Tag Archives: securities market

Michael Lewis Saved from Paying the Piper for False Portrayal in “The Big Short”

By virtue of a poorly reasoned opinion from Second Circuit Judge Richard Wesley, author Michael Lewis narrowly escaped answering to a jury for blatantly inaccurate and unfair descriptions of CDO manager Wing Chau in Lewis’s apocryphal book, The Big Short.  On November 14, 2014, a majority of the three-judge panel in Chau v. Lewis, No. 13-1217, affirmed a district court grant of summary judgment to Lewis on Chau’s claims that descriptions of him in The Big Short were libelous.  Although the majority’s ruling for Lewis was hardly a vindication – it acknowledged the falsity of Lewis’s statements but merely inoculated them against liability in a libel action – it also reflected a myopic elevation of legal nicety over the real world.  A copy of the majority opinion can be found here: Chau v. Lewis 2d Circuit Opinion (Opinion”) .

Courtesy Lucas Jackson/Reuters

Michael Lewis (Courtesy Lucas Jackson/Reuters)

Senior Judge Ralph Winter, a dean of the 2d Circuit bench and author of many securities law opinions over the years, tried to restrain himself, but could not avoid a satiric tinge in a dissenting opinion lambasting the majority for using trees to obscure the forest, even while claiming they were deciding the case based on “the context of the publication as a whole, not just the paragraph or chapter containing them.” Opinion, slip op. at 14.  A copy of Judge Winter’s dissent can be found here: Chau v. Lewis 2d Circuit Dissent (“Dissent”).  Perhaps the great disappointment was that Senior Judge Amalya Kearse, who is highly respected, joined in Judge Wesley’s weak effort.

For those who may be interested in looking at what the lawyers of Chau and Lewis had to say on appeal, copies of their briefs filed in redacted form (to omit the most juicy stuff) can be found here (Appellant Brief in Chau v Lewis) and here (Appellee Brief in Chau v Lewis).

The case originated in Lewis’s blockbuster work of purported non-fiction about the underpinnings of the 2007-2008 financial crisis in the massive market of mortgage-backed securities offerings, and in particular collateralized debt obligations built on subprime mortgages.  Lewis’s book was on the New York Times bestseller list for 28 weeks, but over time has been shown to be far from accurate in key respects.  Nevertheless, as is the way of the world nowadays, the book created impressions that last and are taken as fact, regardless of its degree of accuracy or inaccuracy.  The district court record in Chau v. Lewis includes an expert report from a Northwestern University Medill School of Journalism professor stating: ““Lewis’ methodology in researching, drafting, and fact-checking The Big Short fell far below the standard required by this profession.”  Lewis chose not to have an expert defend his work.  Revelations about Lewis’s factual sloppiness (to be kind) in The Big Short do not bode well for verity-checks of Lewis’s new tabloid-like charges in Flash Boys that the stock market is “rigged” for the benefit of high frequency traders. 

Wing Chau’s company Harding Advisory LLC served as collateral manager for many CDO offerings.  Lewis dwelled in particular on an attack on Wing Chau in Chapter 6 of the book, entitled Spider-Man at the Venetian.  Relying on a report from co-defendant Steven Eisman of a supposed conversation between Chau and Eisman at a dinner in Las Vegas, Lewis presented a no-holds-barred indictment of CDO managers in general, and Wing Chau in particular, for having fostered the origination of worthless mortgage loans which were packaged to create also-worthless CDOs, all to satisfy the wealth and greed of Wall Street, CDO managers, and Wing Chau himself.

Any person who read Chapter 6 came away from the book believing Wing Chau was an idiot, moron, fool, greedy bloodsucker, and fraudster.  That was Lewis’s plain intent and the obvious import of what he wrote.  It ruined Chau’s career, and is a picture he will never live down.  The problem is, Lewis based it on hyperbole, insidious mockery, Eisman’s questionable portrayals, and plainly false statements.  Presumably he relied on Eisman and did little in the way of independent analysis.  I don’t know what steps he took before deciding to commit Chau to a public pillory, but one thing we do know, at least if Judge Winter is reliable, is that Lewis “admits that he does not use a fact checker.”  Dissent, slip op. at 5.  No surprise there.

Judge Wesley decided that just because Lewis ridiculed and demeaned Chau professionally and personally with false statements is not an adequate reason to force him to explain to a jury why he did what he did.  Instead, Wesley wrote down the 26 nasty, snarky, and sometimes false things Lewis said (or Lewis said that Eisman said) and, one by one, explained why each one, standing alone, was not a valid basis for a libel claim.  His opinion is the definition of myopia.  It is as far as you can get from what Wesley portrayed as the correct approach, which requires examining “the context of the publication as a whole, not just the paragraph or chapter containing them.”  Opinion, slip op. at 14.  Somehow he decides that pages and pages of statements that disparaged Chau, portrayed him as a greedy profiteer who made tens of millions of dollars for doing nothing, and accused him of being a fraudster, was not libelous because each statement taken alone was either “opinion” or not sufficiently harmful to qualify as being defamatory.  How frightening that an appellate judge tucked away in his robes and life-tenured position could be so clueless.  By deciding in his view what “an average reader” would and would not view to be defamatory – a plain invasion of the province of the jury – Judge Wesley deprived Chau of his only chance to regain dignity and a future: a decision from a jury of his peers.

As Judge Winter pointed out in dissent, the opinion is just plain wrong.  Lewis used statements that were admittedly false, or in some instances could be proved to be false, to portray Chau as lawless, stupid, greedy, unethical, and immoral.  For example:

