Solving the retirement savings crisis requires widespread access to reliable financial advice. Yet financial advisers often operate without insurance, collecting fees and commissions from customers and leaving them penniless when substandard advice causes harm. Instituting insurance coverage requirements would protect investors and allow market forces to discipline misconduct. For decades, advocates and regulators have raised awareness about the millions of unpaid arbitration awards each year; an insurance solution would significantly reduce the harm suffered. This paper aims to create a roadmap to solve the problem. It identifies the problem and maps out the different levers available to policymakers to increase overall insurance coverage across a fragmented regulatory landscape.

Within signed law professors and law students submitted this letter to the Federal Trade Commission, writing in their individual capacities, not as agents of their affiliated institutions, in support of the Federal Trade Commission’s proposed rule to ban most non-compete clauses (the “Proposal”) as an unfair method of competition. This letter offers comments in response to areas where the FTC has requested public comment. To make our views clear, this letter contains the following sections:I. Summary of the Proposal;II. The Commission Should Consider Expanding Its Definition of Non-CompeteClauses to Prevent Employers from Requiring Workers to Quit Before SeekingAlternative Employment;III. Non-Compete Clauses Are Unfair Methods of Competition;IV. Non-Compete Clauses Negatively Impact Workers and Their Families;V. The Proposed Rule Protects Small Businesses and Entrepreneurs; andVI. The Commission Should Consider a Factor Test for Its Unfairness Analysis forSenior ExecutivesOur comments were publicly submitted electronically with the FTC on April 18, 2023.

We submitted these comments in response to the Securities and Exchange Commissions' proposed rules governing conflicts in the use of data analytics and other covered technologies in investor interactions. In short, we support the proposed conflicts rule. The proposal would push the securities laws’ investor-protection mandate in ways that extend beyond the traditional categories of human advice and recommendation. It would fill important regulatory gaps, promoting firm awareness and self-management of conflicts of interest beyond recommendations to the many ways algorithm-driven advice shapes investor behaviors and market outcomes on a broad scale. We write specifically to address questions raised in the proposal. We focus on six broad issues: the definitions of “covered technology,” “investor interaction,” “conflict of interest,” and “eliminate or neutralize,” as well as the compliance requirement and the economic analysis.

In the market for financial advisers, ordinary people have a hard time searching for high-quality advice and monitoring what they get. To promote trust and deter low-quality advice, regulators disclose to the public information about advisers who’ve been complained about, sued, or had other red flags. This “BrokerCheck” solution to the search-for-quality problem has a well-known flaw: it produces too much expungement of information from the public disclosure database. Brokers routinely secure the deletion of information about previous customer complaints and settlements that others would find useful in comparison shopping among advisers based on quality. Recent scholarship has found that brokers who receive expungement are more likely to get in trouble again. The persistence of secretly recidivist stockbrokers has real stakes for markets and for investor protection.At the end of July 2022, stockbroker regulator FINRA proposed modest reforms to this system that might improve the accuracy problem somewhat. This timely article argues that regulators should head back to the drawing board. Our theoretical framework for thinking about expungement counsels in favor of a doctrinal fix that would address the overproduction of false-positive and -negative expungements, and promote public participation and oversight. FINRA should carry out expungement only in a hearing panel procedure that can guarantee robust error correction and public participation through the Securities and Exchange Commission and the federal courts—and not in arbitration, as it currently does.Drawing on literature about the tradeoff between adjudication and error costs in institutional design, we offer a unique theoretical criticism for carrying out expungement in FINRA arbitration—and a new reason for reform. Regulators’ decision to carry out expungement in arbitration generates significant and costly errors. These include enabling a pooling equilibrium among good and bad-type brokers competing for sophisticated consumers; redirecting capital allocation toward less productive uses; and (in the case of false negatives) imposing reputational consequences to brokers. These costly errors can be ameliorated with modest reforms to the administrative process. Our article reconstructs the policies behind the disclosure solution and identifies potential impediments to comparison shopping and monitoring for quality in the market for advice. Shifting to an administrative forum, we argue, would better implement those policies—and would promote participation in the processes of constructing and gatekeeping access to capital markets. We conclude with comments on the uncertainty for our proposal of an ascendant anti-administrativism in the federal judiciary that has trained its eye on securities regulators.

We submitted these comments in response to the Financial Crimes Enforcement Network's advance notice of proposed rulemaking on the definition of an "effective and reasonably designed" anti-money laundering program applicable broadly to financial institutions. Our comments highlight industry-specific obligations of brokers and dealers in securities to have reasonably designed anti-money-laundering programs. We argue that in undertaking future rulemaking, FinCEN should account for industry-specific statutory requirements, and how these bear on regulators’ experiences implementing AML program obligations analogous to those the advance notice of proposed rulemaking contemplates. Regulators’ experience enforcing compliance with FINRA's informal guidance under the Securities Exchange Act of 1934, for instance, raises questions about whether FinCEN’s proposals to elaborate on AML obligations through periodic guidance would impose obligations enforceable at all. In particular, FinCEN should carefully consider whether essential enforcement regimes will require additional rulemaking because simply issuing official guidance may not create fully enforceable obligations in all regulatory frameworks. For self-regulatory organizations overseen by the SEC, guidance alone may not suffice to create an enforceable obligation. In instances where the SEC reviews SRO enforcement actions, it considers whether conduct violated the SRO's “rules,” meaning rules approved by the SEC. As explained in greater detail below, official guidance may not meet this standard, creating doubt, enforcement challenges, and likely inhibiting FinCEN’s compliance objectives.

