re an UW This exemption allows for secondary transactions in the marketplace (we only care about capital-raising transactions by the corporation) § 2(a)(11): Underwriter: o Distribution = public offering under Ralston-Purina o Types of underwriters:  1) Person who purchases from an issuer with a view toward distribution of the security  With a view toward = intent—TEST: have the securities come to rest in the hands of the purchaser? Objective test that asks whether the purchaser has held the securities long enough to negate any inference that his intention at the time of acquisition was to distribute them to the public  Catches everyone in § 4(2) private placement and Reg D—these are purchased in a private placement and resold in a public trading market w/ a view to resell to the public o BUT purchasers unaffiliated with issuer or principal UW who enter into an agreement with principal UW to purchase all or a portion of securities unsold after a specific time are excluded from defn of UW  View toward distribution v. usually at a discount  Standby agreement: common practice. Chinese Consolidated Benevolent Ass’n (2d Cir. investment intent: o Holding period of 2 yrs establishes presumption of investment intent. 1941): members of Chinese benevolent society in this country who gratuitously undertook to solicit offers for the purchase of 20 .Straight best efforts UW: any secs sold to investors remain sold. Sherwood) o Less than 2 yrs—look at:  Purchaser’s circumstances at time of purchase  Change in circumstances of investor after purchases. Exemption of (Secondary) Offerings Not Involving an Issuer. underwriter. 3 yrs establishes investment intent (US v. giving rise to purchaser’s change of intent (OK: sudden heart attack and purchaser needs to sell to get money. or Dealer    § 4(1)—the provisions of § 5 DON’T apply to any offering NOT involving an issuer.

So. corp must: o Sale must take place in offshore transaction o There can’t be any directed selling in the US o Regulation S  Regulation S. o Abuse that has worried SEC  Safe harbor—follow and you are safe. and this is public offeringuse Form S-4  Both A and B have disclosure obligations  Rule 145 (33 Act): if corp A want to buy out corp B by giving stock (not cash). which embodies Rules 901–05. provides safe harbors for offshore distributions and resales of securities of US and foreign issuers (you need safe harbor b/c § 5 is incredibly broad)  Targets foreign issuers and foreign transactions. a person on a holiday to London is still a US person is OK. then the SHs need the protection of the sec laws. you lose US status 25  . but once you make a foreign country your place of residence. 225)  Three types of companies in the world that may engage in capital raising outside the US:  1) Foreign companies with no US trading interest  This includes a foreign issuer that has no substantial US market interest or that is engaged in an overseas directed trading  Companies who are established in another country. with all their offices in other country with no investors in the US  These are the kinds of companies US investors are unlikely to find as interesting investment opportunities  Must do two things to take advantage of safe-harbor:  Make sure they do not intentionally sell to any US-based person— must be an off-shore transaction  Hypo: You are sent to London to head their legal department for 5 years. and the SHs are voting on the transaction. o It is technically complicated. Are you a US-based person?No—it is where you are living. when does it have to be registered w/ SEC?  Reg S  Foreign corps w/ no US presence. (p.  Reg S is safe harbor for how to structure an offshore transaction in such as way that it will not have to be registered.why? SHs have to be able to make informed decision. to take advantage of safe harbor from 33 Act. this is presumptively a public offering that requires disclosure (presumptive b/c you can buy out a few wealthy people and structure it as a private placement)  Form S-4:  Info about the combination or exchange offer itself  Info about the issuer  Info about the corp being acquired (can be incorporated by reference)  Requirements surrounding the combination’s approval  Global offerings  When foreign corp does capital-raising transaction outside the US. Creates a number of specific safe harbors. so they have to have disclosure about the stocks  Rule 135: if M&A transaction is structured so that shares are the consideration. Chart in readings is good.

