Research Handbook on Securities Regulation in the United States

Research Handbook on Securities Regulation in the United States

Research Handbooks in Financial Law series

Edited by Jerry Markham and Rigers Gjyshi

This fascinating Handbook provides a clear explanation of the securities market regulation regime in the United States. A diverse set of contributors offer a comprehensive overview of the regulatory process, Dodd-Frank, the principal securities statutes, and the regulators and market participants involved. In addition to a general summary of the topic, this volume provides detailed explanations of the process for registering securities, exemptions from registration, secondary distributions, and the underwriting process. Scholars and students of financial law, banking and regulatory law will find this book a useful resource, as will attorneys, compliance professionals, risk-mitigation professionals and corporate leaders.

Chapter 5: The underwriting process and secondary distributions

Zachary J. Gubler

Subjects: economics and finance, financial economics and regulation, law - academic, finance and banking law


Securities underwriters are the midwives of the capital markets, relying on their expertise in valuing and marketing securities, not to mention their deep contacts in the investment world, to help bring a company’s securities to market. The federal securities laws acknowledge this institutional reality and leverage it in two distinct ways. First, the laws regulate what underwriters can (or in some cases must) disclose about their clients (whom the law refers to as “issuers”) while at the same time relying on underwriters to ensure the accuracy of what issuers disclose about themselves. But the federal securities laws also rely on the underwriter, or at least a particular legal definition of the underwriter, to regulate secondary distributions, or in other words, sales of securities by someone other than the issuer. This chapter discusses these different roles played by the concept of the “underwriter” in the federal securities laws. It also discusses how changes in the law’s view of what constitutes underwriting, along with recent institutional developments, has likely contributed to the growth of the market for private (unregistered) securities. This expanding private securities market, the chapter argues, raises a number of issues concerning investor protection and access to the capital markets, both of which may require the consideration of policy reform. Two potential reform avenues are considered, including the recalibration of the rules governing resales and the creation of funds through which retail investors could invest in the market for private (unregistered) securities.

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