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This paper reassesses two conflicting hypotheses on the valuation impacts of private placements of equity (PPEs), the monitoring/certification hypothesis and the managerial entrenchment hypothesis, by focusing on the shareholder approval, active buyer, and premium pricing features of PPEs. We find that PPEs with these features have significant positive announcement returns and insignificant mean long-run returns, while the corresponding announcement and long-run returns for PPEs without such features are significantly negative. Firms with value-enhancing PPE features are better governed and use proceeds more efficiently. Thus, the heterogeneous nature of PPEs helps reconcile the puzzling return patterns and conflicting hypotheses regarding PPEs. Published version Park acknowledges financial support from the Asian Institute of Corporate Governance (AICG) and Korea University Business School Research Grant.

In view of the current global meltdown and the recession in South Africa, the question arises whether the legal framework pertaining to finality of settlement of securities is sufficiently robust to cope with failure of a central securities participant. This article examines this question and highlights some of the problems that exist with regard to uncompleted contracts in the Strate (Share Transactions Totally Electronic) environment. The authors conclude with certain recommendations to overcome the identified problems.

Purpose To explain recent amendments by the US Securities and Exchange Commission (the SEC) to Sections 312.03(b) relating to issuances of securities to substantial stockholders (the Substantial Stockholder Issuance Rule) and 312.03(c) (the 20 Per cent Rule) of the New York Stock Exchange’s (the NYSE) Listed Company Manual to change the definition of “market value” for purposes of the 20 Per cent Rule and eliminate the requirement for shareholder approval of certain private issuances at a price less than book value but greater than market value. Design/methodology/approach This article provides background on the purpose and policy behind the Substantial Stockholder Issuance Rule and the 20 Per cent Rule and summarizes the provisions of each rule, both before and after the recent SEC amendments thereto. This article then highlights the most important changes to the Substantial Stockholder Issuance Rule and the 20 Per cent Rule and explains the implications thereof for NYSE-listed issuers. Findings The amended Substantial Stockholder Issuance Rule and the 20 Per cent Rule provide NYSE-listed issuers greater flexibility in structuring transactions involving private placements of equity and will likely reduce the number of such transactions requiring a shareholder vote. Originality/value Practical guidance from experienced corporate finance and capital markets lawyers.

Islam strongly encourages investment so that possessions can be productive and bring benefits in the future, of course, using a good and right way, which is in accordance with Islamic sharia, like mutual respect and does not harm others. The type of investment can be varied, we can invest through the capital market, one of which is sukuk. Sukuk are securities that are proof of ownership (claim) on assets, whether in the form of tangible, intangible or project contracts from certain activities that require the issuer to pay revenue-sharing to the Sukuk holders and pay back the Sukuk in maturity date. The principle in Sukuk transactions is in the form of emphasis on fair agreements, recommendations for profit sharing systems. In Sukuk transaction, a number of certain assets are needed which to used as the basis for conducting transactions using a contract based on sharia principles. The types of Sukuk in terms of Sukuk Ijarah, Sukuk Mudharabah, Sukuk Musyarakah, Sukuk Istishna' with the method of issuing in bookbuilding, auction methods and private placement. In sukuk transactions there is a requirement for Underlying Assets as well as activities or processes which have been based in accordance with sharia. This shows that investing with sukuk is not worrying for investors who want to transact with sharia financial institutions. Keywords: Investing, Transaction, Sukuk

The rarity of rights issues in the United States makes it difficult to examine the choice between alternative seasoned equity offering (SEO) methods in that market. In Australia, however, both rights issues and private placements are prevalent. We therefore use the Australian market to test whether regulation influences a firm’s choice between rights issues and private placements. When a firm decides to issue seasoned equity in Australia, regulation favours private placements if the issue is small or needs to be completed quickly. Consistent with regulations affecting the choice between SEO types, our empirical results provide evidence that firms in Australia are more likely to choose a private placement for small issues or when taking advantage of temporary periods of overvaluation. JEL Classification: G12, G14

This study looks into the role of corporate life cycle on market discounts and firm performance in private placements. Using the standard event study methodology with 1854 private placements, this study finds that issuing firms on average offer discounts to their investors. While growth firms obtain higher returns around the issuance of private placements, these growth firms generate poor long run post-announcement returns. The results suggest that investors may be over-optimistic to future prospects for growth firms. As old firms generally obtain higher returns in premium offers, the evidence suggests that managers of old firms would put more efforts in managing their firms after private placements. Overall, the evidence indicates that corporate life cycle can play a role to influence firm performance in private placements. The empirical findings shed lights on the importance of corporate life cycle on firm performance in private placements.

