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Socially Acceptable Securities Fraud
Get PDFWhat is a lie? Moreover, where is it a lie? Lies are bad. Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934 create liability for issuer firms and individuals who make “an untrue statement of a material fact” or omit “a material fact required to be stated therein or necessary to make the statements therein not misleading.” In the ninety years since the passage of the Securities Exchange Act, however, the number of ways in which market participants may publicly disseminate statements that will be consumed by investors has exploded; does 10b-5 really apply to all these statements? This Article asks the question the jury in United States v. Schena asked the trial judge during deliberations: Do we not distinguish at all between a tweet and a press release?
Presently, the number of ways in which issuers and officers communicate with the wider public and in which buyers and sellers communicate with each other is almost too long to list: social media such as TikTok, Instagram, Twitter, Discord, and Facebook; investor message boards such as InvestorHub, Motley Fool Community, r/wallstreetbets and Seeking Alpha; company websites; YouTube; earnings calls; webinars; investor and industry conferences; and of course, SEC filings. Some of these communications are scripted; some are vetted by legal counsel; and some are crafted with cautionary language that insulates otherwise rosy forward-looking statements from liability. Some of these communications, however, are extemporaneous, unvetted, and uncrafted. Yet all of these types of statements have formed the basis for private investor litigation, civil enforcement, and criminal enforcement.
The Twitter trial of the century between Tesla investors and Elon Musk garnered substantial attention with scholars and pundits. This 2023 case, however, is not an isolated securities fraud case involving social media; in fact, in United States v. Schena and United States v. Milton, two different CEOs were convicted of criminal securities fraud based on tweeting activity. Though defendants question the role of social media in enforcement actions, courts are treating these marketplace statements just like formal corporate statements. Issuers and their officers who engage with stakeholders via social media may be unwittingly creating substantial litigation risk for their corporations.
This Article presents an empirical analysis of 2022 10b-5 class action lawsuits and of 10b-5 enforcement actions by the SEC that suggests that though social media statements are not yet rich fodder for securities fraud allegations, social media statements are the basis of some lawsuits and prosecutions. In a few cases, the social media statement takes center stage; in some cases, allegedly false statements are repeated in multiple venues, including social media. Currently, courts decide on a case-by-case basis if particular statements in social media should be actionable under traditional rules for falsity, materiality, and nexus to issuer securities. This article argues that this approach may lead to very different outcomes within a single federal securities law regime and should be reformed. Ultimately, this article argues that there may be a level of socially-acceptable securities fraud that must be tolerated in an information society
Enhancing SHAP With Multi-Core Parallelization and Distributed Computation
Get PDFIn recent years, the adoption of complex machine learning algorithms, often perceived as “black box” models, has grown exponentially across various disciplines. However, the lack of understanding regarding how these models come to their predictions often fosters skepticism and mistrust. In response to the demand for transparency and interpretability, Explainable AI techniques, such as SHapley Additive exPlanations (SHAP), have emerged as powerful tools for comprehending and trusting these algorithms. However, SHAP has an exponential computational demand O( x2 ), where x is the number of features. This becomes increasingly problematic with the larger datasets standard in most industries. Many frameworks have aimed to reduce the computation time to address the tractability of SHAP but have achieved limited results. A recently released package, auto-shap, integrates multicore parallelization into the SHAP framework to leverage multiple CPU cores in the computation of marginal feature attributions. This study aims to benchmark this framework using a large dataset and a virtual machine(VM) to evaluate its viability in mitigating the computational load of SHAP calculations. The benchmarking focuses on feature expansion, row expansion, and core expansion across the 16 cores of the VM. Preliminary results show promising improvements: at 10 features a performance increase of blank percentage was observed, and the framework could handle the entire feature set of 54, whereas Kernel SHAP and Tree SHAP became intractable after 15 features and 100,000 observations
Defiance
Get PDFMass public defiance of legal authority has a lengthy history in America, extending back to the nation’s founding. Indeed, the very existence of the United States is the result of the ultimate act of defiance against legal authority—the revolution against Great Britain. It hardly stopped there, however. Defiance of legal authority has persisted from the outset to the present. Examples include Shays’ Rebellion, defiance of the Supreme Court’s decisions in M’Culloch v. Maryland and the Cherokee territory cases; the Nullification Crisis; slave revolts; defiance of the fugitive slave laws; resistance to the Supreme Court’s decision in the Dred Scott case; the Civil War; persecution of freedmen following the Civil War and resistance to the Fourteenth and Fifteenth Amendments; the late nineteenth and early twentieth century’s labor violence; the draft resistance during the First World War; the defiance that led to prohibition and then the defiance of prohibition laws; the Civil Rights Movement; the defiance of the Court’s decision in Brown v. Board of Education; the defiance of the Court’s decisions with respect to school prayer and abortion; resistance to the Vietnam War; the 1960s urban riots; the Los Angeles riots following the acquittal of police officers charged with beating Rodney King; and most recently, defiance of law was triggered by the mistreatment of African Americans by police; and the Capitol’s invasion following the 2020 presidential election. These are simply a few more prominent instances of defiance of legal authority in American history. The American experiences are foreshadowed by the centuries-long history of defiance of legal authority in England, running at least from the Peasants’ Revolt of 1381 through the Lord George Gordon riots of the late eighteenth century (around the time of the American Revolution), not to mention the near continuous revolt and tumult in Ireland.
