Print Archive
Major U.S. companies increasingly raise capital and achieve massive scale in the private market, but not everyone is allowed to buy private company shares. A fundamental question arises from this shift to private capital-raising: to what extent should retail investors have access to growing private markets? This symposium essay examines one aspect of this question through a case study of litigation challenging the Securities and Exchange Commission’s (SEC) “accredited investor” definition. This definition limits who can access prevalent private offerings. The litigation is sparse but suggestive. It reflects some plaintiffs’ willingness to reopen seemingly settled questions of administrative and constitutional law, often as part of a broader policy agenda.
This essay is part of the University of Chicago Business Law Review’s Symposium on “Rethinking Going Public: Innovation, Access, and Accountability in Modern Capital Markets.”
For the last quarter-century, IPOs have been declining. SEC officials usually attribute the decline to startups’ choices to stay private. But that explanation is incomplete. As startups grow, they face a three-way choice between going public, staying private, and being acquired, and they have increasingly chosen the third option. In this Essay, we show how securities regulation pushes startups towards acquisitions by increasing the cost of raising capital and accessing liquidity in both public and private markets. We consider how the trend towards acquisitions could reduce competition, innovation, opportunities for diversification, and transparency. And we offer suggestions for how the SEC could create conditions for independent companies to thrive while preserving safeguards that protect investors.
Private company directors face a complex and high-stakes environment when a liquidity event approaches. This article analyzes the fiduciary duties that guide directors through this process, from the foundational principles of care and loyalty to the challenges posed by a range of exit paths. Drawing on key Delaware case law, we deconstruct the potential conflicts faced by “dual fiduciaries” on venture-backed boards and scrutinize the legal and financial dynamics of company sales, public market entries, and distress. We conclude by offering a modern governance playbook for Delaware corporations, emphasizing the importance of a carefully documented process in mitigating litigation risk and fulfilling the board’s fiduciary duties.
I am pleased to be in Chicago to discuss the current state of our capital markets, both public and private, and I want to thank the University of Chicago Business Law Review for inviting me to be a part of this important and timely symposium. I must note at the outset that my remarks are my own and do not necessarily represent the views of the Public Company Accounting Oversight Board, my fellow Board members, or the staff of the PCAOB.
Special purpose acquisition companies (SPACs) are public companies organized to die. Unlike ordinary corporations, which enjoy perpetual existence by default, SPACs are legally required to consummate a merger within a fixed period—usually two years, never more than three—or else liquidate and return investors’ cash.
This Article takes that clock seriously and argues that limited life is foundational to the SPAC form: it disciplines sponsors by preventing indefinite warehousing of capital, reassures investors by guaranteeing liquidity, and makes the form marketable in the first place. A perpetual SPAC would be good for nobody.
At the same time, the SPAC clock distorts incentives, creating end-period pressures to close “any deal before no deal.” Delaware fiduciary duty law, SEC disclosure reforms, and reputational markets—all operating in the shadow of the deadline—mediate these countervailing forces.
SPACs are one member of the broader class of organizations intentionally endowed with a fixed lifespan. Other examples include private equity funds, spend-down foundations, and government agencies subject to sunset laws. Situating SPACs within the author’s broader Temporal Governance framework reveals duration as a central lever of organizational design. Perpetuity is not destiny. Time can serve as the fulcrum of governance—and for SPACs, it is the variable without which the form could not exist.
Modern corporate theory treats the corporation as the product of private ordering as rational parties bargain over risk, control, and returns, while corporate law supplies enabling defaults that track what those parties would have chosen anyway. This Comment considers that view by examining the medieval Venetian commenda, a commercially sophisticated investment form that emerged centuries before the modern corporation. The commenda was, and organized, a nexus of contracts, taking shape as investors and traveling merchants repeatedly structured ventures, standardizing governance, risk allocations, and agency. But the commenda’s ultimate collapse exposes a central weakness in contractarian theory. When Venice’s post-Serrata political settlement altered the institutional environment, the commenda unraveled not because its contractual architecture failed or the market shifted, but because the state withdrew the conditions that made those bargains viable. By tracing both the construction and the destruction of the commenda, this Comment argues that private ordering can explain the internal design of corporate forms but cannot explain their persistence or lack thereof. Corporate organization, even at its most contractarian, depends on an ongoing state concession, marking a boundary condition for the applicability of contractarianism.
Loyalty discounts can wear different hats: they may function as ordinary price competition or as de facto exclusivity. Courts generally apply cost-based screens under the predatory pricing doctrine when the alleged competitive harm comes from low prices. Loyalty discounts can also become de facto exclusive dealing when they impose switching penalties, lock up demand, or deny rivals the scale necessary to compete. Two-sided transaction platforms after Ohio v. American Express Co. further complicate the loyalty discount doctrine because output is produced only through simultaneous participation on both sides of a platform, and foreclosure on one side may also reduce rivals’ access to the matched transactions necessary to compete on the other side.
This Comment argues that the loyalty discount doctrine is not cleanly applicable in two-sided transaction platforms because traditional price-cost tests may not sufficiently capture exclusionary effects caused by single-homing, routing restraints, and “chicken-and-egg” barriers to entry. Additionally, the Comment proposes a three-step framework that combines cost-based screens, non-price exclusion, and Amex’s instruction that competitive effects in transaction platforms should be evaluated as a whole. Courts should first consider whether the defendant has sufficient market power to make foreclosure plausible. They should then identify the mechanism of exclusion. Specifically, if price is clearly the predominant mechanism, a price-cost screen should be applied; if the challenged arrangement instead functions as de facto exclusivity, a foreclosure-based exclusive-dealing framework would be the more appropriate test. Finally, once exclusion is established, courts should assess competitive effects at the platform level under Amex. This three-step approach upholds the error-cost logic of cost-based rules while allowing courts to identify profitable, above-cost exclusion in two-sided transaction platforms in which denial of scale and matched transactions, rather than profit sacrifice, is the core competitive harm.
