Yuliya Guseva is Associate Professor of Law at Rutgers Law School. This post is based on her recent article, recently published in the Boston College Law Review.
The question of finding an optimal approach to securities law liability and enforcement against foreign issuers in U.S. markets remains open. Seeking to find answers to this policy question, my recent article presents relevant empirical, doctrinal, economic, and institutional arguments. To my knowledge, this paper is the first empirical survey of the recent changes in SEC enforcement against foreign private issuers (“FPIs”). The article argues that although the Commission needs to react to the recent developments in class-action litigation against foreign corporations, a possible lemons problem, and the potential risk of underenforcement, it should not ramp up enforcement. Through traditional enforcement, the SEC would be pursuing an insurmountable task of designing a national “Pigouvian tax” on fraud committed by international corporations operating in multiple jurisdictions. The article suggests a logical alternative that I dub a soft preventive approach. The SEC may send an explicit signal to the market that it is designing more efficient, low-cost monitoring policies by building better cooperation with foreign firms and utilizing its recently improved capacity to analyze “big data” to identify anomalies in foreign issuer reporting.
