Boundaries of SEC Regulation Conference

The Boundaries of SEC Regulation Conference, sponsored by the Financial Economics Institute at Claremont McKenna College and the Journal of Corporate Finance, was held Friday, February 3, 2006. The conference provided a unique perspective on the legal and economic significance of financial market regulations enforced by the SEC. It also attracted over seventy attendees, including accomplished professors, current and former members of the SEC and various analysts from elite investment firms.

The conference was divided into four sessions—held at the Drucker & Ito School of Management at Claremont Graduate University—with a lunch break at noon at CMC’s Marian Miner Cook Athenaeum. The first session of the day, focusing on regulatory impact, was chaired by Robert Hansen, Francis Martin Chair in Business at Tulane University’s A.B. Freeman School of Business. Dr. Hansen’s work primarily focuses on IPO pricing and corporate finance. Speakers during this session included Nadia Massoud, Assistant Professor of Finance at the University of Alberta, who presented her paper “Why do firms go dark?”, Kate Litvak, Assistant Professor, from the University of Texas School of Law, with her paper “The effect of the Sarbanes-Oxley Act on non-US companies cross-listed in the US,” and Jonathan Karpoff, Professor of Finance, from the University of Washington, discussing his paper “Legal penalties for financial misrepresentation.” After the papers were presented, Hansen provided his views on the papers and then opened up the floor for discussion.

The second session of the conference, centering on shareholder proposals and shareholder voting, was chaired by Bruce Johnsen, Professor of Law at the George Mason University School of Law. Johnsen served previously as a Senior Research Scholar and Financial Economist at the Securities and Exchange Commission’s Office of Economic Analysis. The first presentation of the session came from Henry T.C. Hu, Allan Shivers Chair in the Law of Banking and Finance at the University of Texas School of Law, and Bernard Black, Professor of Finance and Law at the University of Texas School of Law. Their presentation of their joint paper “Hedge funds, insiders, and decoupling of economic and voting ownership in public companies” was followed by Randall Thomas of the Vanderbilt University Law School, and his paper with James Cotter of Wake Forest University “Shareholder proposals post-Enron: What’s changed, what’s the same?” Following the presentations, Johnsen offered his comments on the discussed papers and on shareholder proposals and shareholder voting before opening up the floor for criticism and debate.

At noon, FEI students escorted the conference participants to the Athenaeum for lunch and remarks by keynote speaker Jonathan R. Macey, the Sam Harris Professor of Corporate Law, Corporate Finance, and Securities Law at Yale Law School. Macey’s talk evaluated a number of corporate governance institutions and regulations in order to gauge the overall effectiveness of corporate and government initiatives. After he concluded his presentation, he took questions from the audience.

Jennifer Bethel, Associate Professor of Finance at Babson College, chaired the conference’s third session. Bethel’s work focuses on corporate finance and has been widely published in both academic and practitioner journals. She served as the Chief Economist for the Division of Corporation Finance at the U.S. Securities and Exchange Commission from 1996-1999. This session began with a presentation from Mike Stegemoller of Texas Tech University on his paper with Usha Rodrigues of the University of Georgia School of Law: “A gap in the SEC disclosure requirements: The case of the ‘insignificant’ private target.” Charles Collver from Nova Southeastern University in Fort Lauderdale, Florida, then discussed his paper “Is there less informed trading after regulation fair disclosure?” The third presentation of the session was made by Richard Schneible Jr. from Texas Christian University on his paper with Anwer Ahmed from Texas A&M University “The impact of regulation fair disclosure on investors’ prior information quality.” Case Western Reserve University’s Leonardo Madureira provided the final presentation by discussing his paper with Armando Gomes and Gary Gorton of the University of Pennsylvania “SEC regulation fair disclosure, information, and the cost of capital.” At the conclusion of the presentations, Bethel presented on the SEC disclosure regulation in order to synthesize the papers, offered her opinions on the presented papers and opened up the floor to discussion.

Babson College’s Erik Sirri, Professor of Finance whose work primarily focuses on the interaction of securities law and finance, mutual funds, market microstructure and the design and performance of the securities exchange, chaired the fourth and final session of the conference. Sirri currently serves as Governor of the Boston Stock Exchange and is a regulatory board member of the Boston Options Exchange. He served as the Chief Economist of the U.S. Securities and Exchange Commission from 1996-1999. The three speakers during this session were Meijun Qian from Boston College, Camelia Kuhnen of Stanford University, and Sterling Yan from the University of Missouri — Columbia. Qian was first to present and discussed her paper “Whom can you trust? A study of mutual fund governance.” Kuhnen then presented her paper “Social networks, corporate governance and contracting in the mutual fund industry.” Yan provided the final presentation of the conference by discussing his paper with his colleague Steve Ferris “Do independent directors and chairmen matter? The role of boards of directors in mutual fund governance.” Following the talks, Sirri provided criticism and suggestions for each paper, as well as views on overall mutual fund governance before opening up the floor to the participants for additional discussion.

Following the presentations, students and participants dined at Malott Commons’ Hampton Room on the Scripps College campus, during which Larry Harris, Professor of Finance and Business Economics at the University of Southern California Marshall School of Business, offered comments and concluding remarks for the conference. Harris’ research, teaching, and consulting projects primarily address trading and investment management issues that arise in financial markets. The conference ended on a successful note, with many praises from the participants regarding the conference, the topics covered and the professional attitudes of the Claremont McKenna College students.