Mandatory shareholder approval of equity issuances varies considerably across and within countries. In the United States and a few other countries, management typically needs the approval of only its board of directors to issue common stock. In most countries, however, by law or stock exchange rule, shareholders must vote to approve equity issuances when using certain methods or contemplating offers that exceed a specified fraction of outstanding shares. In some countries, shareholders must approve all equity issuances. Even in the United States, shareholder approval is mandatory under certain circumstances. The differences in the stock market reaction to shareholder‐approved equity issuances and to issues undertaken unilaterally by management are strikingly and consistently large. When shareholders approve stock issuances, whether public or rights offerings, or private placements, the average announcement returns are significantly positive, on the order of 2%. But when managers issue stock without shareholder approval, as in the case of U.S. public offerings, returns are significantly negative and 4% lower, on average, than for shareholder‐approved issues. What's more, the closer in time the shareholder vote is to the issue date, and the greater the required plurality (say, two‐thirds instead of half the vote required for approval), the more positive is the market reaction to the issue—and these findings hold for each of the three main kinds of offerings that take place in all 23 countries in the author's sample. Also telling, in countries where shareholder approval is required, such as Sweden and Malaysia, rights offers predominate over public issues. But in countries like the U.S. and Japan, where managers may generally issue stock without shareholder approval, public offers predominate over rights issues. These findings suggest that agency problems—the tendency of corporate managements to put their own interests before their shareholders'—play a major role in equity issuances. Such findings are also largely inconsistent with the adverse selection, market timing, and signaling explanations that currently dominate academic thinking about equity issuances by public corporations.

This study investigates how ultimate owners' self-dealing motivations can affect seasoned equity offering (SEO) methods using the data on listed companies in China during 2006–2015. We find that public equity offerings conduce to enhanced ultimate owner's control and preserve the control structure of the issuers. Moreover, there is a significant positive relation between controlling shareholder's control margin and the likelihood of choosing a private placement. A firm is more likely to choose public offerings in the presence of multiple large shareholders. Further tests show that self-dealing motivations significantly affect price discounts of private placements.

This paper examines external financing of small and growth firms using a regulatory experiment in the US microcap market. The paper focuses on a new financing method for entrepreneurial firms – small public offerings under Regulation A, which was significantly expanded by 2015 amendments. Regulation A offerings serve as a financing alternative for issuers that seek public capital but are unable to conduct a traditional registered public offering. Compared to small registered public offerings, Regulation A involves fewer requirements and draws smaller, younger companies, often raising capital without intermediaries or on a best efforts basis. Regulation A companies raise less capital on average after accounting for their historical financials. The use of Regulation A increased significantly following the 2015 shock, particularly in market segments that had more private placements and traditional public offerings. Different types of issuers are pursuing Regulation A and registered offerings, and Regulation A does not appear to draw issuers away from traditional public offerings.

This article provides private placement financing to provide generous financial support for listed companies' mergers and acquisitions under the premise that the reform of private placement to replace allotment and public placement has become the key refinancing method of listed companies. This article aims to study listed company mergers and acquisitions, private placement and earnings management. This paper uses Jones model to calculate the time series distribution of the discrepancies in manipulable accruals between all sample companies and control samples. Jones model can manage accrued earnings. This paper selects the A-share listed companies that have implemented private placement during 2019-2020 as the research sample. The sampling interval is two years before the private placement and 3 years after the private placement. Experimental data shows that the reason for choosing the data for 2019 and 2020 is that this article intends to study the earnings management before the issuance and unlocking, and the major shareholder lock-up period is longer, which is 3 years, and is subject to time constraints. The experimental results show that the three different types of private placement samples are relatively balanced. However, the number of issuances and financing to major shareholders and their related parties accounted for 36.60% and 44.23% of the total respectively, which exceeded their issuance. The number of institutions accounted for 33.3%. This article introduces strategic investors to improve corporate governance, enhance the supervision of the use of refinancing, increase the efficiency of capital use after listing and mergers, and improve financial performance, and make corporate mergers and acquisitions strategically meaningful, making it a coordinated and industrial structure The real way to adjust.

Since 2010, the enforcement of the Exchange Act by the Securities & Exchange Commission (“SEC”) has been bolstered by that agency’s Office of the Whistleblower (“OOW”). Since the creation of the OOW through the end of fiscal year 2017, the commission has received over 22,000 whistleblower tips. The Commission has obtained over $1.4 billion in financial remedies based on original information provided by whistleblowers. However, the SEC has issued an oral “No Further Action” on a claim brought by the Author that the industry is, regularly and systematically, failing to comply with a “no action letter” that prohibits any “unilateral outs” when the banks make a “firm commitment” to purchase securities. The author believes that the banks violate this “no action letter” in order to justify failing to record multi million dollar obligations to purchase securities as short terms liabilities. This article recommends the SEC prosecute such an action, retaining outside counsel if necessary.

Recent research on blockholders focuses on activist hedge funds and documents positive stock but negative bond returns. This study investigates the role of blockholder heterogeneity on security market effects and target firm follow-on activities across three important dimensions: identity, motive, and purchasing method. We show that target firms’ security returns and post-acquisition activities strongly correlate with blockholder heterogeneity. Further, bond returns are significantly positive for firms with blockholders’ debt-assistance motive while both stock and bond returns are significantly negative in private placements. Overall, our findings highlight the importance of blockholder heterogeneity on the valuation and performance consequences in block acquisitions.

We use meta-analysis to review studies on announcement effects associated with seasoned equity offerings. Our sample includes 199 studies from 38 leading finance journals and Social Sciences Research Network working papers. The studies cover different countries, but the US is particularly wellrepresented with 131 studies. We find a statistically significant mean cumulative abnormal return of −0.98%. Abnormal returns are more negative for equity issues by US companies and for non-US rights issues and are less negative for private placements. In addition, wealth effects are more negative when the proceeds are used for debt reduction, when the SEO is issued shortly after IPO, and for issues by nondividend-paying companies and industrial companies. We identify important avenues for future research.