In May 2020, the North American Securities Administrators Association (NASAA), an organization representing state and provincial securities regulators in Canada, the United States, and Mexico, released a draft Model Whistleblower Award and Protection Act (the Proposed Act) for public comment. The Proposed Act drew from securities-whistleblower statutes in Utah and Indiana, as well as the federal Sarbanes-Oxley and Dodd-Frank Acts. In brief, the Proposed Act provided for a state-level securities whistleblower-award program and an anti-retaliation private right of action. NASAA received seven comment letters, including one from securities scholars. Our securities scholars’ letter highlighted two areas of concern. First, we noted that in Digital Realty Trust, Inc. v. Somers, 138 S. Ct. 767, 778 (2018), the Supreme Court held that the Dodd-Frank Act did not protect from employer retaliation those who blow the whistle only internally. Given that the Proposed Act’s text closely tracked Dodd-Frank’s anti-retaliation provision, we observed that it had the same problem seen in Digital Realty. We urged a revision to close this gap, a change that would give internal securities whistleblowers at least a state retaliation right of action. Second, we urged that the whistleblower-award provision allow for attorney-mediated anonymous reporting. In late August 2020, NASAA released the final version of the act (the Final Act). The Final Act’s Section 10 resolved our Digital Realty concern by extending anti-retaliation protections to those who report only internally. The Final Act’s Section 4 addressed our concern that whistleblowers who submit anonymous reports pre-award should remain eligible for whistleblower awards. A copy of our comment letter follows this introductory note. The Proposed Act is attached as Exhibit A and the Final Act as Exhibit B.

Investors, industry firms, and regulators all rely on vital public records to assess risk and evaluate securities industry personnel. Despite the information’s importance, an arbitration-facilitated expungement process now regularly deletes these public records. Often, these arbitrations recommend that public information be deleted without any true adversary ever providing any critical scrutiny to the requests. In essence, poorly informed arbitrators facilitate removing public information out of public databases. Interventions aimed at surfacing information may yield better informed decisions. Although similar problems have emerged in other contexts when adversarial systems break down, the expungement process to purge information about financial professionals provides a unique case study. Multiple interventions may combine to more effectively surface information and generate better informed decisions. In quasi-ex-parte proceedings, traditional attorney ethics rules must yield to a higher duty of candor. Yet adjudicators should not rely on duty alone. Adversarial scrutiny may emerge by designating an advocate to independently and critically engage in circumstances where no party has any real incentive to oppose an outcome. Ultimately, addressing adversarial failures may require a shift away from adversarial adjudication to a more regulatory framework.

A changing cybersecurity environment now poses a significant corporate-governance challenge. Although some cybersecurity data breaches may be inevitable, courts now increasingly consider when a corporation's officers and directors may be held liable on theories that they acted in bad faith and failed to adequately oversee the corporation's affairs. This short essay reviews recent derivative decisions and encourages corporate boards to recognize that in an environment filled with increasing threats, a reasonable response will require devoting real resources and attention to cybersecurity issues.

Arbitration has expanded broadly, removing disputes involving entire industries from judicial review. The absence of judicial review plunges these disputes and industries into shadow. This shadow causes the public to lose sight of vital information about industry practices and arbitrators to gradually lose sight of the law. Federal intervention may be necessary to restore consumer protections, including customer choice, to bring these disputes out of the shadows.

Different types of financial advisers serve the massive and widely dispersed retail investment market. In a market riddled with conflicts of interests, many advisers exploit retail customers by pitching suboptimal products, leading to lower investment returns and lower overall growth — but also to greater profits for the financial advisers collecting kickback-style commissions. New financial technology firms, commonly known as Robo-Advisers, may disrupt this market and these exploitative practices. Still, these potentially disruptive automated investment advice firms face significant regulatory risks.

“Venture bearding,” a term that we coin in this article, describes processes of obscuring and covering socially stigmatized identities in business environments. This Article introduces distinctive identity performance strategies from the technology, startup, and venture capital context into the legal literature and discusses what their existence explains about business environments and capital formation. “Venture bearding,” as we use the term, describes behaviors that persons with contextually stigmatized identities adopt to access social status and capital. In some instances, women, who are stigmatized in this context, may employ men as front persons to conceal that the venture is an exclusively women-owned business. Venture bearding is a common, complex, and problematic strategy and is driven by stigma and bias in the business environment. The Article focuses on how the current startup, technology, and venture capital landscape causes persons with stigmatized identities to strategically conceal facets of their female identities in favor of presenting masculinized identities to conduct business and raise capital. The Article charts a continuum of venture bearding practices ranging from techniques to downplay a founder’s identity to the actual employment of men for the purpose of deriving economic value from their identities. The existence of venture bearding raises critical capital allocation concerns. While venture bearding strategies may mitigate some capital allocation biases and benefit some entrepreneurs, employing these strategies risks reifying discriminatory norms. These norms increase the cost of capital and inhibit economic growth.

