About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline
LOG IN
LOG IN

10 Lewis & Clark L. Rev. 85 (2006)
Behavioral Economics and the Regulation of Public Offerings

handle is hein.journals/lewclr10 and id is 103 raw text is: BEHAVIORAL ECONOMICS AND THE REGULATION OF PUBLIC OFFERINGS by Stephen J. Choi* The SEC adopted new rules in 2005 governing registered public offerings in the United States. Few, if any, of the rules make sense if we start from a presumption that investors are rational and are able to account properly for any information they receive during the public offering process. In this Article, I examine the new rules and assess the implicit behavioral assumptions about investors contained in the rules. I also provide an assessment of the behavioral biases that may affect regulators at the SEC. Regulator biases may lead the SEC to take an ad hoc evaluative process often ending with a reference to investor confidence in justifying new regulations. As a minimal solution, I propose that the SEC bear the burden of specifying its assumptions behind investor behavior explicitly together with how regulations will benefit investors suffering from such biases (as well as how other investors are affected by the regulations). Taking such an approach will lead to a more consistent approach in how the SEC deals with investor biases and reduce unnecessary regulation (as opposed to the SEC's present ad hoc approach as typified in the public offering rules). To the extent other more public choice factors motivate regulation and references to investor confidence are merely a pretext, my proposal would help bring transparency to these other factors by focusing attention on whether the investor confidence rationale, in fact, isjustfed. 1. IN TRO DU CTION ................................................................................ 86 II. ASSESSING THE 2005 SEC REFORMS ............................................. 91 A. Canvassing the Reforms .................................................................. 92 1. Pre-Filing Period .................................................................... 92 2. W aiting Period ......................................................................... 98 3. Post-Eff ective Period ................................................................... 101 4. Shelf R egistration ........................................................................ 105 B. A Behavioral Analysis of the Reforms ............................................... 107 1. Restrictions on Information ......................................................... 109 2. Cooling Off Period ...................................................................... 114 3. Mandatory Information Disclosure and Delivery ....................... 116 4. Typ e of Issuer .............................................................................. 119 William T. Comfort, III Professor of Law, NYU Law School. Special thanks to Un Kyung Park. Thanks for helpful comments to Andrew Guzman, Troy Paredes, Lynn Stout, and the participants of the 2005 Business Law Forum at Lewis & Clark Law School.

What Is HeinOnline?

HeinOnline is a subscription-based resource containing thousands of academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.



Short-term subscription options include 24 hours, 48 hours, or 1 week to HeinOnline.

Purchase Access

Contact us for annual subscription options:

Contact Us

Already a HeinOnline Subscriber?

Log In

profiles profiles most