IntroductionStarting in the latter half of the 1990s, the spread of the internet provided significant opportunities to various businesses around the world. Among these, financial businesses had a high level of user-friendliness because of their also being an agglomeration of information, and advances in information technology allowed them to make startling strides as internet businesses in Japan and elsewhere. The securities industry in particular, within a few short years of starting online transactions in earnest in 1999, saw growth that took companies from startups to their current sizes.However, as the market quickly grew in this manner, starting in 2001 a series of companies announced their withdrawal from the market. Firms numbered 67 in March of 2001, a high point, and this number shrank dramatically to 55 by September 2003. While some studies have investigated company success factors in regard to competition at the inception of the online securities industry (e.g., Applegate, Umezawa, Ladge, & Egawa, 2003; Takai, 2006) no research has focused on companies that have withdrawn from the industry, nor the factors in their doing so.The Ohlson O-score (Ohlson, 1980), Altman Z-score (Altman, 1968) and other bankruptcy forecasting metrics for "distress" are known to have a strong impact on the withdrawal of companies at the nascent stage of an industry (Daily, McDougall, Covin, & Dalton, 2002; Dowell, Shackell, & Stuart, 2011). In Japan as well, the Ohlson O-score is thought to be an excellent fit (e.g., Inoue, 1999). However, of 77 companies that entered the online securities business from 1996 to 2004, the Ohlson O-score for predicting bankruptcy1 was calculated for the 44 for which their securities reports were available, and as shown in Table 1, the average value of the Ohlson O-score for companies that withdrew from the online securities business and those firms that survived in that business show no significant differences. In other words, companies did not withdraw because they were distressed. This paper identifies the factors that caused the withdrawal of companies from the online securities industry even as the industry was starting up.History of the Industry and WithdrawalsThe history of online securities in Japan began with the entry of Daiwa Securities into the market in April 1996. In less than a year, major players Nikko Securities, Nomura Securities, and several other industry stalwarts had followed suit, with almost twenty companies becoming involved in online securities within two years.There was a series of deregulations known as "Japan's Big Bang' at that time, dramatically changing the competitive landscape in the online securities industry. First, in December 1998 the "licensing system' for securities firms changed to a "registration system'. This caused firms to utilize the internet, the use of which was becoming widespread, and a shift to an online securities business which made it possible for companies to enter the industry even with relatively few investment resources. Many firms from overseas and other industries entered the market in rapid succession (Takai, 2004, 2006).Second was the full liberalization of stock commission fees in October 1999. Until that time, these fees were set by law, but with this change securities firms were free to set fees as they saw fit. The rule of competition that "the only difference in securities firms is their size" was fundamentally altered.The spread of the internet coincided exactly with this time of change in systems. As a result, while there were 34 companies in the online securities industry in September 1999, only six months later, in March 2000, that number had exploded to 51, peaking with one-fourth of Japanese securities firms entering this market. Companies competing therein made announcements on an almost daily basis, reducing fees and expanding product lineups, and providing a variety of new information services. …

Dividends should be used as the way firms reward their investors, but in the Chinese stock market, large stock dividends have been criticised for several years. In this paper, through a case study and large-sample empirical tests, we find that large stock dividends are used to cater to investors participating in a firm’s private placement. Further empirical tests document that during the unlocking periods of privately issued new shares, firms are more likely to pay large stock dividends, especially when outside private placement investors are able to sell their shares. Additional tests reveal that private placement investors do make stock sales after receiving large stock dividends. Furthermore, firms undertaking large stock dividends after private placement have more frequent connected-party transactions, are more tunnelled by other receivables and have more aggressive earnings management and lower investment efficiencies, implying that the governance role of private placement is largely attenuat...

Companies planning a private placement typically gauge the interest of potential buyers before the offering is publicly announced. Regulators are concerned with this practice, called wall-crossing, as it might invite insider trading, especially when the potential investors are hedge funds. We examine privately placed common stock and convertible offerings and find evidence of widespread pre-announcement short selling. We show that pre-announcement short sellers are able to predict announcement day returns. The effects are especially strong when hedge funds are involved and when the number of buyers is high. We also observe pre-announcement trading in the options market.

While the costs borne by firms in raising external capital through initial public offerings (IPOs) and seasoned equity offerings are well documented, the strategic role of IPO underpricing in the market for raising equity after the IPO remains largely unstudied, particularly in an international setting. In China publicly traded firms often issue post-IPO equity through private placements of equity (PEPs), rather than public offerings. This chapter examines the relationship between the pricing behavior of IPOs and the issuance choice of future PEPs. Do companies use IPO underpricing as a strategic precursor toward raising additional capital in future PEPs? If the success of initial offerings of equity can help improve the capital-raising capacity and reduce the issuance cost in subsequent offerings, high-quality firms will intentionally pursue a multiple-issue strategy by lowering the IPO offer price in order to raise more capital at a higher price in PEPs.