The regulatory structure for financial advice now tolerates incentives motivating financial advisors to manipulate and deceive retail investors. While scholars thus far have argued for ways to improve investor protections, the literature has largely ignored how these flawed incentives affect the economy as a whole. This Article contends that these flawed incentives cause financial advisors to negatively affect capital allocation throughout the overall economy.This Article draws on literature about manipulation and deception in principal-agent relationships to show how conflicts of interest cause the market for financial advisor services to generate excessive intermediation, driving harms to the real economy. This Article uses case studies of nontraded real estate investment trusts and closed-end funds to illustrate how financial advisor conflicts of interests contribute to inefficient capital allocation and inefficiency in the market for institutional intermediation.To address this issue, this Article argues that an effective policy response will address compensation incentives and focus on limiting the ability of conflicts of interest to skew capital allocation.

Without easy access to relevant information, many consumers unwittingly trust serious decisions to professionals with histories of malpractice and negligence — leading to harms both individual and societal. This Article proposes to improve professional services markets with a tool that has already proven effective in the securities markets: a prospectus. A “Professional Prospectus” would reduce information asymmetries and improves the market for professional services through disclosure and consumer choice. A Professional Prospectus would alter the market for professional services by making professional reputation a more potent force. Economic theory often relies on “reputation effects” to ensure the efficient functioning of the market without providing for mechanisms to efficiently broadcast reputation. Tailored disclosures delivered through a Professional Prospectus would put existing public information into consumer hands, allowing the market to more effectively value professional services. This would discipline and deter professional misconduct and reward higher-quality service providers. To showcase a feasible Professional Prospectus intervention, the Article presents an initial use case of how a mandatory disclosure intervention could improve the market for immigration law services. The principles developed in this Article may also improve private and social outcomes in other markets for professional services.

The financial services industry indirectly regulates itself through little-discussed, scandal-prone, and structurally-entrenched self-regulatory organizations. FINRA, the most prominent of these self-regulatory organizations, makes regulations and sets enforcement policy that directly affect public welfare. As with other self-regulatory organizations, FINRA’s structure poses a continual risk that industry members will subvert its processes to act like a cartel, promoting industry interests at the expense of the public and contributing to the excessive rents collected by financial intermediaries. Although this dark side to self-regulation poses a constant danger, structural reforms may increase the likelihood that FINRA and other self-regulatory organizations will take the public’s interests into account. While others have discussed how self-regulatory organizations increasingly resemble a fifth branch of the federal government, this article shifts the focus to how the public actually exercises its voice within FINRA and other self-regulatory organizations. This Article examines the purportedly public representatives serving on FINRA’s Board of Governors. It finds that these public representatives often simultaneously serve on the boards of corporate financial intermediaries, giving rise to conflicts of interest between loyalties to market participants and industry lobbying groups and their roles as protectors of the public interest. To amplify the public’s voice within these organizations, this Article proposes a different appointment process for the public representatives serving within self-regulatory organizations and calls for increased transparency and improved oversight.

This essay unpacks the regulatory comment letter process and how to incorporate it into the law school curriculum. Participating in live rulemaking offers unique opportunities for students, from mastering the substantive area of law, developing critical thinking skills, and developing their professional identities and expertise. We describe our own experiences in incorporating students into the regulatory rulemaking process. Because of our focus on securities law, our students review and comment on proposed actions by securities regulators — the Financial Industry Regulatory Authority (FINRA) and Securities and Exchange Commission (SEC). After providing an overview of the pedagogical and practical rationale for incorporating the securities rulemaking process into our courses, we describe how we teach the process to students, from identifying appropriate rules to submitting a comment. We conclude with a discussion of the outcomes and benefits that we and our students experienced after adding the live rulemaking process to our pedagogical toolkits.

In recent years, federal courts have heard, without clear subject matter jurisdiction, contract disputes involving billions of dollars worth of securitized financial instruments (SFIs). These SFI disputes are litigated in federal court under the federal interpleader statute, which specifies that a federal court has subject matter jurisdiction over these cases only when parties deposit the disputed amount with the court. SFI litigants have ignored this requirement, so courts have, at best, uncertain jurisdiction over these cases. Why have no parties raised the jurisdictional defect, even though some would stand to gain from raising it? This Essay advances game theoretical explanations for litigants' puzzling silence in these major post-financial crisis cases, and argues that parties may strategically value litigating in federal court under jurisdictional uncertainty over other alternatives.

Federal efforts to reform federal securities class actions now reverberate in state courts and in individual actions. This article explores emerging consequences driven by national litigation trends and the Securities Litigation Uniform Standards Act (SLUSA). I argue that a new dynamic, class disaggregation, has begun to occur. Individual investors may be following institutional investors into state courts in search of better litigation outcomes. Given these developments, I argue that Congress should consider further reforms to level the field and ensure that private parties resolve disputes involving national market securities under consistent standards.