The Logic of Securities Law

This book explains both financial markets and securities regulation in simple yet sophisticated terms.

Nicholas L. Georgakopoulos (Author), Richard Posner (Foreword by)

9781316610992, Cambridge University Press

Paperback / softback, published 10 May 2018

214 pages, 14 b/w illus.
23 x 15.3 x 1.1 cm, 0.33 kg

'American securities law has developed, since its creation in the 1930s, in response to changing practices and changing problems. As judges, regulators and legislators attempted to respond to the pressing issue of the day, focus turned from the forest to the trees and the theoretical coherence of securities laws as a whole has diminished. In The Logic of Securities Law, Professor Georgakopoulos acts to restore some of the lost coherence, tying together different strands of securities law around a simple yet powerful theoretical focal point - a virtuous circle in which liquid markets, accurate securities prices and low trading costs reinforce each other. By directing securities law to facilitate this virtuous cycle, law is given a clarity of purpose and those who study and practice the law are given a simple yet supple roadmap to understand and evaluate this complex and important legal field.' Amitai Aviram, Director of the Corporate Law Program, University of Illinois

This book opens with a simple introduction to financial markets, attempting to understand the action and the players of Wall Street by comparing them to the action and the players of main street. Firstly, it explores the definition of a security by its function, the departure from the buyer beware environment of corporate law and the entrance into the seller disclose environment of securities law. Secondly, it shows that the cost of disclosure rules is justified by their capacity to combat irrationalities, fads, and panics. The third section explains how the structure of class actions is designed to improve deterrence. Next it explores the economic harm from insider trading and how the law fights it. In sum, the book shows how all these parts of securities law serve the virtuous cycle from liquidity to accurate prices and more trading and how the great recession showed that our securities regulation reacted mostly adequately to the crisis.

Foreword Richard Posner
1. Introduction. Real markets and financial markets
Part I. Definition of a Security: When to Leave Buyer Beware for Seller Disclose?: 2. Toward defining a security
3. The vacuous definition of a security
4. The function of investment contract
5. Pricing mechanisms
6. From the sale of business doctrine to Gustafson
7. Gustafson works!
8. Definition conclusion
Part II. Disclosure: Why Subsidize Informed Traders?: 9. Introduction
10. An overview of disclosure theories
11. The failure of the corporate disclosure decision
Part III. Deterrence of Securities Fraud: 12. Introduction to deterrence intensity
13. Comparing the economic function of deceit to that of securities fraud
14. Reliance in deceit and securities fraud
15. Conclusion of deterrence intensity
Part IV. Insider Trading: 16. Introduction to insider trading
17. Insider trading law
18. Defining insiders
19. Concluding the insider trading analysis
Part V. The Virtuous Cycle of Liquid Markets, Accurate Prices and Cheap Trading: 20. The virtuous cycle
21. Closing note: financial crises and securities law.

Subject Areas: Economic systems & structures [KCS], International finance [KCLF], Economic theory & philosophy [KCA]