Fraud on the Market: An Action Without a Cause
11 Pages Posted: 22 Nov 2011 Last revised: 14 Sep 2012
Date Written: November 19, 2011
This is a response to William W. Bratton & Michael L. Wachter, The Political Economy of Fraud on the Market, 160 U. PA. L. REV. 69 (2011). Bratton and Wachter argue that fraud-on-the-market class actions (FOTM) should be eliminated and replaced with stepped-up public enforcement efforts targeted at individual wrongdoers (rather than the corporate enterprise, the FOTM target of choice). In this Response, I do not disagree: My own scholarship has similarly emphasized the benefits of shifting away from FOTM to greater reliance on public enforcement mechanisms. Instead, I take the opportunity to elaborate on the deterrence and corporate governance shortcomings of FOTM, strengthening further the case Bratton and Wachter make for an enhanced public enforcement role.
Keywords: Securities fraud, enterprise liability, fraud on the market, deterrence, corporate governance, private enforcement, public enforcement, Securities & Exchange Commission
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