This Article will focus on instances in which an individual or, much more usually, a group will publicly and deliberately defy the law based on a belief that it is unjust or simply wrong, sometimes but not always to provoke legal reform. Just as private individuals can engage in public defiance of law, so may government officials. In our democracy, everyone is under an obligation to obey the law. Many instances of public defiance, as will be seen, involve misconduct by government officials. When that occurs, ideally, the courts will impose sanctions
Firm-specific Information Processing and the Delayed Discovery of Macroeconomic News: Evidence from Earnings Announcement Returns
No full textAnalyzing a panel of earnings announcers from 1998-2022, we document that the aggregate market return on quarterly earnings announcement dates is positively associated with the announcing firm’s 3-day abnormal returns following the announcement. This effect is strongest for firms with extreme earnings surprises and fades by day 7, indicating a short-lived delay in incorporating the aggregate return from the announcement date. Additional analyses confirm these patterns of return predictability for a set of well-identified macroeconomic news dates. Our findings are more pronounced when investors exert more effort in acquiring announcing firm information, as measured by SEC EDGAR filing downloads, when macro-news has a larger impact on a firm’s stock returns, for smaller firms with higher costs of information processing, and when marginal investors are more constrained in attention and processing capacity, as proxied by retail trading activities. Overall, findings support the notion that investors have finite information processing capacity and that intensive efforts to acquire firm-specific earnings news impede the timely incorporation of macroeconomic news into prices
Insurrection-Proofing the Courts: Judicial Tools to Protect the Legal System from Litigation Abuse in the Wake of the 2024 Election
Get PDFIn the wake of the 2020 presidential election in the United States, lawyers sought to overturn the results of that election filing baseless and far-fetched claims. Courts sanctioned many of those lawyers and at least some of them have been disbarred or are in the last throes of disbarment proceedings. Yet such punishment has come nearly four years after the events that precipitated the need for such professional discipline. Are there things courts can do now, on the immediate eve of the next presidential contest, to “insurrection-proof” their courtrooms to make sure that the legal system is not used, once again, in an anti-democratic fashion that seeks to undermine the rule of law? In this Essay, I explain how courts can deploy a range of tools to try to prevent a repeat of what happened in the wake of the 2020 election. First, I describe such tools as Rule 11 of the Federal Rules of Civil Procedure, 28 U.S.C. § 1927, and the inherent powers of the court. Since the first two of these options have some limitations to them by design—that they are intended to deter future conduct—courts should flex their inherent authority to sanction misconduct by lawyers at the outset of litigation. What is more, since a lawyer can avoid punishment under Rule 11 and § 1927 by withdrawing a claim shortly after it is filed and after it has already done public mischief, courts may have to rely on their inherent powers to sanction conduct that might otherwise evade those other provisions. Second, courts must scrutinize pleadings that seek to overturn the results of the election using the plausibility standards set forth by the Supreme Court in Ashcroft v. Iqbal and should hold lawyers alleging fraud to the higher standard set forth in FRCP 9(b) that such claims must be pled with particularity. Third, when entertaining requests for injunctive relief, courts must hold litigants to the appropriate standard for such a remedy, and reject claims where the credible facts and legal arguments do not satisfy every element of the injunction standard. Fourth, courts should give priority to claims that seek to challenge the results of the election and put such cases on an expedited schedule, requiring lawyers to establish the validity of their claims at the earliest possible moment. Finally, courts should issue standing orders reminding lawyers of their obligations under the rules to file only claims that have a good faith basis to them and that failure to do so will result in significant sanctions for such abuse. After recounting the history of the post-2020 election litigation, and the consequences for some of the lawyers who brought frivolous actions and engaged in other unethical conduct, this Essay will explore, in turn, each of these five components of an insurrection-proofing approach to what is sure to be a tidal wave of legal challenges to the results of the 2024 election
Sorry for the Delay: How FAA Regulations in the U.S. are Stifling Innovation and Hindering the Growth of a Promising New Industry Based on Delivery Drones
