After Gregory Bolan quit as a research analyst for Wells Fargo & Co. in Nashville, Tenn., his former colleague, trader Joseph Ruggieri, gave him a set of keys to Mr. Ruggieri’s Manhattan apartment to help him as he interviewed for jobs in New York.
This seemingly innocuous favor was cited by the Securities and Exchange Commission, when it filed civil charges last year against both men alleging insider trading.
The agency said the gesture of friendship helped demonstrate that Mr. Bolan benefited from allegedly tipping Mr. Ruggieri about his upcoming market-moving reports on several stocks from April 2010 through March 2011, when they still worked together.
Now, the supposed benefit is at the center of a courtroom battle—the latest in a string of legal challenges stemming from a landmark appeals-court ruling in December that raises the bar for prosecutors and the SEC in proving insider trading.
The two men intend to file a motion Thursday, seeking the dismissal of all charges against them as a result of the appeals-court ruling, according to Mr. Bolan’s lawyer, Sam Lieberman. The men deny wrongdoing and say the SEC’s case doesn’t meet the new standard set by courts. ...
Prosecutors and the SEC “in a lot of ways…have been quite cavalier” about assuming that friendships are sufficient to satisfy the personal-benefit test in insider-trading cases, said Stephen Bainbridge, a law professor at the University of California, Los Angeles. That’s set to change, he added: “The days when you could just allege that [the tipper and trader] were buddies and talked to each other are clearly over.”
According to the Guinness World Book of Records, the longest game of correspondence chess spanned 53 years and ended only with the death of one of the participants. Professor Macey and I have a good start at challenging this record, but with any luck, we will reach closure without either of us having to expire. And, if you are keeping score, this post is my reply to Professor Macey’s reply (here) to my response (here) to Professor Macey’s reaction (here) to a paper posted by Commissioner Gallagher and me asserting that the Harvard Shareholder Rights Project has violated federal securities law (here). Whew.
Blogging by academics is now routine. But it's worth occasionally pausing to consider whether it still makes sense. A thoughtful post by Patrick Dunleavy offers good reasons for it remaining a key part of every academic's portfolio:
Academic blogging gets your work and research out to a potentially massive audience at very, very low cost and relative amount of effort. Patrick Dunleavy argues blogging and tweeting from multi-author blogs especially is a great way to build knowledge of your work, to grow readership of useful articles and research reports, to build up citations, and to foster debate across academia, government, civil society and the public in general.
What's interesting for me is that Dunleavy makes a strong case for what he calls multi-author blogs (MABs), which differ from group blogs in having hundreds rather than a dozen or two authors. In my field, Harvard's corporate governance forum probably comes closest to a MAB. I like it. But it's not really my thing.
The latest attack on academic freedom comes not from government authorities or corporate pressure but from students. At UC Santa Barbara, the student Senate recently passed a resolution that calls for mandatory "trigger warnings" — cautions from professors, to be added to their course syllabi, specifying which days' lectures will include readings or films or discussions that might trigger feelings of emotional or physical distress.
The resolution calls for warnings if course materials will involve depictions and discussions of rape, sexual assault, suicide, pornography or graphic violence, among other things. The professors would excuse students from those classes, with no points deducted, if the students felt the material would distress them; it is left unclear how students would complete assignments or answer test questions based on the work covered in those classes.
The student resolution is only advisory, a recommendation that campus authorities can turn into policy or reject. They should not only choose the latter course but should explain firmly to students why such a policy would be antithetical to all that college is supposed to provide: a rich and diverse body of study that often requires students to confront difficult or uncomfortable material, and encourages them to discuss such topics openly. Trigger warnings are part of a campus culture that is increasingly overprotective and hypersensitive in its efforts to ensure that no student is ever offended or made to feel uncomfortable.
While their [i.e., shareholder activist hedge funds] prominence has been steadily increasing in recent years, in 2014 they reached new heights, sweeping out all the directors of one company, getting a seat on the board of the nation’s oldest bank and helping set the stage for the biggest takeover of the year.
Activists also raised billions of dollars in a sign they are likely to be as busy, or busier, in 2015. ...
More than ever in 2014, when shareholder votes were up for grabs, activists won. They scored a board seat in about 73% of all proxy fights, topping the previous year’s record of 63%, according to FactSet.
