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Abstract:
This Abstract introduces the authors' new book, The Sarbanes-Oxley Debacle: What We've Learned; How to Fix It (The AEI Press 2006). The Sarbanes-Oxley Act of 2002 ("SOX") is a colossal failure, poorly conceived and hastily enacted during a regulatory panic. Everyone now concedes that the direct compliance costs of SOX have been much greater than anticipated. While that alone should give any serious policy analyst pause, the Act's defenders press the case that SOX was worth its problems. This book demonstrates that the supporters are wrong in their assessment: Both logic and evidence make it clear that SOX was a costly mistake.

Abstract:
American corporate law has seen numerous changes that may be characterized as random mutations. Some mutations thrived, some died, but they all had a common trait - they were purposeful efforts to somehow improve corporate law. Natural selection through market forces determines whether one legislature's or one court's "improvement" is actually an improvement or a detriment. In American corporate law, the natural selection process is manifest through the Economic Darwinism of jurisdictional competition. For an evolutionary process to work, catalysts - akin to random mutations - must occur and cause changes. In this process, inadequate laws and poor judicial decisions may lead to the discovery of improved corporate law. The Delaware Supreme Court's decision in Smith v. Van Gorkom was just such a random mutation. Van Gorkom was a major and seemingly random change in the corporate law of fiduciary duties. It certainly took corporate law observers and commentators by surprise. And Van Gorkom's reverberations continue to be felt.

Van Gorkom, Jurisdictional competition, federalism, corporate governance

Abstract:
State regulation of insurance companies has been criticized for many years because of the burden imposed on insurers by having to comply with the laws of many jurisdictions. These higher costs are passed on to consumers. The problems with the current regulatory structure are prompting calls for increased federal regulation of insurance. However, all proposals to federalize insurance regulation create opportunities for abuse at the hands of the federal government and fail to utilize the benefits of a federal system. This article shows how many of the problems of the current system can be addressed without resorting to a large scale intrusion of federal regulators into insurance markets. The proposed solution calls for minimal federal intervention to provide for jurisdictional competition between states that would be allowed to charter insurers that could operate nationally with only the single license granted by the charter. This single-license approach addresses the most salient concerns of proponents of federal optional chartering. It also has the potential for triggering competition and innovation in insurance products and rates while preserving a meaningful role for state regulation.

insurance, financial services, optional federal charter, federalism, regulation

Abstract:
State regulation of insurance companies has long been criticized for increasing costs and limiting product innovation and rate competition as insurers attempt to conform to different states' codes. In response, it has been suggested that insurance regulation be federalized. This article proposes, instead, that insurers be allowed to operate nationally so long as they are licensed in one state. Doing this would provide 50 new licensing options for multi-state insurers. The single-license solution has the potential for triggering competition and innovation on insurance products and rates while preserving a role for meaningful state regulation.

single-license solution, regulation, insurance, state-based regulation, jurisdictional competition, optional federal chartering, guaranty funds, consumer protection, insurance regulation, interstate commerce, antitrust, NAIC, exit, National Insurance Act, race-to-the-bottom

Abstract:
State Consumer Protection Acts (CPAs) were adopted in the 1960s and 1970s to protect consumers from unfair and deceptive practices that would not be redressed but for the existence of the acts. In this sense, CPAs were designed to fill existing gaps in market, legal and regulatory protections of consumers. From an economics perspective, CPAs were designed to solve two simple economic problems: 1) individual consumers often do not have the incentive or means to pursue individual claims against mass marketers who engage in unfair and deceptive practices; and, 2) because of the difficulty of establishing elements of either common law fraud or breach of promise, those actions alone are too weak an instrument to deter seller fraud and deception. The most striking lesson of our analysis is that the typical state CPA - with relaxed rules for establishing liability, statutory damages, damage multipliers, attorneys fees and costs, and class actions - solves the basic economic problem that CPAs were intended to address several times over. The effect of this redundancy in solutions is that CPAs can deter the provision of valuable information to consumers and, thus, harm consumers. That is, as currently applied state Consumer Protection Acts harm consumers. This need not be the case. A few modest reforms would dramatically improve the impact of CPAs on consumer welfare.

consumer protection, advertising, class actions, punitive damages, overdeterence, attorneys fees, fraud, misrepresentation, no harm, reliance, information