A New Market-Based Approach to Securities Law

81 Pages Posted: 27 Aug 2018 Last revised: 18 Aug 2021

See all articles by Kevin S. Haeberle

Kevin S. Haeberle

William & Mary Law School

M. Todd Henderson

University of Chicago - Law School

Date Written: August 16, 2018


Modern securities regulation has three main areas, each of which is plagued
by a core problem. Mandatory disclosure law leaves society with suboptimal disclosure, as the government calls for too little of some information (for example, management analysis of company prospects) and too much of other information (for example, data about trivial executive perks). Securities fraud law (specifically, its
central fraud-on-the-market theory of reliance) yields damages at odds with any reasonable theory of compensation and deterrence. And insider trading law fails to
achieve its ends because incentives to police illegal trading and tipping by executives
are currently weak.

In this Article, we propose fixing these fundamental flaws of securities law by
shifting much of the regulatory focus from firms to information. In particular, we
introduce the idea of building the law around a well-regulated market for the public company information that sits at the center of each of the three main areas of securities law. Deploying this market, we argue, would trigger incentives for firms to
disclose more information of value while also motivating them to more rigorously
police illegal trading and tipping by their agents. Additionally, it would help regulators
identify when the law requires disclosure that is not socially valuable and
assist in the identification of a class of securities fraud plaintiffs that is more in line
with the goals of the anti-fraud regime.

Keywords: Securities Regulation

Suggested Citation

Haeberle, Kevin S. and Henderson, M. Todd, A New Market-Based Approach to Securities Law (August 16, 2018). University of Chicago Law Review, Vol. 85, No. 1313, 2018, Available at SSRN: https://ssrn.com/abstract=3233122 or http://dx.doi.org/10.2139/ssrn.3233122

Kevin S. Haeberle (Contact Author)

William & Mary Law School ( email )

PO Box 8795
William and Mary Law School
Williamsburg, VA 23187
United States

M. Todd Henderson

University of Chicago - Law School ( email )

1111 E. 60th St.
Chicago, IL 60637
United States
773-834-4168 (Phone)
773-702-0730 (Fax)

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