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June 1, 2016Joan MacLeod Heminway

Crowdfunding and the Public/Private Divide in U.S. Securities Regulation

The origination and expansion of crowdfunding as a capital-raising tool has been a hot topic on the street and in the media and the academy for a few years now. In less than ten years, this fusion of social media and traditional corporate finance—a mode of corporate finance through which firms raise investment capital by reaching out over the Internet to a broad, undifferentiated mass of potential investors—grew from a creative impulse to a movement that catalyzed federal legislative action. Its socio-legal bounds are as yet relatively untested. It seems that crowdfunding offers something to nearly everyone.

Remaining or Going Private: Traditional and New Rationales

The going private transaction has been popular in the past and will likely continue in popularity, given the number of startup “exits.” In the alternative, companies could continue to remain private, as venture capital funding and mega-rounds give companies a way to operate privately and their founders to retain control. Traditional rationales were centered around public speculation and filing or disclosure requirements. I suggest that new rationales include control by founder/CEOs, although it is hard to be sure. In the future, there could be new trends, less founder-centric companies, and more rationales for remaining, or going, private.

A New Trend in Securities Fraud: Punishing People Who Do Bad Things

This article seeks to articulate a distinct view of federal securities law as it is increasingly used in non-traditional enforcement actions commenced to punish corporate bad behavior. This paper argues that these non-traditional enforcement mechanisms should be viewed with skepticism. This skepticism should not be misinterpreted as cynicism, as the author believes that these non-traditional enforcement actions are beneficial vehicles to accomplish the admirable governmental objective of “punishing people who do bad things.” However, the author recognizes that such use of securities law does not fall into a category of clearly defined criminal law and carries a significant risk of abuse. The author also recognizes the “admirable governmental objective” may be thwarted when it comes to private companies. Finally, the author is uneasy with the societal values conveyed when the government sanctions corporate misbehavior in the name of protecting shareholders from deception.