Archive
| Volume 82 | July 2009 | Number 5 |
Equity Compensation and Informant Bounties: How Tying the Latter to the Former May Finally Alleviate the Securities Fraud Predicament in America
Justin Tyler Hughes
82 S. Cal. L. Rev. 1043
ABSTRACT
Recent Supreme Court decisions, including Stoneridge Investment
Partners, LLC v. Scientific-Atlanta, Inc. and Tellabs, Inc. v. Makor Issues & Rights, Ltd., have brought complex securities fraud issues back into the
national limelight. Moreover, growing frustration with the Sarbanes-Oxley
Act of 2002 and the current financial catastrophe have further intensified securities concerns. Regardless of which side one supports in the ongoing
debate regarding appropriate regulation, one thing is certain: securities
fraud continues to purge the American markets of billions of dollars per
year. With today's political disposition favoring increased government oversight of corporate America, and with a new presidential regime, the
time for reevaluating America's procedure for detecting and deterring
large-scale securities fraud is swiftly approaching.
This Note presents a new approach to securities fraud that aims to
increase early detection, enforcement, and deterrence, while easing some of
the traditional concerns surrounding the current enforcement system. Part
II reviews the history of private securities litigation from the adoption of
the Securities Act of 1933 and the Securities Exchange Act of 1934 to the
Supreme Court's recent decisions in Stoneridge and Tellabs. Part III
highlights important securities fraud legislation implemented over the past
twenty years, concluding with a brief presentation of the Securities and
Exchange Commission's ("SEC's") current enforcement powers. Part IV
presents some of the traditional concerns regarding the current securities
fraud enforcement system with an emphasis on its inability to deter
fraudulent behavior. Part V illustrates a new approach to securities fraud
that will effectively increase early detection and deterrence without
exacerbating the traditional problems with the current system.
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