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Safe Harbors in the Shadows: Extending 10b5-1 Plans to Cover Shadow Trading
Get PDFInsider trading, or trading while in possession of material nonpublic information, remains the legal conundrum it has been for over four decades. The governing rule prohibiting insider trading is Rule 10b-5, passed in 1943 by the Securities and Exchange Commission (SEC) in order to clarify Section 10(b) of the Securities Exchange Act. Notably, neither Rule 10b-5 and Section 10(b) mention the term “insider trading.” In fact, scholars and historians have opined that insider trading was not considered by Congress as one of the aims of Section 10(b) or Rule 10b-5. Without any statutory guidance regarding insider trading, the legal contours of the prohibition against trading while in possession of material nonpublic information have been shaped almost exclusively by the common law.
The SEC recently pushed a “new” theory of insider trading forward: shadow trading. In August of 2021, the SEC charged Matthew Panuwat with insider trading. Panuwat worked for Medivation, a mid-sized biopharmaceutical company. In the course of his employment, Panuwat learned that Pfizer was going to acquire the company. Upon learning that his company was to be acquired, Panuwat purchased stock options in Incyte Corporation, another mid-sized biopharmaceutical company. Panuwat most likely believed that Medivation’s acquisition would make Incyte’s stock more valuable because it would make Incyte a more valuable target for acquisition by a larger firm. After Medivation announced its acquisition, Incyte stock prices rose, netting Panuwat $107,066 in profits.
The SEC charged Panuwat with insider trading for his trades in Incyte, despite the fact that Panuwat was not an insider at Incyte, and he received no information from an insider at Incyte. In short, the SEC argued that Panuwat committed insider trading despite his having no tie to Incyte or its employees whatsoever. The SEC premised its charges upon the misappropriation theory, reasoning that Panuwat owed a duty to Medivation as the source of the information to refrain from trading. Shadow trading thus represents a new and confusing theory of liability in a field already rife with confusion and complicated precedents.
As the confusion around what constituted insider trading grew (and continues to grow), the SEC in 2000 passed Rule 10b5-1, which created a safe harbor through 10b5-1 plans. Rule 10b5-1 plans allow corporate insiders to trade in securities of their company on a predetermined schedule. Rule 10b5-1 provides an affirmative defense to insider trading liability on the theory that because the trades were prescheduled and predetermined, they do not abuse material nonpublic information. The SEC recently amended Rule 10b5-1 to impose several new requirements on Rule 10b5-1 plans, including: (1) a cooling off period; (2) a certification as to the absence of possession of no material nonpublic information; (3) limitations on overlapping and single trade plans; and (4) a requirement to act in good faith.
The logical overlap of these two recent SEC efforts – an update to the 10b5-1 plans and the pursuit of shadow traders – suggests that 10b5-1 plans should be broadened to include peer firms. That is, insiders in corporations should be disallowed from trading in their own firms, as well as any peer/shadow firms, in order to keep to the spirit of 10b5-1 plans
Mitigating the Legal Challenges Associated with Blockchain Smart Contracts: The Potential of Hybrid On-Chain/Off-Chain Contracts
Get PDFTantamount with the increasing application of blockchain technologies around the world, the use of blockchain-based smart contracts has rapidly risen. In a “smart contract,” computer protocols automatically facilitate, verify, and enforce arrangements made between parties on a blockchain. Such smart contracts offer a variety of commercial benefits, notably immutability and increased efficiency facilitated by removing the need for a trusted intermediary. However, as discussed in recent legal scholarship, it is difficult for smart contracts to uphold certain fundamental principles of contract law. Translating concepts of individual intention and responsibility into the decentralized space of blockchain is problematic. Aggregating such individual intention into the combined will and intention of the blockchain entity is at best challenging, and at worst unfeasible. Further, while traditional contracts accommodate change and allow for the amendment of terms in response to evolving circumstances, blockchain smart contracts do not. As the difficulties of blockchain smart contracts become apparent, attention is turning to hybrid smart contracts.
“Hybrid” smart contracts are commonly described in legal discourse as arrangements that consist of both a traditional contract (natural language) and a blockchain-based smart contract (formal computer code) component. In comparison, computer science scholarship provides a more complex and nuanced articulation, framing hybrid smart contracts as arrangements that combine code running inside the blockchain (on-chain) with data and computations from outside the blockchain (off-chain). The link between these on-chain and off-chain operations is created through a decentralized oracle network. Such hybrid contracts maintain the immutability of blockchain, and the trustless contracting this facilitates, with the flexibility that comes from connecting to real-world, real-time data sources.