Purpose To explain two papers published by the European Securities and Marketing Authority (ESMA) covering the application of the mar-keting “passport” under the Alternative Investment Fund Managers Directive (AIFMD). Design/methodology/approach Explains ESMA’s first paper, containing an advice to the European Parliament, Council and Commission (collectively the Trilogue) on the potential application of the AIFMD passport to non-EU Alternative Investment Fund Managers (AIFMs) and Alternative in-vestment Funds (AIFs), and a second paper, containing ESMA’s opinion on the current functioning of the AIFMD (currently used by EU AIFMs marketing EU AIFs in the EU) and National Private Placement Regimes (NPPRs, used for marketing by non-EU AIFMs and non-EU AIFs). Findings The ESMA papers were disappointing because they gave far less guidance and encouragement than anticipated that AIFs located in major jurisdictions such as the US and the Cayman Islands will be any easier to market to EU professional investors in the near future. Practical implications AIFMs (both inside and outside the EU) who are already using, or intending to use, the NPPRs should take some comfort that it seems highly unlikely that these regimes will be removed in the near future. Originality/value Practical guidance from experienced financial services lawyers.

What effect does market feedback have on managers’ decisions on private placement in family firms? Based on information asymmetry, agency theory, and corporate governance theory, we investigate the relationship between managers’ final decisions and market feedback to the announcement. We find that managers in family firms accept market feedback in decision-making and their attitude can be affected by many external factors. Managers tend to listen to the market when family firms are non-high-tech, when family members participate in purchasing the placed shares, when family members serve as managers, and when separation of control rights from ownership is small.

This study examines whether foreign firms raise debt capital more often and at lower rates after cross listing their equity shares in the U.S., and the sources of these debt market benefits. Employing a large global sample from more than 40 countries, we find that firms raise debt capital more frequently in the bond market and issue fewer syndicated loans following an equity cross-listing on a U.S. exchange. Offering yields of bonds are significantly lower after the cross-listing, while syndicated loan spreads do not change. We also find that cross-listed firms are more likely to conduct public bond offerings, at lower rates, instead of placing their bonds privately. Moreover, cross-listed firms domiciled in countries with a relatively weak regulatory and reporting environments issue bonds more frequently outside the U.S., while those located in countries that protect lenders well, issue more Yankee bonds, again at a lower cost. These results support the notion that bonding, information disclosure, and liquidity benefits from U.S. equity cross-listings extend to the debt holders of the firm.

Arabic Abstract: يهدف البحث إلى استطلاع آليات عمل سوق جديدة دشنتها سوق تورينتو المالية في مارس 2014م وهي سوق الطرح الخاص (TSX Private Market) وتقييم إمكانية تطبيقها في البيئة السعودية لتسهيل حصول المنشآت الصغيرة والمتوسطة (المدرجة وغير المدرجة) على التمويل من خلال ربطها بالمستثمرين المحتملين، وتوفير آلية لتداول وتسوية الأوراق المالية التي تتولد في هذا السوق. ويركز البحث بشكل خاص على استكشاف إمكانية إنشاء سوق طرح خاص لمنتج "الاستصناع التحوطي للتمويل بالمشاركة" الذي ابتكره تاج الدين (2011ب) لتمويل المنشآت الصغيرة والمتوسطة في قطاعات الصناعة والبناء والتشييد. وقد خلص البحث إلى توافر البيئة التنظيمية والتقنية المواتية لتأسيس سوق طرح خاص في المملكة، وأن السوق تنسجم مع مبادرات رؤية المملكة العربية السعودية 2030 التي تستهدف زيادة إسهام هذه المنشآت في الناتج المحلي الإجمالي. كما توصل البحث إلى إمكانية تحوير سوق الطرح الخاص في المملكة لتوفير التمويل المحمي بعقود الاستصناع التحوطي، التي تعتمد عليها شريحة كبيرة من المنشآت الصغيرة والمتوسطة في المملكة. English Abstract: The paper aims to explore new Private Market introduced by the TSX in March 2014 and to evaluate its applicability in the Saudi environment to facilitate the access of SMEs (listed and unlisted) to finance by linking them to potential investors. In addition, the market can operate an OTC market to trade the securities issued in this market. In particular, the paper investigate the possibility of establishing a similar private placement market for hedged Istisna'a product proposed by Tag El Din (2011) to finance SMEs in the manufacturing and construction sectors. The paper concluded that Saudi regulatory and technical environment is capable to establish the proposed private market in Saudi Arabia, which reinforce the initiatives of Saudi 2030 Vision to increase the contribution SMEs to GDP. The paper also asserted that private market in the Kingdom could be adapted to finance secured by hedged Istisna'a contracts that is urgently needed by a large segment of SMEs in the Saudi economy.

In this paper, we propose and construct a direct measure of investors' divergence of opinion based on auction bids data of the private placements in China. We find that the firms with higher bids dispersion generate lower long-run stock returns after the issuance of private placements. This effect is economically significant and robust when controlling for market discount, earnings management, analysts forecast dispersion, and self-selection bias. Moreover, this negative relation is stronger for stocks with more stringent short-sale constraints. Our findings therefore provide strong evidence in support of the Miller (1977)'s divergence of opinion hypothesis.

