Syllabus FINA—6290 §10, Professor Klock
Securities Regulation & the Financial Crisis, Fall 2014
Funger Hall 222, TUES. 7 :10-9 :40
Basic Information: Office hours T & R 10:30-11 and 2:10-3:40. Also T 5:30-7:00,
Funger 503
Phone: 994-8342
Email: msk20@gwu.edu
Text: Understanding Securities Law, 5th ed. by Marc Steinberg ISBN: 978 1 4224 7349 8
In addition, there will be papers to be read that are accessible via Gelman Library’s web
page or other internet sources. I should be able to post most of them to Blackboard before
we reach that part of the course.
Subject matter: The first part of the course will provide an overview of the philosophy
and framework of laws governing the sale of securities (e.g., stocks, bonds, investment
contracts). Our securities laws are designed to promote sustainable fair markets for
capital. The second part of the course will examine financial scandals including Enron,
Charter Communications, Bernard Madoff, and the 2008 financial crisis and the role that
changes in securities law and housing policy played in creating these events.
Class format: The class is organized as a lecture and discussion.
Grading: Grades will be based on an average of scores as follows:
30% Midterm
30% Paper
30% Final
10% Class Participation
Instructor: Professor Klock began teaching college statistics and economics in 1980. He
received a Ph.D. in economics in 1983 and began full-time faculty work in finance in
1984. He joined the GWU faculty in 1987. In 1988 he received a law degree and was
admitted to the Maryland Bar. Professor Klock spent seven years as Chair of the Finance
Department, and two years as an Associate Dean. His research has been well cited, and
he has published more than 45 articles in journals including: Journal of Financial and
Quantitative Analysis; American Economic Review; Journal of Corporation Law;
Wisconsin Law Review; Columbia Business Law Review; Journal of Accounting,
Auditing and Finance; The Financial Review; and many others. In addition to teaching in
the School of Business he serves as a member of the Center for Law, Economics &
Finance in the Law School.
Paper: You are to write a 10-15 page paper on a topic of your choice related to
regulation of financial markets or a major financial scandal. Papers will be graded for
both content and quality of communicating your ideas. Papers are due on December 4,
and should be sent to my email address attached in either Microsoft Word format or a pdf
file.
Tentative Schedule:
Week Date Chapters
Topic
1
8/26
1
2
9/2
2
Introduction, overview of the philosophy and structure of
the securities laws, taking companies public
Definition of a security
3
9/9
3
Exemptions from registration
4
9/16
4&5
Registration process
5
9/23
6&7
Resales & Due Diligence
6
9/30
8 & 10
Section 10(b) and secondary liability
7
10/7
11 & 12
Affirmative disclosure obligations and insider trading
8
10/14 Midterm exam
9
10/21 Enron scandal and responses to it:
Larry E. Ribstein, Market vs. Regulatory Responses to Corporate Fraud: A Critique of
the Sarbanes-Oxley Act of 2002, 28 J. Corp. L. 1, 1-67 (2002)
Mark Klock, Two Possible Answers to the Enron Experience: Will It Be Regulation of
Fortune Tellers or Rebirth of Secondary Liability?, 28 Iowa J. Corp. L. 69-109 (2002)
10
10/28 Institutional changes affecting financial scandals:
John C. Coffee, Jr., Gatekeeper Failure and Reform: The Challeng of Fashioning
Relevant Reforms, 84 B.U. L. Rev. 301 (2004)
John C. Coffee, Jr. and Hillary A. Sale, Redesigning the SEC: Does the Treasury Have a
Better Idea?, 95 VA. L. REV. 707 (2009)
11
11/4 Erosion of investor protection in the courts:
Mark Klock, What Will It Take to Label Participation in a Deceptive Scheme to Defraud
Buyers of Securities a Violation of Section 10(b)? The Disastrous Result and Reasoning
of Stoneridge, 58 U. Kan. L. Rev. 309 (2010)
Mark Klock, Improving the Culture of Ethical Behavior in the Financial Sector: Time to
Expressly Provide for Private Enforcement Against Aiders and Abettors of Securities
Fraud, 116 Penn. St. L. Rev. 437 (2011)
12
11/11 Madoff Scandal:
Robert J. Rhee, The Madoff Scandal, Market Regulatory Failure and the Business
Education of Lawyers, 35 J. Corp. L. 363, 365-66 (2009)
Mark Klock, Lessons Learned from Bernard Madoff: Why We Should Partially Privatize
the Barney Fifes at the SEC, 42 Ariz. St. L.J. 783 (2010)
13
11/18 Housing and foreclosure crisis:
Kenneth E. Scott, Lessons from the Crisis, 8 (John M. Olin Program in Law and
Economics, Stanford Law School, working paper #385 Nov. 2009)
Todd J. Zywicki and Joseph Adamson, The Law & Economics of Subprime Lending, 80
U. Colo. L. Rev. 1 (2009)
14
11/25 Dodd Frank and regulation:
Arthur Wilmarth, The Dodd Frank Act:, 89 Oregon L. Rev. 951
Jonathan Klick and Gregory Mitchell, Government Regulation of Irrationality, 90
Minnesota L. Rev.
15
12/2
Designated make-up day, no class, but papers are due via email
12/9 reading day, no classes or exams
FINAL EXAM PERIOD December 16 will be the date of our final exam. There will be
an option to take the final exam on-line for students who will be out of town.
STUDENT INFORMATION SHEET—next page. Please print out, fill out, and bring to
class to pass in, or email to me.
STUDENT INFORMATION SHEET
Fall 2014
NAME_________________________________
Class (MBA. ESIA. JD, etc.)
Major
Previous courses taken in finance and economics
Concurrent classes being taken in finance and economics
Plans after graduation
Interests/hobbies
Concerns/comments