not a per se rule (look at how important the thing more than 5 years ago was)  Item 404: you must disclose certain affiliated transactions (conflicts of interest). or exec officer w/in 5 years of filing regis sm  Item 401(a–b): identify all directors. illegal. so you have to disclose who is in control and what their backgrounds are (this case show how much you must disclose about corp leadership)  Item 406: you must disclose whether the corp has a code of ethics that covers the principal exec officer. fraudulent. and injunctions/orders barring exec from engaging in business activity o When deciding whether to disclose. look at whether the pending suit bears on mgmt’s stewardship of the firm or it overall integrity o You only need to disclose the basic facts of the pending suits. or exec officer o This only includes claims that have been adjudicated. if the transaction (or proposed transaction) exceeds $60.  Item 402: you must disclose executive compensation—this is required for the 5 most highly compensated officers whose cash includes more than 30 . or immediate family of any of these  You don’t have to disclose the purpose or effect of the transaction— investors can assess that  In re Franchard Corp. person nominated to become a director. 625): controlling SH Glickman was borrowing money from the corp. and its controller. so this could be a conflict of interestyou invest in execs as well as in the corp. and others expected to make a significant contribution to the firm  Item 401/403: material legal proceedings: requires disclosure with respect to director. you must disclose it  Code is drafted and administered by corp’s general counsel  Code sets forth certain conflicts of interest and who you should ask to help resolve the conflicts. director nominee.directors.)—don’t say how you think the suit will turn out o 401(f) is silent on actions that have been settled  Item 403(c): you must disclose any arrangements known to the corp. so this has become a de facto rule requiring a code of ethics  Every time there’s an explicit or implicit waiver of the code. exec officer. etc. but this is a guide. not all pending claims. director nominee. financial officer and accountant. (SEC 1964) (p. you must say why (no one wants to say they don’t have this. and you don’t need to characterize the suits (crim. exec officers. or SH who owns more than 5%. securities/commodities law violations. BUT all pending criminal proceedings must be disclosed. etc. exec officers  Item 401(f): you must disclose certain types of adjudications w/in the past 5 years that are material to an evaluation of the ability of any director. including any pledge that may result in a change of control in corp  Events more than 5 years in the past are not material. This includes bankruptcy. but the nature and extent of the borrowing was concealed in the S-1this is a material violation (even though he was only borrowing 2% of corp’s assets) b/c the corp marketed itself with Glickman as a brilliant investor.000 and is between the issuer (or its subsidiary) and its director. if you have no code of ethics.

there is no system of continuous disclosure Fiduciary duties—pre-existing duties to disclose due to a fiduciary status (ex. exec officers. which the firm must pay for—it usually costs $50–75 million to go to trial  Risk of losing trial (jurors usually want someone to pay for the loss. (7th Cir. you can’t buy insurance for intentional torts. insider trading. C. so that have a motive to bring cases aggressively  Most of the issues are murky. Π must give facts that give rise to a strong inference that Δ committed fraud with scienter Facts: these facts must be alleged pre-discovery. which forces settlement o Costs of litigating (not settling):  Uncertainty  Litigation costs (typical Π lawyer sues the corp. you must state facts “with particularity” (not enough to just put Δ “on notice” of the case)  Fight class certification  Motion for SJ (hard b/c it requires no dispute of material facts) Private Securities Litigation Reform Act of 1995 (PSLRA) was a response to these fears in litigation o Goals of PSLRA (Tellabs):  Curb frivolous. so you can bring the cases in good faith. and you can’t indemnify people for actions not taken in good faithyou settle so you don’t concede liability and thus lose your insurance or indemnification)  Distraction (lots of resources and time have to be devoted to meeting discovery demands) o Settling becomes the most attractive option. Heightened Pleading   TEST: Under PSLRA. 9: in fraud cases. Litigation Reform: PSLRA Policy concerns with having such open-ended and potentially crippling litigation: o Practical consequences:  Control: it cuts off communications b/w employers and the outside world  Conservatism: you err on the side of disclosing more. or don’t say anything b/c you don’t want to give a half-truth o Plaintiffs’ lawyers (they love this):  Lots of venue choices  Attorneys get huge portion of judgments/settlements (20–30%). Abbott Laboratories. lawyer-driven litigation  Preserve investors’ ability to recover on meritorious claims  1. directorsrequires a lot of firms to defend all sets of Δs. 2001) (p. Inc. 686): a duty to correct only arises if the statement was incorrect when made.  o Gallagher v. regardless of your liability under lawthis has led to the perception of litigation abuse o How can you get rid of the case before costs incur?  12(b)(6) MTD (hard b/c you have to assume complaint is true)  FRCP R. thus eliminating the bad cases—this allows argument over facts even before discovery o You must show facts that prove fraud as well as scienter o The facts should show:  Δ benefited in a concrete and personal way from the purported fraud  Engaged in deliberately illegal behavior 35 .

