A MAVERICK ACHIEVES SOMETHING NOBLER THAN SIMPLE REBELLION: WHY SHARESLEUTH IS LEGAL UNDER SECTION 10(b) AND RULE 10b-5, AND WHY IT SHOULD REMAIN THAT WAY
2009; Northwestern University School of Law; Volume: 103; Issue: 1 Linguagem: Inglês
ISSN
0029-3571
Autores Tópico(s)Securities Regulation and Market Practices
ResumoThe whole world loves a maverick and the whole world wants the maverick to achieve something nobler than simple rebellion.[dagger] Introduction 336 I. BACKGROUND 337 A. What Is Sharesleuth? 337 B. What Has Sharesleuth Accomplished? 340 C. What Is the Law? 345 D. What Is the Controversy? 351 II. SHARESLEUTH'S BUSINESS MODEL IS LEGAL 353 A. Sharesleuth Does Not Violate Insider Trading Precedent 353 B. Sharesleuth Does Not Result in Stock Manipulation 354 C. Sharesleuth Does Not Result in Material Misrepresentation or Omission.. 356 D. Sharesleuth Does Not Rely on Misappropriated Material, Nonpublic Information 357 III. ThE SEC CANNOT REGULATE SHARESLEUTH 361 IV. THE SEC SHOULD NOT REGULATE SHARESLEUTH 364 A. Sharesleuth Is an Asset to Price Efficiency 365 B. Sharesleuth Encourages Free Exchange of Ideas and Information 366 CONCLUSION 367 INTRODUCTION In 2006, Mark Cuban, the mercurial owner of the Dallas Mavericks NBA franchise, announced his most contentious enterprise to date: Sharesleuth.com. Controversy was nothing new to Cuban, who propelled his technology startup Broadcast.com through a legendary 1998 IPO,' sold it to Yahoo! for $5.7 billion the following year,2 and subsequently founded a number of hotly followed entrepreneurial ventures.3 In addition to Sharesleuth, his current holdings include HDNet, HDNet Films, 2929 Entertainment, Magnolia Pictures, and Landmark Theaters.4 Sharesleuth, however, has proved itself unique. Sharesleuth's mission, though ambitious, is fairly benign on its face: it seeks to provide independent reporting aimed at exposing securities fraud and corporate malfeasance to an online authence.5 Cuban hired award-winning St. Louis Post-Dispatch reporter Christopher Carey to manage the website6 and promised to adopt an antifraud, pro-investor stance as the site's foundational journalistic strategy. Cuban heralded Sharesleuth as a new model for Internet journalism and a formidable threat to crooked executives. was only one catch: Cuban revealed that, in an effort to make the project financially viable, he would take positions in securities on the basis of malfeasance that Carey uncovered prior to publication of those findings.7 There are a million ugly stories in the financial underground. We plan on finding and sharing and profiting from them.8 Within moments of the announcement, those listening carefully might have heard a curious sound: the voices of many a securities lawyer, financial journalist, and market analyst asking in unison, Can he do that? This Comment examines the legality of Cuban's Sharesleuth venture and demonstrates that Cuban has not engaged in any illegal activity. Part I briefly describes the Sharesleuth business model, its publications to date, the contemporary legal standards for insider trading through an analysis of the doctrinal development of Section 10(b) and Rule 10b-5 under the Securities Exchange Act of 1934, and the arguments cited by Sharesleuth's critics. …
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