Adam C. Pritchard is the Frances and George Skestos Professor of Law at University of Michigan Law School and Robert B. Thompson is Peter P. Weidenbruch, Jr. Professor of Business Law at Georgetown University Law Center. This post is based on their recent paper.
Key pillars of modern securities law—insider trading regulation, implied private rights of action, and “federal corporation law”—were born in the 1960s, not as a result of legislative enactment, but rather, judicial pronouncement. In our paper, Securities Law in the Sixties: The Supreme Court, the Second Circuit, and the Triumph of Purpose over Text, we show how the judicial approach to securities law transformed in that decade. In our paper we focus on the key Supreme Court cases of the period, looking not only at the published opinions, but also at the papers of each of the justices. This archival research shows the exchange of ideas among the justice and how the opinions evolved in the drafting. The Supreme Court of the Sixties did not simply apply the text as enacted as a mere agent of Congress, but instead made itself a partner of Congress in shaping the securities laws. Under this approach, the purpose of the securities laws became the touchstone of interpretation. The interpretive space opened by the invocation of purpose allowed a dramatic expansion in the law of securities fraud.