and the misrepresentation must be attributed to that specific actor at the time of public dissemination (in advance of the investment decision)—this upholds the reliance requirements of the statute  This is concerned with who “makes” the statement  Facts: Ernst & Young did the financials of the corp. S76): Reliance is key (look at proximity)—shift from attribution to proximate 40 . accountants. which authorizes SEC enforcement actions in the courts against any person that knowingly provided substantial assistance Elements of the cause of action for aiding and abetting a Rule 10b-5 violation: o 1) existence of an independent disclosure violation o 2) actual knowledge (and recklessness can be sufficient) by the aider and abettor of the misrepresentation and his role in furthering it o 3) the aider and abettor provided substantial assistance in the transaction giving rise to the investor’s injury   2. LLC v. Ernst & Young LLP (2d Cir. reviewing. Who’s Liable? Primary and Secondary Liability    Primary violator—someone who commits the act proscribed by the statute or rulethey can always be liable Secondary violator—someone who assists or supports the primary violator. and editing the misleading financial reports. but the corp never mention Ernst & Young not attributed any info to them (and the press release even said the audit wasn’t complete)Ernst not liable  The SEC opposes this test—it would rather treat as a primary participant a person. who is often the secondary violator 1. First Interstate Bank of Denver (SCOTUS 1994) (p. then there will be a chilling effect in the industry and they will raise costs) PSLRA adds § 20(f).: accountants and underwriters were liable when they had a significant role in drafting. Scientific-Atlanta. Inc. 1998) (p. Aiding and Abetting  Central Bank of Denver v. and had deliberately chosen to conceal the truth  Other circuits look at Δ’s involvement with the misrepresentation o Bright-line attribution test: a third party’s review and approval of documents containing fraudulent statements is not actionable under § 10(b) b/c one must make the material misstatement or omission in order to be a primary violator  Wright v. and bank who employ a manipulative device or make a material misstatement or omission on which a purchaser or seller relies CAN be liable as a primary violator o (If we make these easy targets liable as secondary violators. 764): Δ must actually make a false or misleading statement to be liable under § 10(b). and does so with scienter o Stoneridge Investment Partners. Primary Participants  Circuit split on two possible tests for when a secondary violator’s conduct implicates primary liability: o Substantial participation test: third parties may be primarily liable for statements made by others in which Δ had significant participation  9th Cir. 761): Aiders and abettors can ONLY be liable in SEC enforcement actions. acting alone or with others. (SCOTUS 2008) (p. who creates a misrepresentation on which the investor-Πs relied. NOT in private actions o Lawyers.E. or is liable b/c of a relationship with the violatorthey can sometimes by liable Πs often go after the deep pocket.

anyone with comparable responsibilities or any other corp exec actively involved in policymaking and day-to-day control of the corp (each corp has to decide for itself who qualifies for this. But when group agrees to act in concert. it shows insider info)—Congress didn’t 45 . that means the corp is doing well (basically. the number of shares owner. not record ownership. The group is “formed” when it has some power  Wellman v. if there’s a change in your ownership (buy or sell). so hedge funds often own 4. when people aggregate their wealth and the hedge fund acts on their behalf. What is different from beneficial ownership is that nobody must be in charge. 1982) (p. o Plans and intentions have to ripen into something reasonably fixed before they become useful 13(d) disclosures. but it’s on appeal 13D requires both purpose and plans or proposals—courts are split on what you have to disclose if you aren’t sure what your plan is Enforcement:  SEC can bring action (no requirement of scienter in such actions)  Issuers can bring private actions for equitable relief (no damages) § 16: o Addresses requirements of:  Officers = not based strictly on title. which they put in the disclosure)  Directors = any member of Bd  10% SHs (not controlling. beneficial ownership = you have the ability to control (voting power and investment power (to sell)) Who is a “person”?  Group: 13(d) contemplates the possibility that a group can be formed. but it profits from themhedge fund goes out and tries to make money. and you must file amendments when there are any changed after that—like an early warning system Purpose of rule: notify SHs and the corp about what’s going on (then corp can take defensive action) Look at beneficial ownership. the source of funding. then the hedge fund profits from an increase in value—bank profits b/c it takes the fee that the hedge fund gives it and uses it to buy shareswhat if the bank’s shares that profit hedge fund and the bank’s own shares are more than 5%? Does this trigger § 13(d)? recent trial court said yes.       You must file Schedule 13D. that’s a sign that the ship is about to sink. if you plan on doing a tender offer. CFO. you have to file at 5% ownership—must be filed w/in 10 days of gaining 5%.9% o Total refund swap: the bank owns the corp’s shares. any contracts or arrangements with respect to such shares. 970): you don’t need a group charter or legally binding agreement. holding. in exchange for a fee that the hedge fund gives the bank—hedge fund doesn’t own any of the corp’s secs.  This often happens with hedge funds. not record ownership (see above) o § 16(a): you must file how many shares you own. it assumes the identity of a single person (like a conspiracy). but it’s a lot)—test is beneficial ownership. and the purpose of the acquisition (including any plans or proposal regarding possible exercise of control over the issuer)—basically. and the bank is willing the pay the hedge fund the value of any increase in the corp. Can be made up of people of equal power. Dickinson (2d Cir. disclosing the background and identity of the acquirer. you have 48 hrs to notify the SEC  Rationale: if they’re selling a lot. it is enough that they have explicitly or implicitly agreed to furtherance of a common end of buying. or selling. but rather on power—CEO. if they’re buying.

Creates incentive for good lawmaking.  This regime allegedly will do better than what we have now. There is nothing that says regulator has to get this right. o Arguments against:  Doesn’t work unless efficient markets can rescue.  50 . Economics-based argument that starts with premise that we already do this with corporations.  What degree of confidence do you have for people to fend for themselves.  Risk will be priced.  Downside of system that is strongly-territorial. Would be cheaper to issue in US than in Belize. There is no check on law for special interests and bureaucratic stupidity. Won’t be chosen unless product appeals to investors.Market will take care of itself.  So folks will drift towards optimal amounts of regulation depending on their circumstances.