In this study, we examine the effectiveness of corporate governance in mitigating dilution in the economic and voting interests of existing nonparticipating (retail) shareholders in private placements. Based on a sample of 2420 private placements in Australia from 2001 to 2012, we find support for this proposition through the influence of corporate governance on pricing negotiation and firms’ choice of issuing method in private placements. Specifically, firms with better corporate governance offer private placements with a smaller discount, and are more likely to include a share purchase plan, which protects nonparticipating shareholders from ownership dilution in the placement.

Purpose – To provide an overview of the basic model used by many peer-to-peer lending platforms and some of the key peer lending regulatory and structuring considerations under the federal securities laws. Design/methodology/approach – Explains how the basic peer lending model works, how “borrower dependent notes” or “BDNs” may be offered in private placements or less commonly through public offerings, how companies engaged in peer lending are compensated, how sponsors of peer lending programs generally avoid registration as broker-dealers under the Securities Exchange Act of 1934, as investment advisers under the Investment Advisers Act of 1940 and as investment companies under the Investment Company Act of 1940, and how peer lending platforms are structured to take into account the laws that govern online transactions, consumer privacy, and other related issues. Findings – The authors expect that peer-to-peer lending platforms will continue to mature and evolve, and they expect that the issues discussed in this article will continue to drive their structuring decisions, business models, and regulatory compliance under the federal securities laws. Originality/value – Practical guidance from experienced financial services lawyers.

We examine the role of institutional investors in the voting process by analyzing the changes in the equity lending market around the time of a vote. Using a comprehensive proprietary data set, we find a marked reduction in the supply of lendable shares around the time of a vote because institutions restrict or call back their loaned shares prior to a vote. The reduction in the supply of lendable shares is most pronounced in cases for which ISS recommends voting against the proposal. Examining the subsequent vote outcome, we find that a recall in lending supply is associated with greater votes cast against both management and material proposals. There are also fewer favorable votes cast if ISS opposes management, and for firms with larger institutional ownership. Our results imply that institutions are willing to give up revenue from lending securities in order to exercise voting rights. To address concerns related to empty voting, we also examine changes in borrowing demand around the time of a vote. There is some evidence of increased demand around the time of the record date. However, we find no relation between voting outcome and borrowing demand at the record date. Our results indicate both that corporate governance is important to institutional investors and that the proxy process is an important channel for corporate governance.

Purpose – To alert broker-dealers to Securities and Exchange Commission charges brought against a broker-dealer for ineffective controls over employee use of confidential information and to provide guidance regarding development and implementation of controls to protect against improper use of material non-public information by employees. Design/methodology/approach – Reviews Securities and Exchange Commission settlement order with broker-dealer for violations of securities laws for failure to adequately prevent insider trading by employees and provides guidance for implementing control to prevent insider trading. Findings – The Securities and Exchange Commission’s charges are the first to be brought against a broker-dealer for failure to adequately protect against insider trading. A broker used a customer’s confidential information regarding an impending acquisition by a private equity firm to purchase stock in the target company. The broker-dealer settled charges of violations of the federal securities laws for failing to adequately establish, maintain, and enforce policies and procedures to protect against insider trading by employees with access to confidential client information. Originality/value – Practical guidance regarding internal controls at broker-dealers from experienced securities litigation and regulation lawyers.

The article explains the concept of the investor as the main securities market participant. Depending on the goals and methods of investment the authors single out groups of investors. They conduct the analysis of each group of investors in the Russian securities market. On this basis the authors identify its main problems and suggest ways to address them.

After the generation of private placement system, it is popular with the securities market and listed companies, it has become one of the main channels for enterprises to carry out equity refinancing, domestic scholars’ studies mainly focus on the purchase discount, big shareholders’ profit transfer problems, and problems with the company’s short-term effect, articles about private placement and operate performance are not enough, conclusions are also different, so it is very necessary for the empirical study on the relationship between listed companies’ private placement and performance by using the private placement experience of western countries and combining the reality of the capital market’s development of China. In this paper, by using factor analysis method and using Chinese A-share listed companies who have implemented private placement in 2010 as the samples, through calculating the samples’ comprehensive performance score from 2009 to 2014 and its average ranking non-parametric test, the results show that whether in the short or long term, private placement has a negative effect on companies performance, but the effect is not significant in statistics, the results will be more of reference value and practical significance, this paper will be beneficial for investors, the market regulator and the private placement’s follow-up study.

Although the Securities and Exchange Commission is the primary securities regulator in the United States, the Department of Labor also engages in “securities regulation.” It does so by virtue of its authority to administer the Employee Retirement Income Security Act (ERISA), the statute that governs the investment of retirement assets. In 2016, the DOL used its securities regulatory authority to adopt a rule that, for the first time, designates securities brokers who provide investment advice to retirement investors as fiduciaries subject to ERISA’s stringent transaction prohibitions. The new rule’s objective is salutary, to be sure. However, this Article shows that, by way of its reformation of many advisers’ relationships with their retirement-investor customers, the “fiduciary rule” imperils retirement investors in ways that are not immediately evident and that other scholars have not noticed. First, the rule promotes a particular investment strategy — namely, passive investing — for all retirement investors, regardless of their individual needs or objectives. Second, as a thought experiment demonstrates, the rule portends a constriction of most retirement investors’ participation in the securities markets and a still-wider gap, in terms of investment opportunities and performance, between these investors and their “sophisticated” counterparts. Despite these difficulties and speculation that the Trump administration would scuttle the rule, moreover, the rule’s effects are likely enduring. Given the damage that the fiduciary rule threatens to inflict on retirement investors, the DOL’s adoption of it is an episode of failed rulemaking — one that, as this Article contends, may be traced to doctrinal factors: U.S. securities regulation is based on the notion that regulation should be neutral as among firms’ business and financial objectives and should harness, without necessarily abolishing, financial professionals’ conflicts of interest. Yet with its fiduciary rule, the DOL has effectively forsaken the principle of neutrality and deployed a scorched earth strategy against conflicts. With a view toward addressing the special concerns that shared regulatory authority creates, the Article delves into the lessons arising from this episode and how policymakers might better promote regulatory objectives and sound policy going forward.