  • He wrote that Chau “spent most of his career working sleepy jobs at sleepy life insurance companies” before turning to CDO investing, to make the point that Chau lacked the skills to work as a CDO Manager.  This is now admitted to be false.
  • He said Chau invested in only “dog shit” subprime CDOs when in fact 40 percent of his CDOs were not in that category.  Faced with this, Judge Wesley lamely opined: that this was a “fine and shaded distinction[]” that would not matter to a reader.  Opinion, slip op. at 24.  That’s what juries are supposed to decide.
  • He said Chau “made it possible for tens of thousands of actual human beings to be handed money they could never afford to repay.”  There’s so much wrong with that statement it’s hard to know where to start.  Suffice it to say that there is an ample likelihood that it would be proved false at trial.
  • He said Chau “didn’t do much of anything” as a CDO manager, which almost certainly is inaccurate.
  • He said Chau was a “double agent” who “represented the interests of Wall Street bond trading desks” and not that of investors.  He surely had no facts to support that beyond Eisman’s meanderings, but its truth or falsity is certainly a jury issue.  Judge Wesley exonerates Lewis for this and some other statements because he cloaked them by referring to “CDO Managers” generally, but not Chau in particular.  Opinion, slip op. at 21.  But that is laughable, since the whole chapter is about Chau as a CDO Manager and Eisman’s purported discussion with Chau, as Judge Winter points out (Dissent, slip op. at 3).
  • He said Chau didn’t care about what his CDOs invested in because he “simply passed all the risk that the underlying home loans would default on to the big investors.”  The point is that he allegedly failed in his duties to investors because he passed on risk to others.  Another clear jury issue.
  • He said Chau served “as a new kind of front man for the Wall Street firms,” i.e., that Chau allegedly committed fraud on investors by favoring the Wall Street firms.  That could be true or false, but is again a jury issue.  Judge Wesley gave Lewis a pass on this because he viewed calling someone a “front man” for others is a matter of “opinion.”  Opinion, slip op. at 20.  Far from it.  It is an accusation that someone falsely portrayed himself as protecting investor interests when he was not doing so, in other words, that he committed mail, wire, and securities fraud.  Accusing someone of criminal conduct is not “opinion,” as Judge Winter recognized.  See Dissent, slip op. at 10 (“This description could easily serve as the opening statement in a civil or criminal fraud trial.”).
  • He said Chau took home $26 million in a single year for doing all this but “didn’t spend a lot of time worrying about what was in CDOs.”  That is patently false as to what he earned (by a factor of ten), and likely is false as to the rest.  It suggests, falsely, that Chau earned $26 million in return for betraying his duties to investors.

How an appellate judge could declare that pages of such statements were not actionable “because an ordinary person would not take the statement (albeit incorrect) in context to be sufficiently derogatory to make an actionable claim for defamation” is totally beyond comprehension.  Judge Wesley said that a statement is defamatory if it exposes an individual to, among, other things, “shame, obloquy, contumely, odium, contempt, ridicule, aversion, ostracism, degradation or disgrace.”  Opinion, slip. op. at 15 (emphasis added).  Let’s see.  Obloquy is “the condition of someone who lost the respect of other people.”  That seems pretty clear here.  Shame means “dishonor or disgrace.”  Ditto.  Ostracism — “exclusion by general consent from common privileges or social acceptance” — was actually reflected in evidence in the district court record.  Ridicule is patently apparent on the face of the publication.  Judge Wesley either didn’t read what he wrote or didn’t bother to take it seriously.  His only role was to decide whether a reasonable jury (not him) could look at the evidence and find any of those impacts on Chau, and it really seems beyond debate that the evidence would permit that.  

Judge Winter certainly thought so.  He wrote:

Michael Lewis’s book describes appellant as admitting to acts that a jury could easily find to have breached his obligations to investors in the fund that employed him and to have constituted civil or criminal fraud. . . .  [T]heir conclusion that certain statements are not defamatory is reached only by evaluating those statements in hermetic isolation from the context in which they were made.  They conclude that certain statements can have only a single and non-defamatory meaning even where the book clearly conveyed a different and defamatory meaning that was adopted by the book’s readership. . . .

*          *          *

 A trier of fact could easily find the following.

. . .  Appellant is portrayed as lining his own pockets and foisting doomed-to-fail portfolios upon investors.  Although he was paid to monitor the amount of risk in the fund’s portfolio, he worried only about volume because he was paid by volume.  And, knowing that the default rate of residential mortgages was sufficient to wipe out the fund’s holdings, appellant sold all his interests in the fund, passing all the risk to the fund’s investors, who believed he was monitoring that risk. The portrayal of the appellant is particularly graphic because it purports to show his state of mind and his actions out of his own mouth. . . .

 The book’s author admits that he does not use a fact checker, and much of what the book says about the appellant is known even now (before a trial) as false. . . .  These falsehoods provide the scenic background for the portrayal of the appellant as engaging in conduct that a trier of fact could find amounted to fraud in order to line appellant’s own pockets.  This portrayal can be described as non-defamatory only by declining to view it as a whole; by taking some of the statements and quotations entirely out of the context in which they were made; by finding that some statements have only a single and non-defamatory meaning when the book clearly intended a different and defamatory meaning, one adopted by readers, or so a trier could find; and by labeling some statements as opinion without regard to the facts that they imply.

Dissent, slip op. at 1, 3-4, 5-6.

Perhaps Judge Wesley’s willingness to give short shrift to the allegations of defamation here derive from an excessive willingness to see people in the financial business as acceptable targets of ridicule, hyperbole, and false accusations simply because they are involved in a big money business.  Remember, Wing Chau was not a public figure when Lewis savaged him; he was just a bit player in the huge financial markets.  Let’s do a little fictional mind experiment.  Imagine a self-absorbed author decided to try to make money writing a book sensationalizing sordid legal practices in upstate New York (I know this is far-fetched, but stick with me).  As part of this book, he decided to personalize the charges by including accusations he heard about a lawyer who practiced in a well-known firm in Rochester and then became a partner in a small firm outside of Rochester with a varied practice.  He accused all upstate lawyers of breaching fiduciary duties and used this lawyer as a poster child.  Without doing any fact-checking, he accused the lawyer of breaching fiduciary duties to his clients in order make big bucks by knowingly ignoring his clients’ needs.  The accusations were false.  The lawyer didn’t make such big bucks and didn’t ignore his clients’ needs.  The lawyer tried to save his reputation but was stymied when a judge said he hadn’t actually been defamed.  As a result he was unable to continue work as a lawyer, could not become elected an assemblyman, could not be elected to serve as a judge, and could never get appointed to the federal bench.  Instead, he got hauled before the Bar on charges that he violated the law (as Wing Chau has been hauled before an SEC administrative law court).  I have little doubt Judge Wesley would not look so skeptically at the claims that the lawyer was injured by a defamatory publication.

