The Logic of Securities Law [Paperback]

This book explains both financial markets and securities regulation in simple yet sophisticated terms.Finance is alien to our daily experience and its regulation is incomprehensible. This book reveals the world of finance and shows the engine of its regulation with simplicity, examining securities law in great detail.Finance is alien to our daily experience and its regulation is incomprehensible. This book reveals the world of finance and shows the engine of its regulation with simplicity, examining securities law in great detail.This book opens with a simple introduction to financial markets, attempting to understand the action and the players of Wall Street by comparing them to the action and the players of main street. Firstly, it explores the definition of a security by its function, the departure from the buyer beware environment of corporate law and the entrance into the seller disclose environment of securities law. Secondly, it shows that the cost of disclosure rules is justified by their capacity to combat irrationalities, fads, and panics. The third section explains how the structure of class actions is designed to improve deterrence. Next it explores the economic harm from insider trading and how the law fights it. In sum, the book shows how all these parts of securities law serve the virtuous cycle from liquidity to accurate prices and more trading and how the great recession showed that our securities regulation reacted mostly adequately to the crisis.Foreword Richard Posner; 1. Introduction. Real markets and financial markets; Part I. Definition of a Security: When to Leave Buyer Beware for Seller Disclose?: 2. Toward defining a security; 3. The vacuous definition of a security; 4. The function of investment contract; 5. Pricing mechanisms; 6. From the sale of business doctrine to Gustafson; 7. Gustafson works!; 8. Definition conclusion; Part II. Disclosure: Why Subsidize Informed Traders?: 9. Introduction; 10. An overview of disclosure theories; 11. Tlƒ4