Mandatory shareholder approval of equity issuances varies across and within countries. When shareholders approve issuances, average announcement returns are positive. When managers issue stock without shareholder approval, returns are negative and 4% lower. The closer the vote is to the issuance or the greater is the required plurality, the higher are the returns for public offers, rights offers, and private placements. When shareholder approval is required, rights offers predominate. When managers may issue stock without shareholder approval, public offers predominate. These findings suggest that agency problems affect equity issuances and challenge existing adverse selection, market timing, and signaling explanations.

This chapter provides an overview of the regulation of the securities markets in the United States with primary focus on the regulation of the new issues (i.e., primary) markets. The chapter describes regulations that pertain to traditional registration as well as to shelf registration and Rule 415 offerings. In addition, the chapter covers the regulation of private placement and various registration simplifications. The chapter also summarizes regulatory provisions adopted in recent laws. The chapter concludes with an overview of the regulation of new issues conducted by US issuers abroad as well as the regulation of new issues conducted by foreign firms in the United States.

This Amicus Brief was filed with the U.S. Supreme Court on behalf of nearly 50 law and business faculty in the United States and Canada who have a common interest in ensuring a proper interpretation of the statutory securities regulation framework put in place by the U.S. Congress. Specifically, all amici agree that Item 303 of the Securities and Exchange Commission's Regulation S-K creates a duty to disclose for purposes of Rule 10b-5(b) under the Securities Exchange Act of 1934. The Court’s affirmation of a duty to disclose would have little effect on existing practice. Under the current state of the law, investors can and do bring fraud claims for nondisclosure of required information by public companies. Thus, affirming the existence of a duty to disclose will not significantly alter existing practices or create a new avenue for litigants that will lead to “massive liability” or widespread enforcement of “technical reporting violations.” At the same time, the failure to find a duty to disclose in these circumstances will hinder enforcement of the system of mandatory reporting applicable to public companies and weaken compliance. Reversal of the lower court would reduce incentives to comply with the requirements mandated by the system of periodic reporting. Enforcement under Section 10(b) of and Rule 10b-5(b) under the Securities Exchange Act of 1934 by investors in the case of nondisclosure will effectively be eliminated. Reversal would likewise reduce the tools available to the Securities and Exchange Commission to ensure compliance with the system of periodic reporting. In an environment of diminished enforcement, reporting companies could perceive their disclosure obligations less as a mandate than as a series of options. Required disclosure would more often become a matter of strategy, with issuers weighing the obligation to disclose against the likelihood of detection and the reduced risk of enforcement. Under this approach, investors would not make investment decisions on the basis of “true and accurate corporate reporting. . . .” They would operate under the “predictable inference” that reports included the disclosure mandated by the rules and regulations of the Securities and Exchange Commission. Particularly where officers certified the accuracy and completeness of the information provided in the reports, investors would have an explicit basis for the assumption. They would therefore believe that omitted transactions, uncertainties, and trends otherwise required to be disclosed had not occurred or did not exist. Trust in the integrity of the public disclosure system would decline. The lower court correctly recognized that the mandatory disclosure requirements contained in Item 303 gave rise to a duty to disclose and that the omission of material trends and uncertainties could mislead investors. The decision below should be affirmed.

China is about to undergo a major reform of its securities offering and listing processes. Since the inception of the Chinese capital markets in the early 1990's the government has exercised tight control to determine which companies will be allowed to engage in initial public offerings and become listed on a national securities exchange. The system has led to both corruption and favoritism and has blocked numerous companies from access to capital markets. Reform now appears imminent based on proposed legislation adopted in 2013 but as yet not implemented. The principal reform element would open registration to many more companies on a disclosure-based process in a manner somewhat analogous to the U.S. securities laws. Despite a generally favorable response to reform, many questions remain regarding implementation and particulars. This article examines the concerns regarding the reform proposals and sets forth a series of recommendations based on China's particular market conditions and comparisons to the U.S. model.

This study examines the association between U.S. Census industry concentration measures and the informativeness of corporate disclosure policy. We find that in more concentrated industries firms’ management earnings forecasts are less frequent and have shorter horizons, their disclosure ratings by analysts are lower, and they have more opaque information environments, as measured by the properties of analysts’ earnings forecasts. Also, when these firms raise funds they prefer private placements, which have minimal SEC-mandated disclosure requirements, over seasoned equity offerings. Overall, our findings suggest that firms in more concentrated industries disclose less and avoid certain financing decisions that have non-trivial disclosure implications, presumably due to proprietary costs of disclosure.