Judge Wesley’s error was to diminish the significance of the accusations made against Chau while showing excessive deference to allowing false publications, in an effort support “the free exchange of ideas and viewpoints.”  Opinion, slip op. at 27.  But Lewis wasn’t doing that.  He set out to make money on sensational “non-fiction” revelations.  Wing Chau became a vehicle for doing this — an exemplar villain of the financial markets who met face-to-face with Lewis’s faux anti-hero, Eisman.  Lewis skillfully went about crucifying Chau based on false accusations to promote Lewis’s own personal benefit, and should sit in the dock and face the music for doing so.  The majority opinion disingenuously diminishes the substance of what happened here.  This involves more than “simple slights” or “wound[ing] one’s pride.”  Id.  What Chau suffered is a lot more than “hurt feelings.”  Id.  He is professionally disgraced; his ability to support himself and his family is shattered.  That the court deprives him of his chance to stand up for his name and dignity is an affront to the legal process.

Michael Lewis is the villain here, and Judges Wesley and Kearse are accessories after the fact.

 Straight Arrow

November 17, 2014

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SEC Found To Be Assisting High Frequency Traders

As they say, you couldn’t make this stuff up!

The Wall Street Journal reported today (October 29, 2014) that a new study confirms that the Securities and Exchange Commission (SEC) is feeding information to high frequency traders (HFT) before it goes to the general investment public.  What?  Could you say that again?

Yes, it’s true.  Your SEC — the U.S. government agency tasked with assuring a fair and efficient securities marketplace — provides special information access to favored investors, including the much ballyhooed high frequency traders.  Read about it here in this article: Fast Traders Are Getting Data From SEC Seconds Early.

The Journal reports that:

Hedge funds and other rapid-fire investors can get access to market-moving documents ahead of other users of the Securities and Exchange Commission’s system for distributing company filings, giving them a potential edge on the rest of the market.  Two separate groups of academic researchers have documented a lag time between the moment paying subscribers, including trading firms, newswires and others, receive the filings via a direct feed from an SEC contractor and when the documents are publicly available on the agency’s website….

When a company submits a document, the contractor forwards it to the Edgar subscribers and to the SEC website “at the same time,” according to the SEC. But the studies suggest that the SEC website can take anywhere from 10 seconds to more than a minute to post the documents, giving an advantage to the Edgar subscribers or their customers, who are often professional investors. Mom-and-pop investors can download the documents from the SEC website, but the information may already be known to others in the market, the studies indicate….

[A] forthcoming paper will document that investors could make about several cents a share, on average, on market-moving filings by receiving it in advance of those who rely on grabbing the document from the SEC website.

Straight Arrow

October 29, 2014

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SEC HFT Enforcement Action Looks Nothing Like “Flash Boys”

On October 16, 2014, the SEC entered into an administrative settlement of an enforcement proceeding involving a high frequency algorithmic trader — Athena Capital Research, LLC.  But if you review the Administrative Order, which is available here (In re Athena Capital Research), don’t expect to see anything like the fanciful musings of Michael Lewis in “Flash Boys.”  In fact, there is no suggestion that high frequency trading might be unlawful outside of the complex, labyrinthine alleged manipulation scheme described in the SEC’s charges.

I won’t bother to try to describe the charges here because they are so complex.  But they involve an algorithm of multiple high speed buy and sell transactions at the close of the trading day designed to create a favorable price increase for Athena Capital in the after-closing auction.  The important thing is that the SEC did not assert that the problem was high frequency trading (HFT), but that HFT was a vehicle for pursuing “a familiar, manipulative scheme: marking the closing price of publicly-traded securities.”

SEC Chair Mary Jo White made it clear that it was the manipulative conduct that was key: “When high-frequency traders cross the line and engage in fraud we will pursue them as we do with anyone who manipulates the markets.”  SEC officials in the division of the SEC tasked with examining trading systems and practices previously expressed skepticism about Michael Lewis’s accusations and follow-on proceedings by New York Attorney General Eric Schneiderman.  See SEC’s Berman Says Critics Like Schneiderman Misjudge Regulator and SEC official suggests order cancellations not currently a problem.

Another interesting aspect of this proceeding is that the settlement occurred based on the respondent neither admitting nor denying the charges — meaning the SEC did not have the leverage to insist on an admission of liability — and, although there was a $1 million penalty imposed, the SEC did not seek any “disgorgement” of alleged unlawful profits — probably meaning they had a hard time proving significant profits actually occurred.

Straight Arrow

October 21, 2014

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SEC Commissioner’s Remarks on Enforcement Issues Are Worth a Read

On October 14, 2104, SEC Commissioner Michael Piwowar gave a speech to SEC enforcement practitioners that is worth reading.  Commissioner Piwowar is an economist and his views on the role of SEC enforcement in achieving the SEC’s overall goals reflect that perspective.

The speech is included as a link in our SEC Enforcement section, and can be read here.  Here are a few excerpts:

In administering the securities laws, we seek behavioral conformity by all market participants with a particular set of expectations and norms.  Regulatory enforcement is an important tool in achieving this objective.  But our ultimate goal is not achieving regulatory compliance. Our goal is to have a healthy, robust, and resilient capital market ; hence, our mission to protect investors, maintain fair, orderly, and efficient trading markets, and facilitate capital formation.  It is important to recognize that regulatory compliance is not a final objective in and of itself, but rather a tool to assist in achieving our larger goal.  We must be cognizant to avoid situations in which this tool may in fact impede the achievement of our overall objective….

…  If every rule is a priority, then no rule is a priority.  If you create an environment in which regulatory compliance is the most important objective for market participants, then we will have lost sight of the underlying purpose for having regulation in the first place.  Rather than enabling vital and important economic activity, we will have unnecessarily shackled it – and our country will be far worse off from the absence of such activity….

…  Decisions on enforcement priorities and the use of investigative discretion must complement these efforts, rather than serve as an independent source of policy.  That is why the thoughtful application of investigative discretion in an enforcement program is a powerful tool.  These decisions, by and large, reside with the staff, so it is important that the Commission’s senior leadership provide appropriate guidance so that the nearly 1,300 employees in the Division of Enforcement can use our enforcement authority to achieve desired outcomes….

…  I oppose the use by the Commission of enforcement measures as an alternative to rulemaking under the Administrative Procedure Act. The Administrative Procedure Act, with its requirements for the government to engage in notice and comment rulemaking, implements key due process protections.  I understand the frustrations of the rulemaking process.  It takes a significant amount of time, effort, and bandwidth for the Commission to propose and adopt rules under the Administrative Procedure Act.  Nevertheless, I have significant concerns when Commission orders – especially in settled administrative actions – create new interpretations of the laws or regulations or impose new regulatory requirements.  When Commission actions create such results, we fail in our duty to uphold due process….

