Abstract

http://ssrn.com/abstract=2028768
 


 



Private Investment Companies in the Wake of the Financial Crisis: Rethinking the Effectiveness of the Sophisticated Investor Exemption


Cary Martin


DePaul University - College of Law

2012

Delaware Journal of Corporate Law (DJCL), Vol. 37, No. 1, 2012

Abstract:     
The Securities and Exchange Commission ("SEC") is the regulatory body that is charged with implementing the federal securities laws. It fulfills this obligation by actively pursuing its mission to protect investors, maintain fair, efficient, and competitive markets, and facilitate capital formation. While considerable disagreement exists with respect to the policies and mechanisms utilized by the SEC, the proper implementation of its mission is integral to the overall health of the capital markets. However, the current regulatory framework that divides public and private investment companies is compromising the fulfillment of this vital mission. This framework divides public and private vehicles based on the status of individual investors, where transactions that are restricted to sophisticated investors, which are statutorily defined as institutional or high net-worth individuals, are automatically deemed private. Yet, many such private investment companies are avid participants in the public capital markets and are capable of creating negative externalities that adversely affect unsuspecting third parties as well as the national economy. As such, this Article argues that the sophisticated investor exemption is no longer a reliable mechanism for separating private and public investment companies. This Article broadens this analysis by examining the extent to which the sophisticated investor exemption has undermined the SEC's ability to fulfill its mission to protect the public capital markets, and whether this failure has left the general public inadequately protected.

Number of Pages in PDF File: 65

Keywords: Delaware, Journal, Corporate, Law, SEC, securities, hedge fund, private investment companies, securities transactions

Accepted Paper Series





Download This Paper

Date posted: March 27, 2012 ; Last revised: August 4, 2014

Suggested Citation

Martin, Cary, Private Investment Companies in the Wake of the Financial Crisis: Rethinking the Effectiveness of the Sophisticated Investor Exemption (2012). Delaware Journal of Corporate Law (DJCL), Vol. 37, No. 1, 2012. Available at SSRN: http://ssrn.com/abstract=2028768

Contact Information

Cary Martin (Contact Author)
DePaul University - College of Law ( email )
25 E. Jackson Blvd.
Chicago, IL Cook County 60604-2287
United States
312-362-6799 (Phone)

Feedback to SSRN


Paper statistics
Abstract Views: 781
Downloads: 114
Download Rank: 145,241

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo3 in 0.422 seconds