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1 – 10 of over 1000M. Alexander Koch, Carmen J. Lawrence, Aaron Lipson, Russ Ryan, Richard H. Walker, Jessica Rapoport and Katie Barry
To analyze the impact of the U.S. Supreme Court’s decision in Liu v. SEC, where the Court confronted the issue of whether the SEC can obtain disgorgement in federal district court…
Abstract
Purpose
To analyze the impact of the U.S. Supreme Court’s decision in Liu v. SEC, where the Court confronted the issue of whether the SEC can obtain disgorgement in federal district court proceedings.
Design/methodology/approach
This paper provides an overview of the authors’ prior work analyzing courts’ treatment of SEC disgorgement and a summary of the background and opinion in Liu v. SEC. This article then focuses on the practical implications of Liu on SEC disgorgement by considering questions left open by the decision.
Findings
The Court in Liu held that the SEC is authorized to seek disgorgement as “equitable relief” as long as it “does not exceed a wrongdoer’s net profits and is awarded for victims.” But the Court left many unanswered questions, such as whether disgorged funds must always be returned to investors for disgorgement to be a permissible equitable remedy, whether the SEC can obtain joint-and-several disgorgement liability from unrelated co-defendants, what “legitimate expenses” should be deducted in disgorgement calculations, and to what extent the SEC can seek disgorgement in cases when victims are difficult to identify.
Originality/value
Original, practical guidance from experienced lawyers in financial services regulatory and enforcement practices, many of whom have previously worked in the SEC’s Division of Enforcement.
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Russ Ryan, Matthew H. Baughman, Carmen J. Lawrence, Aaron W. Lipson, Richard H. Walker, Jessica Rapoport, Katie Barry and Scott Hiers
To analyze the impact of recent legislation that amended the Securities Exchange Act of 1934 to expressly empower the U.S. Securities and Exchange Commission (SEC) to seek…
Abstract
Purpose
To analyze the impact of recent legislation that amended the Securities Exchange Act of 1934 to expressly empower the U.S. Securities and Exchange Commission (SEC) to seek disgorgement in federal district court proceedings and to codify applicable statutes of limitations.
Design/methodology/approach
This article provides an overview of the authors’ prior work analyzing courts’ treatment of SEC disgorgement and summarizes how the scope of the remedy has evolved since Kokesh v. SEC (2017). Then, the article analyzes the changes to the Securities Exchange Act of 1934 contained in Section 6501 the 2021 National Defense Authorization Act (NDAA), which statutorily empowered the SEC to seek and obtain disgorgement in federal court actions. Finally, the authors discuss the impact of the legislation on the Supreme Court’s decisions in Kokesh and Liu v. SEC (2020).
Findings
The availability and appropriateness of SEC disgorgement have been the subject of vigorous debate. Just as courts began to iron out the contours of SEC disgorgement in the wake of Kokesh and Liu, Congress intervened by granting to the SEC explicit statutory authority to seek a remedy traditionally obtained at equity. In passing this legislation, Congress answered some questions that remained after Liu but also raised many new ones. These new questions will likely take years to resolve through subsequent litigation and potentially additional legislation.
Originality/value
Original, practical analysis and guidance from experienced lawyers in financial services regulatory and enforcement practices, many of whom have previously worked in the SEC’s Division of Enforcement.
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Alan R. Friedman, Dani R. James, Gary P. Naftalis, Paul H. Schoeman and Chase Henry Mechanick
To analyze the U.S, Supreme Court’s decision in Liu v. S.E.C., 140 S. Ct. 1936 (2020) and its potential implications for insider trading cases.
Abstract
Purpose
To analyze the U.S, Supreme Court’s decision in Liu v. S.E.C., 140 S. Ct. 1936 (2020) and its potential implications for insider trading cases.
Design/Methodology/Approach
Provides context on the history of disgorgement in SEC enforcement proceedings; discusses factual and procedural background underlying the Liu decision; summarizes the Court’s opinion and rationale, with a particular focus on the Court’s pronouncements regarding the permissible scope of SEC disgorgement as an equitable remedy; identifies and explores three possible issues in insider trading cases that may be affected by the Court’s narrowing of SEC disgorgement.
Findings
In Liu, the Supreme Court narrowed SEC disgorgement by stating that, as a general matter, SEC disgorgement is not permitted where: (1) the proceeds are not remitted to investors; (2) one defendant is made to disgorge profits that were received by someone else; or (3) the amount of disgorgement fails to deduct legitimate business expenses, in each case subject to possible exemptions as outlined by the Court.