…  Determining overall effectiveness of our enforcement program by the amount of monetary sanctions, such as disgorgement and civil penalties, ordered against wrongdoers is also a poor metric.  I recognize that a large monetary sanction may be more likely to attract attention.  Thus, properly utilized, these types of sanctions can, in addition to removing the ill-gotten gains from the hands of wrongdoers, deter others from committing such violations.  But if there is a perception among our staff that cases with large monetary sanctions are key to recognition and promotion, then there will be, at minimum, a subconscious shift of efforts to pursue those types of cases….

…  It would be a mistake to put too much emphasis on aggregate dollars as the primary measure of investor harm.  For example, a financial reporting fraud by a large company may result in the loss of billions of dollars of market capitalization and affect, directly or indirectly, millions of investors.  But the risk to any single investor of financial reporting fraud by any single issuer can be mitigated by holding a diversified portfolio of securities.  So while investors are injured by such a fraud, individually, they may only incur a relatively small amount of harm as a percentage of their investments.  On the other hand, a dishonest or corrupt broker, investment adviser, or promoter might cause an investor to lose all of his or her investments.  Even if it is a relatively small amount of dollars, it might account for 100% of that person’s holdings.  So we must ensure that our efforts appropriately focus on these types of frauds as well….

…  corporate penalty due process concerns  have heightened since the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act).  As this audience is well aware, one of the provisions of the Dodd-Frank Act allows the Commission to impose a civil penalty on any person who violates, or causes a violation, of the securities laws or regulations in an administrative proceeding.  Prior to the Dodd-Frank Act, the Commission only had the authority to seek monetary penalties in administrative proceedings against regulated entities and would have needed to file an action before an Article III federal court to obtain a monetary penalty against any other person….

Thank goodness some folks over at Union Station are thinking about the proper role of enforcement in achieving the SEC’s overall “mission to protect investors, maintain fair, orderly, and efficient trading markets, and facilitate capital formation.”

Straight Arrow

October 15, 2014

 

Ninth Circuit Misconstrues Loss Causation Requirement in Loos v. Immersion Corp.

The U.S. Court of Appeals for the Ninth Circuit recently amended an opinion in Loos v. Immersion Corp., No. 12-15100 (9th Cir. Sept. 11, 2014) (available here: Loos v Immersion Corp), affirming dismissal of a securities class action for failure to allege facts supporting loss causation.  The change to the opinion was small, adding a footnote saying that the court did “not mean to suggest that the announcement of an investigation can never form the basis of a viable loss causation theory,” and noting that “[t]o the extent an announcement contains an express disclosure of actual wrongdoing, the announcement alone might suffice” to support loss causation for the wrongdoing acknowledged.  Because the opinion, even as amended, is founded on specious analysis of the content of these types of public disclosures, how the market functions, and the nature of loss causation, it is worthy of discussion here.

In substance, the Loos opinion, even as amended, continues to accept the questionable notion that a drop in stock market price can be “caused” by a revelation of prior false or misleading public statements only if the price reaction follows news explicitly showing that the earlier disclosures were inaccurate.  That approach adopts a simplistic view of the content of information – and of the reasons underlying the market price reaction – that bears little relation to reality.  It represents, in effect, an illegitimate fact-finding exercise by the courts on the issue of causation long before the evidence is collected and evaluated.  It prevents the judicial process, which includes fact-finding by a jury in most such cases, from running its course.

To see why this is true, let us look at the factual allegations in Loos as stated by the appellate court.

Immersion Corp. develops and licenses “haptic” technology, which is the means by which electronic devices vibrate to provide tactile feedback to users.  The complaint centers on Immersion’s quarterly disclosures of its business activity, and in particular its quarterly revenues and profits.  In successive quarters in 2007, Immersion reported its first profits, and, more importantly, increasing revenue growth.  The profitability trend stalled in Q1 2008, but the company reporting continuing revenue growth nonetheless, with increased revenues in Q1, Q2 and Q3 2008.  The reported revenue growth ended in Q4 2008, but continued revenue growth was reported in the company’s medical device segment.  In May 2009, the company reported that in Q1 2009, revenue was stagnant, and reported medical device revenue dropped significantly.

In July 2009, the company issued a press release revealing “an internal investigation into certain previous revenue transactions in its Medical line of business,” and that it had “not yet determined the impact, if any” to its historical financial statements.  The stock price dropped 23% following this news release.

In August 2009, Immersion said that its previous financial statements “should no longer be relied upon” because of irregularities with certain revenue transactions in its medical device business.

In February 2010, the company disclosed errors in its recording of revenue in the medical line of business and a restatement of earnings for 2006, 2007, 2008 and Q1 2009.

The critical issue addressed in the appellate opinion is one of loss causation: whether the stock price drop in July 2009 following the announcement of an internal investigation into previous revenue disclosures could have been caused by investor awareness of previously undisclosed overstatements of company revenue.  The court ruled it could not because the July 2009

announcement of an investigation does not “reveal” fraudulent practices to the market.  Indeed, at the moment an investigation is announced, the market cannot possibly know what the investigation will ultimately reveal.  While the disclosure of an investigation is certainly an ominous event, it simply puts investors on notice of a potential future disclosure of fraudulent conduct.  Consequently, any decline in a corporation’s share price following the announcement of an investigation can only be attributed to market speculation about whether fraud has occurred.

Slip. Op. at 19.  In reaching this result, the Loos court endorsed and followed the reasoning of the Eleventh Circuit in Meyer v. Greene, 710 F.3d 1189 (11th Cir. 2013).

In this view, inaccuracies in earlier disclosures are only “revealed” by a new disclosure that what was previously stated to be a “fact” is no longer a “fact.”  It reflects an assumption that investors can only have a binary view of disclosed information: either it is true or false, and until it is known (to some unstated degree of certainty) to be false, investors can only “speculate” over whether it is true or false.  That approach is wholly artificial because it ignores the reality that people, including investors, reason their way to conclusions about the truth or falsity of information based on less than certain evidence.  When investors reevaluate the price of a security based on new information that raises the prospect that previous information about a company may no longer be correct, that is not “speculation,” it is the human process of determining, as quickly as possible, the long-term implications of the new facts on the value of the company’s securities.

