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http://ssrn.com/abstract=315375
 
 

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The Short Life and Resurrection of SEC Rule 19c-4


Stephen M. Bainbridge


University of California, Los Angeles (UCLA) - School of Law


Washington University Law Quarterly, Vol. 69, Pp. 565-634, 1991

Abstract:     
In the 1980s, many corporations adopted disparate voting rights plans (also known as dual class stock plans) to concentrate voting control in the hands of incumbent managers and their allies. At most adopting firms, such plans were intended mainly to deter unsolicited takeover bids. Incumbent managers who cannot be outvoted, after all, cannot be ousted. In 1988, the Securities and Exchange Commission adopted rule 19c-4 pursuant to a claim of regulatory authority under Section 19(c) of the Securities Exchange Act of 1934. Rule 19c-4 purported to amend the listing standards of the self-regulatory organizations (i.e., the major stock exchanges and NASDAQ) so as to prohibit most forms of dual class stock. The United States Court of Appeals for the District of Columbia Circuit, however, subsequently invalidated rule 19c-4 as exceeding the scope of the SEC's delegated authority. This article reviews the history of dual class stock and stock exchange listing standards affecting it. The article then demonstrates that the D.C. Circuit was correct in concluding that the SEC lacked authority to adopt rule 19c-4. Finally, the article proposed an alternative exchange listing standard that responded to the conflict of interest inherent when management proposes a dual class stock recapitalization.

Number of Pages in PDF File: 82

JEL Classification: K22

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Date posted: June 18, 2002  

Suggested Citation

Bainbridge, Stephen M., The Short Life and Resurrection of SEC Rule 19c-4. Washington University Law Quarterly, Vol. 69, Pp. 565-634, 1991. Available at SSRN: http://ssrn.com/abstract=315375 or http://dx.doi.org/10.2139/ssrn.315375

Contact Information

Stephen Mark Bainbridge (Contact Author)
University of California, Los Angeles (UCLA) - School of Law ( email )
385 Charles E. Young Dr. East
Room 1242
Los Angeles, CA 90095-1476
United States
310-206-1599 (Phone)
310-825-6023 (Fax)
HOME PAGE: http://www.professorbainbridge.com
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