Statutory obsolescence is the fate of all legislation. At some point in the natural "life cycle" of any statute, courts tend to move from purposive statutory construction, focused on the actual legislative intent, to greater deference towards administrative expertise as they implicitly recognize that the original legislative intent no longer fits the contemporary institutional landscape. Given that the federal securities laws were passed during the 1930s, they have now entered the geriatric zone where their possible obsolescence must be considered. Some academics have already called for the SEC's elimination on precisely this basis. Practitioners complain about the "metaphysical" and "hypertechnical" distinctions that the SEC's doctrinally absorbed staff has developed, which arguably have little relationship to public policy concerns or the needs of investors. Meanwhile, the SEC, itself, appears to be administratively repealing some of the Securities Act of 1933's clearest prohibitions. Independently, Congress seems intent on "deregulating" the Securities Act of 1933, in part by making prospectus delivery optional with the investor.
Although the idea that the federal securities laws need rejuvenation is timely, it is not new. A well-known and widely respected model for updating the federal securities laws has existed for the past thirty years. In 1966, Milton Cohen published what probably has become the most influential article ever written on the federal securities laws, Truth in Securities Revisited. Cohen argued that the combined disclosure requirements of the Securities Act of 1933 (the '33 Act) and the Securities Exchange Act of 1934 (the '34 Act) produced pointless duplication. Had the statutes instead been passed in the reverse order or as part of a single integrated statute, he suggested that our disclosure system would have been structured very differently. Because the '34 Act creates a system of continuous, periodic disclosure, the existence of this system profoundly reduces the need for transaction-specific disclosure at the time when an issuer later seeks to sell its securities. Logically, a corporate issuer seeking to sell securities under a continuous disclosure system would only be required to disclose any additional material information that it had not previously disclosed pursuant to the continuous disclosure system.
Business Organizations Law | Law | Securities Law
John C. Coffee Jr.,
Re-Engineering Corporate Disclosure: The Coming Debate over Company Registration,
Wash. & Lee L. Rev.
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