Before the July 2009 disclosure of an internal investigation, investors had no reason to believe that Immersion’s historical revenue disclosures could be inaccurate, including its oft-noted increases in revenue generally and particularly in revenue from the medical segment of its business.  That changed on July 1, 2009.  Investors then were presented with a new state of the world for the company in which there was: (i) some probability that there were no errors, but that there could be significant drains on company performance arising out of the investigation, likely regulatory investigations and private litigation; and (ii) some probability that the prior revenue disclosures were false, which could change future projected performance of the company, in addition to the costs and dislocations from investigations and litigation.  The market needed to reach a judgment on these respective probabilities, and how they would impact future enterprise value.  That is a complex calculation which depends on how costly the investigation and litigation process will be (in dollars and lost focus on business activities); how likely it is that revenues would be restated; if so, by how much; and how that would translate into likely future earnings of the company.  (Keep in mind that, at least theoretically from the standpoint of an economist, a company’s stock market price should be based on the market’s estimate of present value of future earnings.)

The 23% drop in stock price was the result of that type of analysis on a marketwide basis.  While it is hard, and perhaps impossible, to determine what portion of that price decline is based on the expectation of restated revenues, undoubtedly some part of the decline is tied to that prospect.  I say “undoubtedly” because investors know from experience that company management and boards of directors are reluctant to commence an internal investigation, and all the negative side effects it can have, even if it shows no misconduct occurred.  The very fact that an investigation was commenced suggests the Board of Directors found something in the nature of “probably cause” that a problem existed.  As a result, even without total certainty that revenues were previously overstated, it is more than plausible that some portion of the decline in stock price is attributable to expected future disclosure of a revised revenue pattern going back some period of time.  If loss causation is to have any meaning at all, it has to include that portion of the price drop attributable to revised market estimates of likely company revenue in light of the newly disclosed prospect of false historical revenue disclosures.

Why is that so?  Why is it wrong to insist, as the Loos and Meyer courts do, that loss causation can only be proved after a disclosure reveals definitively, or at least to a high degree of probability, that a fraud occurred?  Because that is not how markets work, and taking that approach inevitably will prevent recovery of losses plainly resulting from market estimates that fraud occurred.  The Loos court adopts a market model that is backward-looking, when markets are always forward-looking.

At all times, investors are looking to see if prices need to be adjusted because of future events of varying likelihood.  That plainly is true for something like consumer tastes.  If new data shows that consumers are moving towards a preference for smartphones with larger screens, investors will bid up the price of stock for companies producing larger-screen phones, and punish those producing smaller screens, long before those preferences are actually reflected in smartphone sales.  Even though those stock price changes occur before the consumer purchases actually change, there can be no doubt that the lost value in stock of companies selling small-screen phones is, at least partially, “caused” by the expected changes in consumer product preference.  The market functions by “speculating” about the future (in the Loos court’s words), although that would more properly be described as “revising expectations” of future company earnings.  That same process applies to market expectations about future revelations of corporate misconduct.

If, as the Ninth and Eleventh Circuits seem to be saying, loss causation from a stock price decline can only be proved when the decline follows a definitive or near-definitive “revelation” that a fraud occurred, investors will be precluded from recovering identifiable losses incurred from stock price declines that can be proximately tied to the reasoned expectation of a future announcement of a fraud.  Stock price declines that might be shown by a preponderance of evidence to have occurred because they arose out of revised market expectations based on clues that a fraud could be revealed will not be compensated.  And when the definitive evidence of fraud is “revealed,” the market reaction may well by  negligible because the market already correctly predicted that it would occur and bid the stock price down before the announcement, thereby negating any compensation for the loss.  To be sure, the prospect of developing evidence showing that stock price declines are caused by expectations of future fraud revelations, rather than concerns about the impact of investigations and litigation apart from any fraud, may be slim.  But whether losses demonstratively associated with clues of future fraud disclosures are proximately caused by the fraud is a decision that the ultimate trier-of-fact should make.  It is not a decision properly made by the court as a matter of law to deprive investors of an opportunity to pursue relief in a private cause of action.

Straight Arrow

September 16, 2014

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Does High Frequency Trading (HFT) “Rig” the Market?

Michael Lewis’s “Flash Boys” purports to reveal a system of “market-rigging” by the intervention of high frequency traders into executions of market orders.  Using some of the same sources that he used to source his highly misleading book “The Big Short,” he created a “sky is falling” atmosphere by promoting his book as the revelation of rigging the market.  He portrays a supposed fraud on ordinary traders by high frequency traders because of their ability to step in front of a trade and execute it for themselves at that price and then resell to the trader with a miniscule mark-up, thereby gaining huge profits when these miniscule mark-ups are repeated millions of times.

This has been labeled “insider trading” by many uninformed people, but it almost surely is not, because the high frequency traders do not appear to possess material non-public information when they trade.  I have not yet seen evidence suggesting they were engaged in committing any form of fraud, or breaching any fiduciary or fiduciary-like duty of confidentiality through the process by which they gain access to trade order information before it gets from the exchanges to market-makers responsible for trade execution.  They certainly do not have material non-public information about the public company whose stock is being traded, which is the standard fare of insider trading violations.

Whether this is a form of “front-running” is another issue.  Front-running is a description of trading that occurs when someone learns about an impending trade order, knows that this order will “move the market price,” and steps in front of the order to make a trade before the order hits the market (and moves the price), then usually pockets the profit by selling at the new market price.  This typically would be seen only when people have access to confidential order information involving large block orders of a stock that could conceivably move the market price enough to allow for a front-running profit after costs of order execution are taken into account.  What Lewis describes as high frequency trades are not this type of front-running because they do not involve large block, market-moving, trades.  And it is not at all clear, as compared to front-runners who misuse confidential access to trading information for their own benefit, whether the high frequency traders are engaging in an impropriety at all, since, once again, there is no apparent source of a duty of confidentiality they would be breaching.

