• Selected
• Entire List

Abstract:
The Fair Fund provision of Sarbanes-Oxley allows the Securities and Exchange Commission ("SEC") to direct money penalty amounts to injured investors. Because of the provision, large penalties mean potentially large SEC-obtained investor compensation, heralding a new compensatory role for the agency. The SEC has announced that it will direct money to injured investors whenever possible, but has not articulated clear priorities. This Article fills the gap by introducing terms of debate and proposing a framework for the SEC's exercise of its discretion under Fair Funds.

The Article introduces the concept of "public class counsel," a public actor that has the dual function of deterrence and victim compensation. The concept describes - and suggest limits to - the SEC's role in a system in which public and private remedies for securities law violations increasingly converge. The Article then draws on the analogy between the "public class counsel" and the "private attorney general" to propose an answer to the following question: When should the SEC exercise its discretion to create a Fair Fund? It suggests that the SEC focus on distributing penalties gathered from aiders and abettors of securities fraud because such an approach would minimize two significant concerns with investor compensation: first, that compensation of injured investors often amounts to a transfer of money among equally innocent investors and, second, that giving the SEC and private actors a role in compensation risks duplication of costs.

Fair Funds, Sarbanes-Oxley, investor compensation, Securities and Exchange Commission, remedies, civil penalties, disgorgement, restitution, administrative agency

Abstract:
When an unresolved state-law question arises in federal court, the court may certify it to the relevant state court. The practice of certification from one court to another has been widely adopted and has been touted as "help[ing] build a cooperative judicial federalism." This article proposes that states promote cooperative interbranch federalism by allowing federal agencies to certify unresolved state-law questions to state courts. It draws on Delaware's recent expansion of potential certifying entities to the Securities and Exchange Commission to argue that this innovation should be extended to other states and other federal agencies.

Certification from federal agencies to state courts promotes cooperative interbranch federalism by preserving state control over certain primary conduct and allocating decisionmaking according to institutional expertise, allowing an agency that is expert in a specialized federal statutory and regulatory scheme to certify questions to a court that is expert in state law. Because the proposed certification procedure is interbranch as well as interjurisdictional, its effect depends on the type of activity in which the agency is engaged: adjudication, rulemaking, or informal action. Federal agency certification has the potential to speed resolution of state-law questions when a federal agency acts as an adjudicator and would add another tool for informed rulemaking. The article concludes that the need for certification is particularly acute, however, when the agency is engaged in informal actions in which no recourse may otherwise be had for interpretations of state law that ultimately the state may reject.

certification, administrative law, judiciary, federalism, Delaware, corporate law, SEC, Securities & Exchange Commission, advisory opinions