Purpose – The article sets out the practical implications of the EU Alternative Investment Fund Managers Directive for USA managers with a focus on the marketing provisions of AIFMD. Design/methodology/approach – This article summarises key marketing issues for USA managers. Findings – The article addresses in particular the means by which USA fund managers who are not regulated in the EU can access EU investors including passive marketing. Practical implications – AIFMD grants EU member states latitude when implementing their local private placement regime. Some EU member states have not yet implemented AIFMD while others have imposed conditions that are so onerous that in practical terms they equate to the negation of private placement as an option. Originality/value – The article is of value to USA fund managers who are not regulated in the EU because it provides insight into the practicalities of navigating the minefield that is AIFMD.

We empirically investigate whether increases in the U.S. Securities and Exchange Commission's (SEC) budget have an effect on firms' compliance behavior with securities market rules. Our study uses a dataset on the SEC's resources and its enforcement actions over a period beginning shortly after the Second World War and ending in 2010. We find that increases in the SEC's resources both improve compliance and lead to an increased activity level of the SEC. The higher level of compliance is reflected by a decrease in the numbers of enforcement cases. The increased activity level is reflected by a surge in the number of investigations conducted by the SEC.

Purpose – The purpose of this paper is to examine the impacts of private placement announcements by Australian Real Estate Investment Trusts (A-REITs) on existing shareholders. The study examines 96 A-REIT private placements from January 2000 to December 2012. Design/methodology/approach – Utilising event study methodology the authors examine the impact on existing shareholders wealth by measuring the abnormal returns (AR) around the placement announcement. The authors extend the analysis to model the A-REITs ARs against a number of explanatory variables to investigate the possible drivers for the observed event study results. Findings – The results support the information signalling hypothesis, in that existing investors in A-REITs earn negative and significant cumulative ARs of −1.3 per cent over the three-day event window [−1, +1]. This result is in contrast to prior studies conducted on industrial firms, for example; Hertzel and Smith (1993), Krishnamurthy et al. (2005) and Wruck and Wu (2009). Practical implications – Regression analysis shows A-REITs trading at a premium to net tangible assets and A-REITs that use placement funds for their core business have a positive impact on announcement ARs. Originality/value – This paper adds to the existing literature surrounding private placements and is the first paper, to the authors’ knowledge, to examine the impact of Australian REITs.

Purpose – To review the M&A Brokers “no-action” letter issued in February 2014 by the staff of the USA Securities and Exchange Commission that clarifies the circumstances in which intermediaries (M&A brokers) may receive transaction-based compensation for services provided in connection with sales of private companies without having to register and be regulated by the SEC as broker-dealers under the USA Securities Exchange Act of 1934. Design/methodology/approach – Examines the new SEC staff interpretative guidance on activities of M&A brokers in light of USA federal securities laws and previous staff no-action letters that address the application of broker-dealer registration requirements to such intermediaries when they render services in connection with purchases and sales of privately-held companies. Summarizes the manner in which the SEC staff’s new position expands the types of private M&A transactions on which intermediaries may advise and broadens the scope of services they may provide without subjecting themselves to Exchange Act registration. Findings – The M&A Brokers letter dispels much of the uncertainty existing under earlier SEC staff no-action letters about the scope of permissible activities in which unregistered intermediaries may engage in private M&A transactions. By broadening the scope of those activities under the federal statutory regime governing broker-dealers, the new staff guidance should facilitate the expansion of services provided by M&A brokers without registration and permit greater flexibility for M&A brokers and their clients to structure compensation arrangements. The paper cautions that, absent reform of more restrictive regulation under the securities laws of some states, the prospects for expanded involvement by unregistered intermediaries in private M&A transactions may not be fully realized. Originality/value – Expert guidance from experienced securities lawyers.

Collateral frictions have a profound effect on our economic landscape, ranging from the design of financial securities, laws, and institutions, to various rules and regulations. We analyze a model with disagreement, where securities and collateral requirements are endogenous. It shows that the security that isolates the variable with disagreement is "optimal" in the sense that alternative securities cannot generate any trading. In an economy with N states, investors may introduce more than N securities, and markets are still incomplete. The model has several novel predictions on the behavior of basis—the spread between the prices of an asset and its replicating portfolio.

This paper empirically examines the factors that determine the choice between qualified institutional placements (QIPs) and Rights issues for raising seasoned equity capital by selected BSE listed firms in India from 8th May 2006 to 31st December 2010. By conducting multivariate logit regression analysis, the study finds that firms placing equity privately on QIP basis tend to be bigger in size, more costly in terms of direct issue expenses and have considerable growth opportunities than Rights offering firms. In contrast to the extant studies, the study finds conclusive evidence that QIP firms have higher cash flows, more earnings from operations, and greater institutional investors’ following vis-a-vis firms going for Rights issues. The findings suggest that QIPs, as a method for issuing subsequent equity, find favor with seasoned players in the market.