Finally, the “market rigging” aspect of HFT would seem to be a hyperbolic, publicity-grabbing description, at best.  The focus appears to be on cumulative profits allegedly gained by the high frequency traders, but the actual impact on specific trades is so small as to be immaterial to the person who entered the order.  How many of us, or even institutional traders, care very much whether our trade is executed at $1 per share or $1.001 per share?  To be sure, the SEC should be making  efforts to try to assure best execution of trade orders, but the real question to ask is what costs we are willing to incur to prevent  that $.001 mark-up from occurring?  In some instances, analysts appear to be showing that there could be an issue of phantom liquidity that may be worth pursuing, not because it is a fraud, but because it may be allowing incorrect liquidity expectations to impact market executions.  I’ve included one interesting such analysis in the “securities markets” links to right (Nanex.net analysis of HFT trade cancellations), which appears to show that HFT sometimes results in unreliable reports by exchanges of trade offers because of high frequency traders cancelling offers before executions can occur.  Whether spending, and causing others to spend, hundreds of millions of dollars or more to address such an issue in investigations and “settlements” of enforcement actions addressing what appear to be lawful practices may make little sense.  Moreover, if this is an issue, it would appear to be a regulatory one, not an enforcement one, and the SEC’s experts on market practices, not the enforcement division, should lead the way.  The politically-oriented state Attorneys-General with no market expertise and no authority to regulate markets should be excluded from the process altogether.

The main problem here is a common one that people like Michael Lewis, many commentators, and, unfortunately often the SEC itself, get in a huff when financial market participants find even lawful ways to make a lot of money.  They seem to forget that the entire market process is, and must be, driven by the ability to garner lawful profits from trading, because that is what creates market efficiency, which is the driver of the market system.  The huge ruckus created by “The Big Short” was just such a mistake.  The fact that some people made a lot of money by betting on the housing market to decline, and huge institutions lost a lot of money by failing to protect themselves against a massive decline in housing values, is what markets are all about.  The short trades Lewis described typically were not unlawful (the contrary verdict in the Fab Tourre case was, in my view, a travesty, because it is plain that the counter-party was not defrauded in any meaningful respect).  They were either very good bets based on informed judgments about over-exuberance in housing markets, or, in many cases, very good luck when short positions put on as a hedge became wildly, and unexpectedly, profitable.  The SEC wasted millions of taxpayer dollars investigating these matters for more than five years, and caused billions of dollars of expenses and “settlements” for no good reason other than to punish financial institutions for allowing a marketplace driven by huge, well-informed, institutional investors to function as intended.

Whether the same is true for the now-blossoming HFT investigations will remain to be seen, but the hype and hyperbole attendant to the investigations and commentating on this issue suggests we are moving down a similar path.

Straight Arrow

July 20, 2014

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The Myth of Insider Trading Enforcement (Part I)

For Insider Trading, Mr. Bumble Was Right — “The Law Is a Ass”

In Oliver Twist, Mr. Bumble, whose wife was of a type that John Mortimer later immortalized as “she who must be obeyed,” was told that “the law supposes that your wife acts under your direction,” his response was apt:

“If the law supposes that … the law is a ass – a idiot.”

Charles Dickens, Oliver Twist.

I read with interest Henry Manne’s op-ed piece in the April 29, 2014 Wall Street Journal, Busting Insider Trading: As Pointless as Prohibition, a link to which can be found to the right.  Dean Manne, a devoté of the application of economic principles in the law, discusses the pointlessness of our current insider trading legal regime.  He focuses on the fecklessness of devoting major enforcement resources to this effort, but also notes towards the end that: “Insider trading not only does no harm, it can have significant social and economic benefits including a more accurate pricing of stocks.”  How true, and how generally ignored, that is.

The law of insider trading is a mess.  Even highly-experienced securities lawyers can disagree about whether particular trading scenarios are lawful or unlawful.  The result is that uncertainty over what is permitted causes securities investors who want to comply with the law — and to avoid costly and potentially debilitating SEC investigations of trading activity — to refrain from participating in market transactions that, as part of overall market activity, would help make the securities markets more efficient, at least in the sense that security values truly reflect available information.  Any securities lawyer who has advised clients in this area knows that what often is the critical consideration is not whether a trade is lawful or unlawful, but whether the SEC might become interested and commence an investigation, the costs of which would obliterate any possible profit.

In the next several posts, we will examine how this area of law became such a mess.  It is a tale that shows how statutory law can stray far from the legislative enactment that creates it, and also shows the enormous power of unelected officials — chiefly administrative government employees and appointed judges — to mold the law in a form they choose, even if it becomes a gerry-built embarrassment.

Part I:  The Securities Exchange Act of 1934 Signed Into Law Gets Revised by Administrative Fiat and a New Version Gets Embraced by the Courts

For years, the SEC’s insider trading enforcement program has been driven by the purported concept of equal access to information – that the securities markets must be (or be perceived to be) fair to all participants, and to accomplish that, we have to eliminate informational advantages available only to some market participants.  Of course, that is not, and has never been, the law, nor should it be.  (More on that below.)  But it is the vision that has driven SEC policy-making and enforcement for fifty years.

Yet, this concept that the sine qua non of fair markets is that all participants must come to the marketplace as informational equals is facially inconsistent with the economic principles on which the financial markets are founded.  If they could be forced to confront the issue head-on, even SEC decision-makers would have to agree with this, because they fully understand that an efficient securities market requires price-setting mechanisms that depend on the effect of incorporating unequal information sources into the buy and sell process.  A “fair” market requires a mechanism that delivers a “fair” price for goods (or securities) being bought and sold.  In the securities markets, it means that the relative prices among various securities available for investment should, to the extent possible, reflect the value of those securities to investors.  (See Smolowe v. Delendo Corp., 136 F.2d 231, ___ (2d Cir. 1943) (The goal of the 1934 Act, as reflected in §2, “was to insure a fair and honest market, that is, one which would reflect an evaluation of securities in the light of all available and pertinent data”).)

Although “insider trading” (however that might be defined) is viewed by many as improper, it was accepted as a part of securities trading when the Securities Exchange Act of 1934 was enacted.  The 1934 Act sought “to insure the maintenance of fair and honest markets” for securities transactions (Section 2), but Congress never thought that encompassed preventing “insider trading.”  The only forms of “insider trading” targeted in the 1934 Act as improper were short-term trades by officers or directors (purchases and sales within a six-month period).  What is now section 16(b) of the 1934 Act provided that profits from such purchases and sales (“short-swing profits”) had to be paid to the Company.  This was true whether or not the trades were based on, or made in possession of, material nonpublic information about the Company.  It was plainly understood at the time that the statute did not otherwise address insider trading, and certainly did not prohibit it.  (See Hearings Before the House Committee on Interstate Banking and Foreign Commerce, H.R. 7852 & H.R. 8720, 73rd Cong., 2d Sess. (1934) (testimony of Tommy Corcoran).)

