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Category Archives: Securities Law

How the SEC Helps Speedy Traders

Jackson, Robert J. and Mitts, Joshua, How the SEC Helps Speedy Traders (November 6, 2014). Available for download at at SSRN: http://ssrn.com/abstract=2520105 or http://dx.doi.org/10.2139/ssrn.2520105

“We show that the Securities and Exchange Commission’s system for disseminating market-moving information in securities filings gives some investors an advantage over others. We describe two systems — the SEC’s file transfer protocol (FTP) server and public dissemination service (PDS) — that give certain investors access to securities filings before the general public. While contemporaneous work on this issue is limited to insider filings, we show that both the FTP and PDS gaps are pervasive across all types of filings, including Form 8-K, which includes market-moving information such as corporate earnings. We show that FTP access gives investors a mean (median) 85 (11)-second lead time, and PDS gives investors a mean (median) 77 (10)-second lead time, before the filing is available on the SEC’s website. We also provide evidence suggesting that investors had the opportunity to take advantage of this lead time to earn trading profits. In particular, we show that traders could earn economically and statistically significant returns by trading on either the FTP or PDS gaps. Moreover, even investors who waited as long as ninety seconds to execute trades on the FTP or PDS gaps could earn meaningful returns using this strategy. We also identify abnormal trading volume in the moments after PDS subscribers receive SEC filings. Finally, our direct access to both FTP and PDS also allow us to document the changes to those systems that the SEC implemented after the public revelation of this issue in October 2014. We show that the SEC imposed a significant delay on the PDS service after the existence of the informational advantage was revealed. We also, however, show that, as of November 2014, PDS subscribers still receive some 37% of filings before the general public. We argue that lawmakers should consider reforms that would help the SEC develop a centralized information-dissemination system that is better suited for the high-speed dynamics of modern markets.”

Conflict Minerals and Resource Extraction: Dodd-Frank, SEC Regulations, and Legal Challenges

Conflict Minerals and Resource Extraction: Dodd-Frank, SEC Regulations, and Legal Challenges. Michael V. Seitzinger, Legislative Attorney; Kathleen Ann Ruane, Legislative Attorney. October 15, 2014. “Two sections of the Dodd-Frank Wall Street Reform and Protection Act (Dodd-Frank) require that the Securities and Exchange Commission (SEC or Commission) issue regulations to make public the involvement of U.S. companies in conflict minerals and inContinue Reading

A Real Fix for Credit Ratings – Brookings

Ann Rutledge and Robert E. Litan: “The failure of credit ratings agencies to do their job – warn investors of the true risks entailed by the subprime mortgage securities they rated – was at the heart of the financial crisis. Policy makers since have wrestled with how to “fix” the ratings process going forward. Although the SecuritiesContinue Reading

Whistleblowers Silenced by Non-Disclosure Agreements – Focus on SEC

POGO – “On July 25, the Project On Government Oversight, along with more than 50 other organizations, sent a letter to the Securities and Exchange Commission (SEC) expressing concern over the growing problem of silencing whistleblowers. Many companies regulated by the SEC are now requiring employees reporting misconduct to sign non-disclosure agreements (NDAs) that undermine the forceContinue Reading

SEC Clamps Down On XBRL Filing Holdouts – InformationWeek

“The Securities and Exchange Commission is clamping down on public companies that fail to submit their financial disclosure statements as structured data, agency officials said. The SEC’s Division of Corporation Finance sent letters on July 7 to an unspecified number of companies that are not submitting their financial disclosure statements as machine-readable, structured data. The move comesContinue Reading

High-Frequency Trading: Background, Concerns, and Regulatory Developments

CRS – High-Frequency Trading: Background, Concerns, and Regulatory Developments. Gary Shorter, Specialist in Financial Economics; Rena S. Miller, Specialist in Financial Economics. June 19, 2014. “On May 6, 2010, the Dow Jones Industrial Average (DJIA), a broad stock index, fell by nearly 1,000 points over the course of several minutes and then quickly rebounded. This was one of the largest intradayContinue Reading

UN Member States on the Record

“This site is about UN Documents related to UN Member States. It provides links to selected UN databases, websites, and other information resources, in order to make the record of Member States’ activities at the UN more accessible. Information available for each Member State includes: the key documents related to its membership in the UN; statements made before the principal organs; draft resolutions sponsored; periodic reportsContinue Reading

Disclosure Universes and Modes of Information: Banks, Innovation, and Divergent Regulatory Quests

Hu, Henry T. C., Disclosure Universes and Modes of Information: Banks, Innovation, and Divergent Regulatory Quests (May 26, 2014). Yale Journal on Regulation, Vol. 31, No. 3, 2014. Available at SSRN: http://ssrn.com/abstract=2442092 “In 2013, a new system for mandatory public disclosure came into effect, the first since the creation of the Securities and Exchange Commission (SEC)Continue Reading

New GAO Reports – Army Corps of Engineers, Defense Business Systems, Oil and Gas, USPS

ARMY CORPS OF ENGINEERS: Actions Needed to Further Improve Management of Hopper Dredging, GAO-14-290: Published: Apr 10, 2014. Publicly Released: May 12, 2014. CLEAR AIR FORCE STATION: Air Force Reviewed Costs and Benefits of Several Options before Deciding to Close the Power Plant, GAO-14-550: Published: May 12, 2014. Publicly Released: May 12, 2014. DEFENSE BUSINESS SYSTEMS: Further Refinements Needed to Guide theContinue Reading

Securities/Commodities/Exchange Civil Filings Jump 43%

“The latest available data from the federal courts show that during March 2014 the government reported a 43 percent jump in new securities/commodities/exchange civil filings. According to the case-by-case information analyzed by the Transactional Records Access Clearinghouse (TRAC), there were 93 new filings in March, up from 65 in February. It is too soon toContinue Reading

The Virtues of Private Securities Litigation: An Historic and Macroeconomic Perspective

Ramirez, Steven A., The Virtues of Private Securities Litigation: An Historic and Macroeconomic Perspective (April 18, 2014). Loyola University Chicago Law Journal, Vol. 45, No. 3, 2014. Available at SSRN: http://ssrn.com/abstract=2426661 “In the wake of the Great Depression, the federal securities laws operated to mandate disclosure of material facts to investors and extend broad private remediesContinue Reading

SEC Staff Analysis of Data and Academic Literature Related to Money Market Fund Reform

“The staff of the Securities and Exchange Commission made available certain analyses of data and academic literature related to money market fund reform.  The analyses, which were conducted by the staff of the SEC’s Division of Economic and Risk Analysis, are available for review and comment on the Commission’s website as part of the commentContinue Reading