ABSTRACT :: The Fair Fund provision of Sarbanes-Oxley allows the SEC to distribute money penalties to injured investors, heralding a new compensatory role for the agency. The SEC has announced that it will direct money to injured investors whenever possible, but has not articulated clear priorities. This Article fills the gap by introducing terms of debate and proposing a framework for the SEC’s exercise of its discretion.
The Article introduces the concept of “public class counsel,” a public actor that has the dual function of deterrence and victim compensation. The concept describes-and suggest limits to-the SEC’s role in a system in which public and private remedies for securities violations increasingly converge. The Article then draws on the analogy between the “public class counsel” and the “private attorney general” to propose an answer to the question: When should the SEC exercise its discretion to create a Fair Fund? This Article suggests that the SEC focus on distributing penalties gathered from aiders and abettors of securities fraud because such an approach would minimize two significant concerns with investor compensation: first, that compensation of injured investors often amounts to a transfer of money among equally innocent investors and, second, that giving the SEC and private actors a role in compensation risks duplication of costs.
April 2014, Vol. 66, No. 2
Sergio J. Campos, Class Actions and Justiciability
Andrew Guthrie Ferguson, Constitutional Culpability: Questioning the New Exclusionary Rules
Alberto R. Gonzales & Amy L. Moore, No Right at All: Putting Consular Notification in its Rightful Place After Medellin
Kevin J. Lynch, The Lock-in Effect of Preliminary Injunctions
Anne R. Traum, Using Outcomes to Reframe Guilty Plea Adjudication
Katrina Wyman & Nicolas Williams, Migrating Boundaries
Stephen E. Ludovici, Rule 60(b)(4): When the Courts of Limited Jurisdiction Yield to Finality