Practical implications
This rule may call into question whether courts may: (a) order disgorgement against insider traders, given the difficulty of identifying investors who have been harmed; (b) order insider traders to disgorge profits earned by others on account of their violations; or (c) order insider traders to pay civil penalties under Section 21 A of the Exchange Act based on profits earned by others.
Originality/Value
Expert analysis and guidance from experienced securities enforcement lawyers with expertise in insider trading.
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Dona Budi Kharisma and Afilya Hunaifa
The purpose of this paper is two-fold: to analyze the legal issues on disgorgement and disgorgement funds in Indonesia, the USA and the UK and to construct the ideal law regarding…
Abstract
Purpose
The purpose of this paper is two-fold: to analyze the legal issues on disgorgement and disgorgement funds in Indonesia, the USA and the UK and to construct the ideal law regarding disgorgement and disgorgement fund.
Design/methodology/approach
The type of legal research in this paper is normative legal research. The research approach used is a comparative approach and a legal approach. The legal materials used are all regulations on the disgorgement law and the disgorgement fund that apply in Indonesia, the USA and the UK. The technique of collecting legal materials is done by using library research techniques.
Findings
The rapid growth of the capital market in Indonesia still faces various legal issues such as various market manipulations, insider trading and illegal investment management activities. Based on the results of a comparative study, Indonesia does not yet have a calculation mechanism regarding the imposition of disgorgement on violators. Unlike Indonesia, the USA has the rules of practice and rules on fair funds and exchange commissions, and the UK has the decision procedure and penalties manual, which regulates the mechanism for calculating the imposition of disgorgement. Indonesia is solely able to use administrative action in imposing disgorgement, while in the USA and the UK, it can be through courts or direct administrative actions. These legal issues have resulted due to the lack of confidence by international investors and the growth of the investment climate in Indonesia itself.
Research limitations/implications
This study examines the regulation of disgorgement and disgorgement funds in Indonesia, the USA and the UK. However, the focus of research in this paper is limited to legal issues that occurred in Indonesia.
Practical implications
The results of this study may help to construct the ideal regulations on disgorgement and disgorgement funds in various countries and protect the capital market of the investors.
Social implications
The results of this study are expected to be helpful for the investment climate in various countries, especially developing countries.
Originality/value
The ideal legal construction regarding disgorgement, namely, parties to the mechanism for imposing disgorgement; disgorgement filing mechanism; sanctions in disgorgement; disgorgement fund sources; provider of fundholding accounts; mechanism for calculating disgorgement imposition; disgorgement fund distribution mechanism.
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Lijun (Gillian) Lei, Yutao Li and Yan Luo
The emergence of social media as a corporate disclosure channel has caused significant changes in the production and dissemination of corporate information. This review identifies…
Abstract
The emergence of social media as a corporate disclosure channel has caused significant changes in the production and dissemination of corporate information. This review identifies important themes in recent research on the impact of social media on the corporate information environment and provides suggestions for further explorations of this new but fast-growing area of research. Specifically, we first review the evolution of Internet-based corporate disclosure and related regulations, and then focus on three recent streams of research: 1) companies’ use of social media; 2) information produced by non-corporate users and its impact on capital markets; and 3) the credibility of corporate information on social media platforms.
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Xinjian Ma, Shiqian Liu, Huihui Cheng and Weizhi Lyu
This paper aims to focus on the sensor fault-tolerant control (FTC) for civil aircraft under exterior disturbance.
Abstract
Purpose
This paper aims to focus on the sensor fault-tolerant control (FTC) for civil aircraft under exterior disturbance.
Design/methodology/approach
First, a three-step cubature Kalman filter (TSCKF) is designed to detect and isolate the sensor fault and to reconstruct the sensor signal. Meanwhile, a nonlinear disturbance observer (NDO) is designed for disturbance estimation. The NDO and the TSCKF are combined together and an NDO-TSCKF is proposed to solve the problem of sensor faults and bounded disturbances simultaneously. Furthermore, an FTC scheme is designed based on the nonlinear dynamic inversion (NDI) and the NDO-TSCKF.
Findings
The method is verified by a Cessna 172 aircraft model under bias gyro fault and constant angular rate disturbance. The proposed NDO-TSCKF has the ability of signal reconstruction and disturbance estimation. The proposed FTC scheme is also able to solve the sensor fault and disturbance simultaneously.