Why were our securities law forefathers so insensitive to this issue?  They weren’t.  They simply understood that the misuse of nonpublic corporate information by corporate insiders was an issue addressed by corporate law, governed by state law corporation statutes or common law principles.  The courts were in the midst of addressing the circumstances under which a corporate insider’s securities transaction based on nonpublic corporate information violated any duties or provided the other party to the transaction, or the corporation itself, grounds to assert a cause of action.  In 1909, the Supreme Court ruled in Strong v. Repide, 213 U.S. 419 (1909), that a shareholder approached by an insider to sell her shares when the insider knew about, but kept secret, business negotiations that would enhance the value of those shares, could have a cause of action even though the insider technically did not owe fiduciary duties to the shareholder (as opposed to the company).  State courts ruled in varying ways on such claims, in part depending on the specific facts of the interactions, if any, between insiders and shareholders.  Those courts were sensitive to the concern that “An honest director would be in a difficult situation if he could neither buy nor sell on the stock exchange shares of stock in his corporation without first seeking out the other actual ultimate party to the transaction and disclosing to him everything which a court or jury might later find that he then knew affecting the real or speculative value of such shares.”  Goodwin v. Agassiz, 283 Mass. 358, 362,186 N.E. 659, 661 (Sup. Jud. Ct. Mass. 1933).

In 1934, Congress was well aware of the fact that some corporate directors and officers “used their positions of trust and the confidential information which came to them in such positions, to aid them in their markets activities.”  S. Rep. No. 1455, 73rd Cong., 2d Sess. (1934).  It ultimately concluded that the best approach to that problem was not to enact a federal law barring such trading, but to require prompt disclosure of insider trades so the public could learn of them, and provide that the corporation was entitled to recover profits from short-swing trades under section 16.  See H.R. Rep. No. 1383, 73rd Cong., 2d Sess. (1934).  Even so, it was well-understood that “the unscrupulous insider may still, within the law, use inside information for his own advantage.”  Id. So, even though the chief antifraud provision of the 1934 Act, section 10(b), was incorporated into the original statute in essentially the same form it takes today, it was generally understood that the “manipulative or deceptive device[s]” it prohibited did not bar corporate insider trading.

Although state law on this issue continued to vary in the ensuing years, it was recognized in the key corporate law jurisdiction of Delaware that officers, directors, or employees of a corporation who profit from the use of proprietary corporate information in securities trading, whether or not they owe a “fiduciary duty” to refrain from such trading, can be required to pay the corporation any profits from such trading in an action for disgorgement.  See Brophy v. Cities Service Co., 70 A.2d 5 (Del. Ch. 1949).  The concept is that it is the corporation, not the counter-parties to the trades, to which a duty may be owed, and which is harmed by the unauthorized use of confidential corporate information.  This remains a valid corporate claim to this date.

It was not until many years later that the concept was introduced that a “fair and honest market” incorporated some sense of equal opportunity for investors to profit on securities trading, and that a person may be precluded from trading if he or she has an informational advantage.  And this was not legislated, it was announced by the SEC in an enforcement fiat (not even an administrative rulemaking), and then promoted and advanced by federal courts which elevated their concept of investment egalitarianism above the state laws that normally govern the relationships and duties between corporate officers, directors, and shareholders.

It is reported that when William Cary was appointed SEC Chairman in 1961 (27 years after enactment of the 1934 Act), it was near the top of his agenda to have the SEC effectively overturn Goodwin v. Aggasiz.  The fact that this was a long-standing matter governed by state law was, in his view, unfortunate.  Chairman Cary personally found it “shocking for either courts or business executives to believe that it was permissible conduct for executives to use inside information for their personal benefit,” and was committed to using the SEC to create federal law “guaranteeing, as far as the law could, that all investors trading on stock exchanges have relatively equal access to material information.”  (J. Seligman, Memories of Bill Cary, The CLS Blue Sky Blog, Jan. 24, 2013) (see link to the right).William L. Cary, SEC Chairman

Bill Cary did, in fact, lead the SEC down a new path enshrining equal access to information as the “Holy Grail” of securities markets.  He did this in an administrative enforcement proceeding involving a broker who sold shares of stock for clients after being told by a Board member that the company had reduced its dividend, but before that news was released to the public.  In the Matter of Cady, Roberts & Co., 40 S.E.C. 907 (1961).  Cary effectively ignored corporate state law, as well as the plain history of the 1934 Act, when he envisaged the federal securities acts as generating “a wholly new and far-reaching body of federal corporation law”  (id. at 910), something well beyond the articulations of Tommy Corcoran and the 73rd Congress.  Cary went on to declare: “We, and the courts, have consistently held that insiders must disclose material facts which are known to them by virtue of their position but which are not known to persons with whom they deal and which, if known, would affect their investment judgment.”  Id. at 911.  He cited three district court cases in the previous 27 years, but acknowledged in the same footnote that this was not, in fact, the “majority” rule.  Id. at 911 n.13.  He went on to announce that there was an “inherent unfairness involved where a party takes advantage of such information knowing it is unavailable to those with whom he is dealing” (id. at 912), and that it did not matter that the transaction occurred in an impersonal exchange because “[i]t would be anomalous indeed if the protection afforded by the antifraud provision were withdrawn from transactions effected on exchanges.”  Id. at 914.  After all, he reasoned, we can assume these investors would not have offered the same price if they had known of the negative nonpublic information.  Id.

In one fell swoop, the SEC promulgated (without notice or comment) a new “federal corporation law” governing trading by officers or directors on nonpublic corporate information, and overturned years of state law holdings that officers and directors owed duties to the corporation, but not to shareholders, in impersonal open market transactions.  And he did so without any effort to analyze how these new legal precepts might affect the balance of power between federal and state authorities over corporate conduct, or how it might impact overall pricing of securities in the marketplace (by withholding from the market buy and sell transactions needed to move market price to a “fair” valuation of the security).  In short, in Cady, Roberts the SEC (1) elevated the desire for equal access to information above the need for fair pricing of securities on the exchanges, and (2) elevated its own views on this issue above contrary state law, all without any legislative act endorsing these choices.

As noted, the federal courts generally welcomed the opportunity to follow the SEC’s lead.  The influential Second Circuit Court of Appeals took on the issue in the landmark case SEC v. Texas Gulf Sulphur Co., 401 F.2d 833 (2d Cir. 1968).  The case involved stock purchases by insiders after they learned of a potential large mineral discovery on company property, but before that information was disclosed to the public.  The SEC brought an enforcement action alleging this trading was fraudulent under section 10(b), and sought to compel rescission of these transactions.  The district court tried the case and found liability on some section 10(b) claims (ruling against others on materiality grounds).  The appellate court affirmed the section 10(b) violations (and reversed the finding of immateriality on other claims).  In doing so, the court adopted a broad legal standard endorsing the equal access to information theory in Cady, Roberts.

