Copyright (c) 2009 All rights reserved. http://works.bepress.com/roberta_karmel Recent documents in Roberta S. Karmel en-us Sun, 31 May 2009 11:10:15 PDT 3600 http://works.bepress.com/roberta_karmel/89 http://works.bepress.com/roberta_karmel/89 Thu, 06 Nov 2008 14:27:49 PST Roberta S. Karmel Securities Law http://works.bepress.com/roberta_karmel/88 http://works.bepress.com/roberta_karmel/88 Mon, 10 Mar 2008 09:51:08 PDT Abstract for"Should Securities Industry Self-Regulatory Organizations Be Considered Government Agencies?" by Roberta S. Karmel, Centennial Professor, Brooklyn Law School Securities industry self-regulatory organizations ("SROs") began as private sector membership organizations of securities industry professionals. This article addresses the questions of whether, and to what extent, securities industry SROs have become government agencies, and whether, and to what extent, they should be subject to constitutional and statutory controls on government agencies. It focuses principally on the Financial Industry Regulatory Agency ("FINRA"), a new entity which combined the National Association of Securities Dealers, Inc. ("NASD") and the member regulation functions of NYSE Group, Inc. ("NYSE"). The cases addressing these critical issues are contradictory, and generally not based on any overriding constitutional law principles. In some areas, the courts have just stated that an SRO is exercising delegated governmental power. In other areas, the courts have just stated that an SRO is a private membership organization. Sometimes, courts have distinguished between the commercial and regulatory functions of SROs, in order to draw lines separating the laws applicable to government agencies from private sector organizations. The article will conclude that as long as the securities industry, rather than the SEC, controls the governance of FINRA and the selection of its Board of Governors, FINRA should not be held to be a government entity. This conclusion may be surprising to scholars and lawyers who have not considered the implications of changed SRO governance. Nevertheless, when FINRA is exercising investigative and disciplinary functions it should be treated like a government agency. Furthermore, to the extent practicable FINRA should operate according to transparency standards applicable to government bodies. Striking the right balance between private sector flexibility and constitutional and administrative law protections is critical to the future operation of FINRA and other securities industry SROs. Roberta S. Karmel Administrative Law Banking and Finance Constitutional Law Corporations Economics Law Enforcement and Corrections Organizations Public Law and Legal Theory Securities Law http://works.bepress.com/roberta_karmel/87 http://works.bepress.com/roberta_karmel/87 Thu, 08 Nov 2007 12:23:18 PST The National Association of Securities Dealers, Inc. ("NASD") and NYSE Group, Inc. ("NYSE") have combined their regulatory operations into a new entity called the Financial Industry Regulatory Authority ("FINRA"). Although both the NASD and the NYSE have long histories as self-regulatory organizations ("SROs"), subject to increasingly pervasive and statutorily based SEC regulation, the creation of FINRA poses a question long lurking in the structure and operation of the NASD: was the NASD for all practical purposes a government agency, and if so, what are the constitutional and administrative law ramifications of such a conclusion for its new incarnation, FINRA? This article will discuss a number of issues in an attempt to answer these questions: the constitutional issues inherent in the FINRA's status as an SRO; cases addressing the NASD's or NYSE's immunity from suit for their regulatory decisions and functions; the right of persons under NASD investigation to claim deprivation of their Fifth Amendment rights; the status of NASD arbitration facilities; the constitutional and administrative due process rights of persons subject to FINRA investigations and enforcement actions and FINRA rule-making; and the status of SRO rules in cases posing preemption and antitrust issues. The article will conclude that as long as the securities industry, rather than the SEC, controls the governance of FINRA and the selection of its Board of Governors, FINRA will not be a government entity, but since FINRA will be exercising delegated governmental functions with regard to discipline and rule-making, fundamental constitutional and administrative law protections should be afforded to persons affected by these activities. Roberta S. Karmel http://works.bepress.com/roberta_karmel/86 http://works.bepress.com/roberta_karmel/86 Thu, 08 Nov 2007 12:19:58 PST This article discusses the reasonable reliance requirement in Section 10(b) securities class actions, and in particular, the presumption of reliance upon which many cases go forward. The author recommends that the courts and Congress re-examine this requirement in light of academic skepticism about the efficient capital market hypothesis upon which the presumption of reliance is based and recommendations from several recent high powered reports that the U.S. is losing its pre-eminence in the global markets due, in part, to uncertainties in anti-fraud securities litigation. Further, the U.S. Supreme Court has accepted certiorari in a case, In re Charter Securities Litigation, 443 F.3d 987 (8th Cir. 2006), cert. granted sub nom.w Stoneridge Inv. Partners, LLC v. Scientific-Atlanta, Inc., 2007 U.S. LEXIS 3582, which may cause the Court to reconsider the reliance requirement, especially if the Court accepts certiorari in a controversial decision on a similar issue, Regents v. the University of California v. Credit Suisse First Boston (USA), Inc., 482 F.3d 872 (5th Cir. 2007). These cases are discussed in Part IV of the article. Roberta S. Karmel http://works.bepress.com/roberta_karmel/85 http://works.bepress.com/roberta_karmel/85 Thu, 08 Nov 2007 12:16:24 PST The NYSE Group, Inc., the parent of the New York Stock Exchange, Inc. ("NYSE"), and Euronext NV ("Euronext"), are planning to merge, creating the first trans-Atlantic linkup of stock and derivatives markets. At least three reasons for a merger between the NYSE and Euronext have been put forward. First, is the idea that investors will be able to buy stocks in the U.S. and Europe, thus making it more attractive and cheaper for them to buy foreign shares. The NYSE and other U.S. exchanges have been losing listings, and especially IPOs to European exchanges and merging with a European exchange may be a way to recapture the fees and trading profits from these listings. A second justification for the NYSE-Euronext merger is that it will give the NYSE a derivatives platform. When two exchanges combine, they can cut staff and share technology. A third reason that has been asserted for the creation of a global exchange by the NYSE is that the NYSE and Euronext will be able to operate from a common trading platform. Despite the several sound reasons for a trans-national merger between exchanges, stock exchanges cannot compete as ordinary business enterprises because of the manner in which they are regulated and because they function as self-regulatory organizations. Unless such regulation is significantly changed, the effort by exchanges to become global companies will be impeded. This paper will discuss the impediments to the creation of a global exchange posed by the U.S. federal securities laws and how these laws could be changed to permit the possible synergies of a combination between the NYSE and a foreign exchange to be better achieved. Roberta S. Karmel http://works.bepress.com/roberta_karmel/84 http://works.bepress.com/roberta_karmel/84 Thu, 08 Nov 2007 11:58:11 PST Roberta Karmel http://works.bepress.com/roberta_karmel/83 http://works.bepress.com/roberta_karmel/83 Thu, 08 Nov 2007 11:57:33 PST Roberta S. Karmel http://works.bepress.com/roberta_karmel/82 http://works.bepress.com/roberta_karmel/82 Thu, 08 Nov 2007 11:54:50 PST Roberta S. Karmel http://works.bepress.com/roberta_karmel/81 http://works.bepress.com/roberta_karmel/81 Thu, 08 Nov 2007 11:53:04 PST Roberta S. Karmel http://works.bepress.com/roberta_karmel/80 http://works.bepress.com/roberta_karmel/80 Thu, 08 Nov 2007 11:50:44 PST Roberta S. Karmel