Even though the primacy of the board of director primacy is deeply embedded in state corporate law, shareholder activism nevertheless has become an increasingly important feature of corporate governance in the United States. The financial crisis of 2008 and the ascendancy of the Democratic Party in Washington created an environment in which activists were able to considerably advance their agenda via the political process. At the same time, changes in managerial compensation, shareholder concentration, and board composition, outlook, and ideology, have also empowered activist shareholders.
There are strong normative arguments for disempowering shareholders and, accordingly, for rolling back the gains shareholder activists have made. Whether that will prove possible in the long run or not, however, in the near term attention must be paid to the problem of managing shareholder interventions.
This problem arises because not all shareholder interventions are created equally. Some are legitimately designed to improve corporate efficiency and performance, especially by holding poorly performing boards of directors and top management teams to account. But others are motivated by an activist’s belief that he or she has better ideas about how to run the company than the incumbents, which may be true sometimes but often seems dubious. Worse yet, some interventions are intended to advance an activist’s agenda that is not shared by other investors.
This chapter proposes managing shareholder interventions through changes to the federal proxy rules designed to make it more difficult for activists to effect operational changes, while encouraging shareholder efforts to hold directors and managers accountable.
I've put together a report for a family meeting to choose our next car. We want a compact SUV that can be flat towed behind our Itasca Navion motorhome. When various other filters are applied we ended up with four choices: Chevrolet Equinox, GMC Terrain, Jeep Cherokee, and Jeep Wrangler. This report provides an overview of the pros and cons of the various choices.
A motion for a TRO will be reviewed under the standard for a motion for preliminary injunction if a more developed record is presented to the court, but in any event, a mandatory injunction requires a much greater showing than a typical status quo injunction. Neither standard was satisfied in this case.
Advance notice bylaws are commonplace and will only be enjoined due to inequitable circumstances, not evident in this case. A review of Delaware cases where such bylaws were upheld, and those in which such bylaws were stricken, provide a useful guide for future reference.
Over at his blog Excess of Democracy, Derek Muller (Pepperdine) has a provacative post titled "NCBE Has Data To Prove Class of 2014 Was Worst in a Decade, And It's Likely Going to Get Worse." Derek recounts that the overall bar passage rate across the country for the July 2014 sitting was down as compared to previous years, and he posits that the lower results were caused by "student quality and law school decisionmaking." He believes that the data suggests that lower quality students, and educational decisions of law schools, are producing graduating classes that are less qualified overall, in turn resulting in lower bar passage rates.
In essence, students come into law school having done worse on the LSAT, and they leave law school doing worse on the bar exam.
Apropos of which, Paul Caron has the latest California bar passage data:
First time test takers from ABA-aproved law schools: down 6.5 percentage points
All test takers: down 7.1 percentage points
These declines are concentrated in the lowest ranked schools:
First time test takers at the 5 highest ranked schools: down 1.5 percentage points
First time test takers at the 5 lowest tanked schols: down 12.3 percentage points
This is not unique to California. Bar passage rates have been dropping nationally. In Illinois, for example:
The state’s overall passing rate has declined in the past five years, from 89 percent in 2009 down to 80.9 percent this year.
One might reasonably infer that the slump in law school applications has meant that all schools are taking in students today that they would not have taken 10 years ago, but that the bottom tier schools have been disproportionately affected by this trend, which makes sense. As Brian Tamanaha has noted:
A sharp decline in applicants inevitably leads to a decline in the quality of law students, manifested in declining LSAT/GPA medians and rising acceptance rates. A decade ago, for the entering class of 2003, only 4 law schools accepted 50% or more of their applicants (the highest at 55.4%). Jump forward to 2011: 42 law schools accepted 50% or more of their applicants, broken down as follows: 29 schools accepted between 50% and 59%; 7 schools accepted between 60% and 69%; 5 schools accepted between 70% and 79%; one law school accepted 80.1%.
Here is another comparison to put the decline in perspective: A little more than half of the applicants who applied to law school in 2004 were accepted somewhere; in 2013, around seventy-five (and perhaps eighty) percent of the people who apply will be admitted somewhere. As law schools reach ever deeper into the applicant pool, they will admit students who should not be in law school. Applicants with low LSAT/GPA scores, in particular, have a higher risk of failing out and a higher risk of not passing the bar exam.
The bottom tier schools now are truly scraping the bottom of the barrel, which is reflected in their bar passage rates.