Research limitations/implications
NDO-TSCKF is the novel algorithm used in sensor signal reconstruction for aircraft. Then, disturbance observer-based FTC can improve the flight control system performances when the system with faults.
Practical implications
The NDO-TSCKF-based FTC scheme can be used to solve the sensor fault and exterior disturbance in flight control. For example, the bias gyro fault with constant angular rate disturbance of a civil aircraft is studied.
Social implications
Signal reconstruction for critical sensor faults and disturbance observer-based FTC for civil aircraft are useful in modern civil aircraft design and development.
Originality/value
This is the research paper studies on the signal reconstruction and FTC scheme for civil aircraft. The proposed NDO-TSCKF is better than the current reconstruction filter because the failed sensor signal can be reconstructed under disturbances. This control scheme has a better fault-tolerant capability for sensor faults and bounded disturbances than using regular NDI control.
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Kareen Brown, Fayez A. Elayan, Jingyu Li and Zhefeng Liu
The purpose of this paper is to investigate whether US regulatory actions around reverse mergers (RM) have exerted any spillover effects on the Chinese firms listed in China and…
Abstract
Purpose
The purpose of this paper is to investigate whether US regulatory actions around reverse mergers (RM) have exerted any spillover effects on the Chinese firms listed in China and whether Chinese firms have exhibited lower financial reporting quality than their US counterparts.
Design/methodology/approach
To test the possible spillover effect, this paper calculates three-day cumulative average abnormal returns (CAAR) and the aggregate CAAR for a series of US regulatory actions in 2010 and 2011. The study then compares the accrual quality, conditional conservatism, and information content of accruals of Chinese firms and US firms.
Findings
The paper documents a spillover effect of US actions around RM on Chinese stocks listed in China. Overall results do not support the perception that Chinese firms have lower financial reporting quality than their US counterparts.
Research limitations/implications
While this study provides evidence consistent with investors perceiving poor financial reporting quality among Chinese firms, that perception is not justified by empirical evidence.
Practical implications
Investors need not be overly concerned about the financial reporting quality among the Chinese firms when they make asset allocation decisions.
Social implications
A reality check is important given that perceptions may be outdated, biased, misleading, and costly.
Originality/value
This study puts the financial reporting quality of Chinese firms into perspective helping global investors assess information risk for optimal resource allocation.
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Guoping Liu and Jerry Sun
The purpose of this study is to examines whether clients’ share prices responded to three events, including the Securities and Exchange Commission (SEC) launch of administrative…
Abstract
Purpose
The purpose of this study is to examines whether clients’ share prices responded to three events, including the Securities and Exchange Commission (SEC) launch of administrative proceedings against five Chinese accounting firms on December 3, 2012, for their failure to hand over audit work papers due to conflict of jurisdiction; the issuance of SEC Administrative Law Judge Elliot’s ruling on January 22, 2014; and the settlement of the administrative proceedings on February 6, 2015.
Design/methodology/approach
This study uses the Schipper and Thompson approach.
Findings
It is found that share prices responded negatively around December 3, 2012, for USA-listed Chinese companies who were audited by Chinese auditors.
Originality/value
This study provides evidence on how share prices reacted to SEC enforcement actions against an affair of non-audit failure.
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Nicole V.S. Ratzinger-Sakel and Glen L. Gray
The Pathways Commission on Accounting Higher Education Report (2012) recommends turning the accounting profession into a learned profession through the purposeful integration of…
Abstract
The Pathways Commission on Accounting Higher Education Report (2012) recommends turning the accounting profession into a learned profession through the purposeful integration of accounting research, education and practice. This paper develops an approach to identifying and quantifying the specific dimensions of the gap between the accounting academic and practice communities, thereby contributing to moving the accounting profession to a learned profession. For this we focus on audit research, because the discussion of the perceived gap between audit research and audit practice is extensive; yet no one has actually quantified that gap to date. While researchers have classified and quantified audit research, no one has done likewise for publications issued by the practice community. We choose the 38 distinct recommendations in the Advisory Committee on the Auditing Profession (ACAP) Final Report as an initial benchmark. We compare those recommendations to the 16 audit research themes from Lesage and Wechtler (2012) and to the publications spanning 33 years of audit research posted on the American Accounting Association website. Eight Lesage and Wechtler themes, comprising 50% of the themes, were not explicitly included in any ACAP distinct recommendation. Conversely, seven distinct recommendations had zero direct matches in the audit literature. This gap suggests future research opportunities in terms of exploring underrepresented topics and, maybe more importantly, the reasons why some topics are underrepresented.
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