Financial innovation in the past has occasionally outpaced its regulators. But velocity today is increasingly becoming a tool of regulatory arbitrage. This essay argues that the central challenge of contemporary securities regulation is not merely a temporal lag — law trailing behind markets — but inundation: a flood of capital formation that overwhelms and thereby evades prudent and effective regulation. Whereas earlier generations of innovators cultivated legitimacy through regulatory engagement, today's most aggressive participants can embrace speed as a shield, racing to achieve scale and indispensability before thoughtful oversight can arrive. The result leaves regulators with only two unsatisfying tools: deliberate rulemaking that risks functional irrelevance, or precipitous enforcement that risks penalizing genuine novelty. Inundation can threaten regulatory legitimacy itself, not merely to individual investors, as each episode in which speed beats law teaches the next generation of entrepreneurs that it can. The essay concludes by considering adaptive mechanisms — sandboxes, principles-based frameworks, and algorithmic surveillance — and encourages greater deliberation in regulatory design rather than awaiting moments of crisis.
Banks, which are businesses that simultaneously make loans and take deposits that are available to customers on demand, are inherently unstable. The instability exists because the mismatch in the (long-term) maturity of banks’ assets and the (short term) maturity of their liabilities makes them susceptible to runs and panics that destabilize the broader economy and require bailouts on a regular basis. As such, banks essentially hold society hostage. They must be continuously propped up by the government to prevent them from collapsing and bringing the rest of the economy down with them.
There is a strong need for the transaction-account services provided by banks, and there is a strong need for the loans provided by banks. Why it is necessary to combine lending and deposit taking, within a single firm, rather than have them supplied by separate firms, such as commercial lending companies and money market mutual funds, is an issue that has received surprisingly little attention. The main argument in favor of banks is that econ-omies of scope can be achieved by combining lending and deposit taking. For example, by offering checking accounts to borrowers, banks obtain private in-formation about these borrowers that is not available to rival, non-bank lenders. This private information from depositors is thought to make banks unusually efficient lenders.
In this Article I first argue that improvements in technology and information retrieval and sharing have reduced or eliminated the traditional efficiency justification for combining deposit-taking and lending. At the same time, other improvements in technology have made banks even more fragile by making it easier for depositors to trigger runs by withdrawing their funds electronically.
Previous scholars have argued for “narrow banks” that would unbundle the provision of lending and deposit-taking. Here I observe that these scholars do not consider the rationales offered by financial economists to explain why these activities are combined. They ignore the sparse but important literature in economics and finance that models how combining lending and deposit taking generates efficiencies in the form of synergies. Thus, these scholars focus on the costs of combining lending and deposit taking without considering the benefits.
While the scholars who argue for narrow banks ignore the beneficial efficiencies associated with combining lending and deposit taking, the financial economists who argue that combining lending and deposit taking is efficient ignore the harmful costs associated with combining these two functions. In particular, combining lending and deposit taking makes banks unstable, re-quiring the creation and maintenance of a thicket of regulation to deal with that instability, which still fails to prevent periodic runs and panics. This Article concludes that when the costs associated with combining lending and deposit taking are properly considered, the arguments that traditional banking is efficient appear highly doubtful.
Fraudulent transfer law is one of the principal bulwarks of private law. Fraudulent transfer law, however, now faces a crisis. Courts have long assumed that it was easy to determine whether a debtor made a fraudulent transfer of its property. One could use traditional markers of ownership to determine whether the debtor transferred property to a confederate. But today, most assets are intangible. Transactions happen in the blink of an eye, and they take place entirely on corporate books. Reliance on simple notions of what constitutes a “transfer” of property is wholly inadequate. Understanding what it means for a debtor to transfer property for fraudulent transfer purposes requires revisiting the foundational principles of fraudulent transfer law, a task that has proved elusive because one of those foundational principles has been forgotten.
The Texas Stock Exchange’s registration as a new national securities exchange is arguably the most formidable challenge to the NYSE and Nasdaq duopoly in recent memory. TXSE has raised expectations not only among those who champion the rise of Texas as a financial center and resist the imposition of progressive norms through securities law, but also among scholars who favor competition as a solution to structural problems in the national market system (NMS) for equity trading. This Article explores the extent to which a new exchange can manage these expectations. It further considers what it means to be a “fully integrated stock exchange” in a political and judicial climate increasingly hostile to the self-regulatory model and whether an opportunity for ideological competition can restore confidence in that model.
Should insurance companies be allowed to charge different prices based on a policyholder’s likelihood of making claims? This Article challenges the common view that “risk-based pricing” in insurance presents a tradeoff be-tween the twin goals of efficiency and fairness. It argues that the most com-pelling justification for charging policyholders prices that reflect their indi-vidual risk is grounded not in efficiency, but in egalitarian distributive jus-tice. The Article begins by shifting the focus of distributive analysis from the burdens of insurance (i.e., premium costs) to the benefits of insurance, measured as the consumer surplus each participant gains from coverage. It then demonstrates that risk-based pricing distributes this surplus more equally among high-risk and low-risk insureds than does a uniform “com-munity rate.” This egalitarian perspective helps to explain and justify a puz-zling feature of American law: the surprising lack of comprehensive antidis-crimination rules for insurance compared to other sectors like housing and employment. By providing a fairness-based defense of risk-based insurance pricing, the Article reframes the debate. The central conflict is not one of effi-ciency versus fairness