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2008 Colum. Bus. L. Rev. 657 (2008)
Navigating the Safe Harbors: Two Bright Line Rules to Assist Courts in Applying the Stockbroker Defense and the Good Faith Defense

handle is hein.journals/colb2008 and id is 661 raw text is: NAVIGATING THE SAFE HARBORS: TWO BRIGHT LINE RULES TO ASSIST COURTS IN APPLYING THE STOCKBROKER DEFENSE AND THE GOOD FAITH DEFENSE* Peter S. Kim** I. Introduction ................................................................ 658 II. Safe Harbor Provisions and the Implications of F rau d .......................................................................... 661 A. The Policy Behind Safe Harbor Provisions ........ 662 B. The Significance of Financial Participants Like Prim e Brokers ...................................................... 667 C. Implications of Fraud on the Safe Harbors ........ 670 III. Limiting the Safe Harbor Provisions by Expanding F rau d .......................................................................... 673 A. Ponzi Schemes and Their Emergence in Bankruptcy Law .................................................. 673 1. Effect of Ponzi Schemes on the Stockbroker D efense ......................................... .................. 676 B. The Good Faith Defense and its Requirements. 680 1. Due Diligence and its Effect on the Good Faith D efense .................................................. 682 IV. Two Bright Line Rules for Safe Harbor Provisions to Rem ain Effective .................................................... 686 A. An Ex Ante Approach to Ponzi Schemes ............ 687 B. Using Industry Norms to Evaluate Good Faith. 690 V . C onclusion .................................................................. 692 * This Note was awarded the 2008 Skadden Prize for the best student note submitted to the Columbia Business Law Review. ** J.D. Candidate 2009, Columbia University School of Law; B.S. Systems Science Engineering 2001, University of Pennsylvania. The author wishes to thank Professor Edward Morrison for his guidance, Allison Snyder and the survey team for their direction and feedback, Kimberly Huang for her support, and the staff of the Columbia Business Law Review for its editing assistance.

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