In such a context, the objective of this Essay is to examine the nature and operation of hybrid smart contracts, integrating both legal and computer science discourse, and to critically analyze whether such arrangements have the potential to mitigate some of the legal challenges that have been identified with respect to fully on-chain smart contracts
Pandemic Silver Lining: Discovering the Reasonableness of Remote Learning as an Accommodation Under the ADA
Get PDFAs society returned to “normal” following the worldwide pandemic caused by the outbreak of COVID-19, higher education students around the world could be heard celebrating and warmly welcoming their return to in-person classes. With this return came the face-to-face social interactions most longed for through the worldwide lockdown with friends, classmates, and professors. Some may even feel that in-person learning is more effective than what had become the norm––Zoom university. At this moment, however, these institutions can and should evaluate the potential benefits and continued utility of this alternate way of doing higher education that was forced upon them for over a year. In doing so, institutions should remember and pay special attention to the way it impacted a growing population within their student body––those with disabilities. Courts in this country must be aware of how this newly discovered way of participating in higher education classes may now be a presumptively reasonable accommodation under the Americans with Disabilities Act (ADA) for those students who, due to their disability, cannot attend in-person. This Note incorporates doctrinal and social science evidence in support of the argument that given the reliance on advanced technologies during the pandemic, virtual learning is a reasonable accommodation for qualified students with disabilities
Bailing on Cash Bail: A Proposal to Restore Indigent Defendants’ Right to Due Process and Innocence Until Proven Guilty
Get PDFThe practice of cash bail in the United States is changing. For the past few decades, the cash bail system is abandoning pretrial release and shifting the burden to the defendant thereby abandoning innocence until proven guilty. Bail hearings are increasingly less individualized and discriminatory because of risk assessment tools and judicial discretion without requiring justification, leading to indigent defendants facing unprecedented detainment solely for not being able to afford bail, and thus, violating due process of law. This Note focuses on two 2021 decisions: the California Supreme Court’s decision in In re Humphrey, ruling to partially maintain cash bail, and Illinois’ Pretrial Fairness Act, eliminating cash bail by 2023. This Note argues each state must fully eliminate cash bail to restore indigent defendant’s constitutional rights by highlighting the constitutional concerns which remain prevalent in California and how Illinois’ decision works to correct cash bail’s discrimination. In conclusion, this Note provides a proposal on how states can effectively eliminate the cash bail system using the Pretrial Fairness Act as a guide with District of Columbia’s foreshadowed success since mostly eliminating cash bail in 1992
Election Emergencies: Voting in Times of Pandemic
Get PDFOver the past century, two global pandemics have struck during American elections—the Spanish Flu of 1918 and COVID-19 in 2020. The legal system’s responses to those pandemics, occurring against distinct constitutional backdrops concerning voting rights, differed dramatically from each other. These pandemics highlight the need for states to address the impact of election emergencies, including public health crises, on the electoral process. States should adopt election emergency laws that both empower election officials to modify an election’s rules as necessary to respond to such disasters and set forth “redlines” to identify certain policies that, even in a disaster, are too risky and problematic to adopt. Courts, for their part, must recognize the unique challenges that election emergency litigation poses and adapt their jurisdictional, procedural, and equitable requirements to be able to effectively adjudicate challenges arising from pandemics and other disasters that threaten the electoral process
Looking a Gift Horse in the Mouth: Working Students Under the Fair Labor Standards Act
Get PDFInternships have skyrocketed in popularity as they become the new entry-level position for professional careers across the country. Despite their popularity, the legality of internships falls in a gray area created by a vague statute and a flexible, factor-based judicial test. The Fair Labor Standards Act (FLSA), which regulates employment relationships and importantly mandates a minimum wage and hour requirements, was written long before internships became commonplace and provides little direction for how to regulate these positions. In this void, both the Department of Labor and federal courts have developed guidance, the ultimate culmination of which is the modern primary beneficiary test.