Right out of the box, the court stated a new vision of what section 10(b) was about, saying: “By that Act Congress purposed to prevent inequitable and unfair practices and to insure fairness in securities transactions generally, whether conducted face-to-face, over the counter, or on the exchanges….  Whether predicated on traditional fiduciary concepts … or on the ‘special facts’ doctrine [of Strong v. Repide] … Rule [10b-5] is based in policy on the justifiable expectation of the securities marketplace that all investors trading on impersonal exchanges have relatively equal access to material information….  The essence of the Rule is that anyone who, trading for his own account … has ‘access … to information intended to be available only for a corporate purpose and not for the personal benefit of anyone’ may not take ‘advantage of such information knowing it is unavailable to those with whom he is dealing,’ i.e. the investing public.”  401 F.2d at 848 (quoting Cady, Roberts).  The court then announced a so-called “disclose or abstain” rule: “Thus, anyone in possession of material inside information must either disclose it to the investing public, or … must abstain from trading….”  Id.  This single pronouncement, which did not even purport to be anchored in any statutory underpinning, became the foundation of “equal access to information” insider trading dogma for the next 50 years.  To drive home its New Order and revisionist history, the court later restated: “The core of Rule 10b-5 is the implementation of the Congressional purpose that all investors should have equal access to the rewards of participation in securities transactions.  It was the intent of Congress that all members of the investing public should be subject to identical market risk….  The insiders here were not trading on an equal footing with the outside investors.”  Id. at 851-52.

Texas Gulf Sulphur became the rallying point for proponents who supported more and more extensive legal standards to assure that the Holy Grail of equal access to information for all securities investors could be approached, if not fully achieved.  The law of “insider trading” would be expanded in leaps and bounds, usually at the behest of the SEC.  The distinction between insiders and non-insiders was effectively obliterated, laying waste to the concepts of fiduciary duty which even Cady, Roberts and Texas Gulf Sulphur nodded to as the foundation for their extensions of the law.  “Tippees” were deemed to violate the insider trading prohibition even though they plainly owed no fiduciary duty to either the corporation about which they possessed nonpublic information or the person who happened to be on the other side of their securities trade.  What legal theory was used to support this extension of the law?  No more was required, said the SEC and the courts, beyond the “abstain or disclose” rule pronounced in Texas Gulf Sulfur, and the outrage that would occur if these tippees were permitted to gather profits based on nonpublic information not available to other market participants.  The mere possession of this information created a “duty” — essentially out of thin air — by the tippee not only to the “actual” person on the other side of the transaction, but “to all persons who during the same period” were on the other side of similar transactions.  Shapiro v. Merrill Lynch, Pierce Fenner & Smith, Inc., 495 F.2d 228, 237 (2d Cir. 1974).  The Shapiro decision even created a private cause of action for all of those people against the tippee, without deigning to explain how someone merely in the vicinity of a transaction should be entitled to compensation for his or her unwise investment decision.

Shapiro is a fine example of how far the courts strayed from any anchor in the law, and their complete disregard for the key role of unequal information in achieving fairly-priced markets.  That court expanded the law to create a “disclose or abstain” duty for tippees merely because they “knew or should have known” that information they received originated from a confidential corporate source.  Id. at 239.  It also gave the back of the hand to the long-standing concept, going back at least to the Supreme Court decision in Strong v. Repide, that the liability of an insider to a counterparty in a securities transaction must be founded on facts showing a special relationship between them that created a duty to disclose.  Id. at 239.  And, in the court’s own words, the rationale supporting this upheaval in the law was “based chiefly on our decision in SEC v. Texas Gulf Sulphur … where we stated” the abstain or disclose rule.  Id. at 236.  In deference to a “disclose or abstain” rule the court itself created, and “the strong public policy considerations behind” that rule, the Shapiro court scorned legal arguments founded in long-standing state law principles simply because they “would make a mockery of the ‘disclose or abstain’ rule.”  Id.  The fact that Congress never suggested, and plainly did not enact, a “disclose or abstain” rule was not worthy of mention.  The New Order was to be founded purely on the “strong public policy considerations” anointed by the Texas Gulf Sulphur court.

The Shapiro (and Texas Gulf Sulphur) courts “enacted” the Cady, Roberts “equal access to information” concept of market fairness in complete disregard of economic market principles.  The chosen “policy considerations” of the SEC and the Second Circuit focused on populist visions of equality among investors rather than economic principles about how fair and efficient markets function.

This was made plain in Shapiro, in which the court actually held that it was harmful for the securities markets to move toward a fair price for a security.  In its zeal to assure that no investor should profit from nonpublic information (which, to repeat, was not what Congress envisioned), the court turned upside down the concept of market integrity.  The court accepted allegations that the sales of stock by tippees with negative inside information caused a substantial drop in stock price days before the information was made public, and concluded that this stock price impact undermined the “integrity and efficiency” of the market.  But exactly the opposite is true.  A “market” has neither integrity nor efficiency when trading occurs at artificially high prices — prices that remain elevated while the holders of secret information are not permitted to assist in bringing the value of a security to its economically justifiable level.  The tippees in Shapiro may have lacked personal integrity when they opted to trade based on this information, but they surely assisted in improving market integrity and efficiency by starting the process of bringing stock valuation to levels fairly reflecting the true value of the security.  The court lingered on, and created a claim for compensation for, investors who bought the stock before its price declined, but ignored the fact that in the absence of the tippees’ trading, many additional investors would have suffered by being limited to a market that maintained an artificially high stock price for the security they bought.  The court found it better that all investors should pay the artificially high price until the earnings information was released publicly.  When the tippee arbitrageurs bid that price down, the market as a whole benefited, but the court chose not to consider that “public policy consideration.”  From the standpoint of the law, the court had no business imposing an idea of fairness that, as we have seen, had no foundation in the statute it was purporting to apply.

In Part II, we will look at how the Supreme Court started the pendulum swinging away from the New Order of “equal access to information” by returning to statutory principles, and the SEC’s persistent efforts to push back.

Straight Arrow

May 7, 2014

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