Get PDFFrom the creation of the transistor radio to robots powered by artificial intelligence, the rapid pace of technological advancements in a multitude of industries has ushered in an innumerable amount of economic, environmental, and social benefits that have collectively produced positive effects around the world. However, in addition to benefits, these rapid advancements in technology have created a particular problem affecting many industries in the United States—antiquated regulations that were promulgated for a particular industry become inefficient and impractical due to rapid technological advancements within that industry. The delivery drone industry, a blossoming new sector of air commerce that has grown exponentially in the past decade, has become the latest victim of regulatory stagnation. The Federal Aviation Administration (FAA) currently regulates commercial delivery drone operations in the U.S. by issuing highly restrictive Part 135 certifications that attach a variety of operating limitations to companies’ delivery drones, such as restricting the traveling distance and airspace location. If companies want to conduct any drone deliveries that fall outside of the strict limitations set by Part 135 certifications, which is the only way to expand their operations to an appropriate commercial scale, those companies must receive exemptions and waivers from the FAA. However, the FAA grants these crucial exemptions and waivers on a case-by-case basis with standards and limitations that vary drastically from company to company. As a result, the FAA has created an unpredictable regulatory minefield that has hindered the expansion of delivery drone operations in the U.S., thus deterring innovation within the drone industry as a whole. Rather than accepting regulatory standards that inhibit the growth of an entire industry, the FAA should adopt a streamlined, standardized certification and approval process for delivery drones that efficiently facilitates the advancement of commercial delivery drone operations in the U.S.
This Comment examines the various issues plaguing the current regulatory framework for commercial drone delivery services within the U.S. and seeks to provide a possible solution to these obstructionist regulatory standards through the adoption of a streamlined regulatory scheme for commercial delivery drones. To conduct a full analysis on this topic, this Comment first examines the historical development of the FAA’s current regulations governing commercial drone delivery services, addresses how the current case-by-case exemption process established by the current regulatory regime places an illogical hindrance on the growth of a blossoming industry, and highlights other specific problems plaguing the current regulatory process, echoed by the outcries of various drone industry stakeholders. Additionally, as an alternative solution to the current piecemeal regulatory regime, this Comment argues that Congress, and subsequently the FAA, should adopt the Increasing Competitiveness for American Drones Act of 2023 (American Drones Act) that creates a comprehensive, streamlined regulatory framework for drone delivery services. Finally, this Comment explains how the adoption of the American Drones Act would produce various economic, environmental, and social benefits for millions of individuals across the U.S.—such as the ability to efficiently scale BVLOS drone operations, emissions reduction, and increased consumer access to healthy foods and vital medicines
Slavery in the Taney Court An Examination of the Personal Views of the Justices and their Influences on the Justices\u27 Opinions
Get PDFA.J. Jeffries examines the personal views of the justices of the Taney Court and their influence on decisions concerning slavery. Through an exploration of the lives and political inclinations of thirteen key justices, the paper highlights how these biases shaped landmark cases like Dred Scott and Prigg v. Pennsylvania. Jeffries provides a nuanced look at the intersection of personal belief, judicial analysis, and the societal standards of the time
Cooptation: The Backseat Driver of Competitive Communism
Get PDFCandace Warner analyzes the Chinese Communist Party\u27s (CCP) strategy of cooptation in fostering economic growth while maintaining political control. Using the Chinese automotive industry as a case study, the paper explores how the CCP\u27s support for private entrepreneurs and strategic partnerships has promoted rapid growth but also perpetuated inefficiencies and corruption. Warner argues that this approach, while beneficial in the short term, may undermine China\u27s long-term economic sustainability
Facial Recognition Technology and the Dire Need to Regulate It
Get PDFFacial recognition technology enables the identification of subjects in digital recordings through the use of biometrics. This technology is increasingly used by both state and private actors for crime prevention, criminal investigations, crowd monitoring, and more. Its use continues despite the fact that the technology itself has been shown to have a propensity for bias and misidentification. The flaws inherent in the technology are not the only cause for concern either. There is reason to believe that nefarious actors could intentionally use facial recognition technology to achieve illegitimate ends. Meanwhile, facial recognition technology remains unregulated at the federal level in the United States. This essay calls on Congress to take measures to change that. The legislature must pass a law that puts guardrails in place for facial recognition technology. In doing so, Congress can ensure that facial recognition technology is used in an ethically sound manner