The equestrian industry’s attempt at internships is a position known as a “working student.” These positions did not arise in the same Petrie dish or era as many other internships. Instead, this type of internship is an ages-old derivative of the barter economy and apprenticeships. In short, a young, developing equestrian exchanges her labor for benefits such as training and housing—but, notably, not FLSA-complaint wages—with a professional equestrian. This position is seen both as a rite of passage into a career as an equestrian but also as an opportunity to test the waters of the industry. Working students work long hours, take on physically intensive tasks, and are often fully immersed in the industry and their positions.
Do these positions pass the modern primary beneficiary test? This Note applies the factors of the test to the facts of the working student position and asserts that, for many working students, the answer is ‘no.’ This analysis is largely based on an extensive survey and interviews with working students, which were compiled by the Author and further explained within. Finally, this Note suggests solutions that will preserve the significant benefits of the working student position while bringing the equestrian industry into compliance
Book Review, Kirsten Campbell, The Justice of Humans: Subject, Society and Sexual Violence in International Criminal Justice (2022)
Get PDFIn The Justice of Humans: Subject, Society and Sexual Violence in International Criminal Justice, Kirsten Campbell sets out to analyze approaches to international justice for victims of mass violence through a feminist lens. Using a remarkable breadth of disciplines, Campbell develops a “feminist social theory of the existing legal and feminist forms of international justice and a socio-legal methodology for empirically investigating them” (p. 4). She draws on her own extensive experience with the conflict in the former Yugoslavia to consider two responses to conflict-related sexual violence there: the International Criminal Tribunal for the former Yugoslavia (ICTY) and the Women’s Court. The result is a book that not only challenges current capitalist structures in international criminal law, but also offers a constructive and comprehensive set of recommendations for integrating feminist theory and practice into the institution
Takings in Disguise: The Inequity of Public Nuisance Receiverships in America’s Rust Belt
Get PDFSince they were created in the 1980s in Cleveland, Ohio, public nuisance receiverships have spread across the American Rust Belt. This Note critically analyzes the legal implications of public nuisance receiverships, which involve the intrusion onto private property for public purposes. Despite claims that these actions align with exceptions to due process or public nuisance principles, a deeper examination reveals their fundamental nature as government takings of private property. This Note dissects the legal framework within the context of the Fifth Amendment, debunking the applicability of the public nuisance exception, establishing that receiverships constitute takings, and highlighting conflicts with Anti-Kelo amendments. Additionally, this Note contrasts various state statutes’ approaches and proposes a solution that preserves the benefits of receiverships while addressing their challenges. By emphasizing community involvement and exploring funding mechanisms, the article aims to foster equitable neighborhood redevelopment within a legally sound framework
The 2022 Alabama Executions and the Crisis of American Capital Punishment
Get PDFThe Death Penalty Information Center described 2022 as “the year of the botched execution” in its 2022 Annual Report. Alabama’s execution errors were especially serious: it attempted to execute four people, botched three of its four executions, and ultimately called off two executions. Alabama’s 2022 executions and its errors are the culmination of common problems in capital punishment across the United States. A full understanding of capital punishment requires an analysis of individual cases, including executions, and analysis of how that case fits within the system of capital punishment. Evaluating a single case may reveal unfairness and arbitrariness, but tracking those trends across multiple cases demonstrates broader system failures. Alabama’s 2022 executions present a useful case study for understanding the flaws in execution practices and capital punishment more broadly.
This Article documents the 2022 Alabama executions and makes three contributions. First, it summarizes the events in Alabama surrounding the executions of Matthew Reeves and Joe James, and the failed executions of Alan Miller and Kenneth Smith. It reviews some issues associated with each capital sentence and appeals process. Second, it explores points of commonality among each of the four cases: non-unanimous jury sentencing and judicial overrides, inadequate legal representation and resources, the role the Supreme Court played in the cases, and the problems associated with Alabama’s execution protocols. Finally, it addresses the outcome of Alabama’s decision to suspend executions and offers recommendations intended to protect the Eighth Amendment rights of people facing executions if Alabama’s elected officials are unwilling to take the necessary step to abolish the death penalty.
The problems this Article describes are not unique to Alabama, but events in Alabama afford an opportunity to bring fresh scrutiny to these issues. The Supreme Court’s willingness to authorize executions regardless of the merits of an individual case makes it more likely that errors like this will continue to happen. Alabama is not the whole story of 2022’s botched executions, but what happened in Alabama illustrates just how pointlessly cruel the process of capital punishment is