This paper investigates the large and diverse discounts in UK open offers and placings. Large discounts are a substantial cost to shareholders who do not buy new shares. The existing literature mainly examines US firm-commitment offers and private placements. The institutional setting differs in the UK, in ways that make the theory of inelastic demand for shares more important as an explanation for discounts than in the US. The paper finds that inelastic demand, or illiquidity of the issuer's shares, and financial distress, are key determinants of the discount. We expect these results to apply to other stock markets.

Investors’ participation is essential for the development of securities market, which can be done by providing them adequate protection. Investors’ protection means protection of interest of investors from malpractices of various market intermediaries. SEBI was set up in 1992 to protect the interest of investors. For the growth of securities market it is necessary to build the confidence of retail investors in securities market, which can be done by timely redressing of complaints/grievances of investors. So in this paper, an attempt has been made to check the process of grievances redressal mechanism for investors and to check the performance of SEBI in redressing the grievances of investors over the period 2004-05 to 2013-14. The findings indicate that maximum investigations taken up and completed by SEBI were related to Market Manipulation and price rigging, success rate of investigation cases completed varies between 25.47 per cent and 60.36 per cent.

Theoretical and empirical analyses of listed companies owned and controlled by the state making private placement transactions during 2006 and 2013 were carried out to measure the short-term announcement effect of strategic and financial investors’ subscription for new shares in listed companies owned and controlled by the state on corporate governance and long-run performance of these listed companies. It was found that private placements had a positive influence on the performance of a state-owned and -controlled listed company as they brought new institutional investors to the company; strategic investors who subscribed for new shares in a state-owned and -controlled listed company have appeared to cause an announcement effect greater than financial investors; state-owned and -controlled listed companies that attracted strategic investors with private placements showed a higher level of corporate governance and better long-run performance in comparison to those launching private placements to financial investors only. This study reveals the differences between strategic and financial investors in their influences on short-term announcement effect, corporate governance, and long-run performance of a state-owned and -controlled listed company when they enter into private placement transactions with the company. These findings provide new perspectives on the economic consequences arising from the involvement of external institutional investors in private placements of state-owned and -controlled listed companies, which, to a certain extent, facilitate the decision-making process in private placement transactions and promote the mixed-ownership reform.

Malaysia’s capital market has performed well in 2009 and this is reflected from the Malaysia’s biggest rise of capital in the form of Maxis Bhd’s RM11.2 billion of initial public offering in 2009. Nevertheless, self-interests may create behaviors that pose risks to the safety of investors and the integrity of markets. Therefore, the Malaysian Securities Commission (SC) implemented a civil action against the offender of securities crimes in order to protect investors and to cover losses faced by investors because of securities crimes. The objective of this paper is to discuss and analyze the law and enforcement of civil action in securities industry in Malaysia. This is a legal research and involved examining legal data such as statutes and court cases. The Capital Markets and Services Act 2007(CMSA 2007) regulate matters relating to the activities, markets and intermediaries in the capital markets. The CMSA 2007 provides provisions relating to civil remedies to the victims of securities crimes and further empowers the SC to enforce administrative and civil actions. The analysis on enforcement of civil actions of SC shows that the outcome of the said strategy is very encouraging and accepted well by the industry player.

PurposeThe purpose of this paper is to provide selected Financial Industry Regulatory Authority (FINRA) Regulatory Notices and Disciplinary Actions issued in June, July, and August 2012.Design/methodology/approachThe paper provides FINRA Regulatory Notice 12‐40, SEC Approves New FINRA Rule 5123 Regarding Private Placements of Securities; Regulatory Notice 12‐44, SEC Approves Amendments to FINRA Rule 4210 (Margin Requirements); Regulatory Notice 12‐55, Guidance on FINRA's Suitability Rule; and Regulatory Notice 13‐13, Trading and Quotation Halts in OTC Equity Securities; Trade Reporting Notice of April 17, 2013: Reduction of Reporting Times for Agency Pass‐Through Mortgage‐Backed Securities Traded TBA.FindingsNotice 12‐40: FINRA Rule 5123 is part of a multi‐pronged approach to enhance oversight and investor protection in private placements; the rule will provide FINRA with more timely and complete information about the private placement activities of firms on behalf of other issuers. Notice 12‐44: The SEC approved amendments to FINRA Rule 4210 (Margin Requirements) related to option spread strategies, maintenance margin requirements for non‐margin eligible equity securities, free‐riding, “exempt accounts” and stress testing in portfolio margin accounts. Notice 12‐55: This Notice addresses two issues discussed in Regulatory Notice 12‐25: the scope of the terms “customer” and “investment strategy.” Notice 12‐25 provided guidance in a “frequently asked questions” format in FINRA Rule 2111 (Suitability). Notice 13‐13: The SEC approved amendments to FINRA Rule 6440, which provides authority for FINRA to initiate trading and quotation halts in OTC equity securities in circumstances where it is necessary to protect investors and the public; the rule provides authority to impose foreign regulatory halts, derivative halts and extraordinary event halts. Trade Reporting Notice of April 17, 2013: FINRA reminds firms of the coming reduction in reporting periods for the timely reporting of transactions in agency pass‐through mortgage‐backed securities traded TBA (to be announced) for good delivery and products not traded for good delivery.Originality/valueThese FINRA notices are selected to provide a useful indication of regulatory trends.