Securities Law

The appointment of Supreme Court justices is a politically-charged process and the “ideology” (or “judicial philosophy”) of the nominees is perceived as playing a potentially relevant role in their future decision making. It is fairly easy to intuit that ideology somehow enters the analysis with respect to politically divisive issues such as abortion and procreative rights, sexual conduct, freedom of speech, separation of church and state, gun control, procedural protections for the accused in criminal cases, and governmental powers. Many studies have tackled the question of the relevance of the ideology of the Justices or appellate judges on these issues, often finding a correlation between policy preferences and decisions. This Article fills a gap in the existing literature examining the correlation between ideology and judicial decision-making in the highly technical area of securities regulation. We address the question if “conservative Justices” are more “pro Wall Street,” and “liberal Justices” more “pro investors.” Our results confirm that, even using different definitions and measures of ideology, conservative Justices favor “free and less regulated markets,” and liberal Justices are more protective of investors, especially small investors, more concerned about market failures, and more in favor of private plaintiffs or government intervention. Two caveats are important. First, we do not associate any negative implication with the fact that ideology plays a role in deciding “hard cases.” Obviously our study does not in any way imply that the Justices distort the law in order to achieve predetermined policy goals, but simply that, when the law is ambiguous, different and legitimate interpretative approaches and policy considerations might lead to different outcomes. The best guarantee of good decision-making is not an abstract aspiration to a completely apolitical adjudicator, but in a diverse composition of our courts. Second, while the data indicate a meaningful correlation, the correlation does not entirely explain the positions of the Justices, therefore confirming the independence and prestige of the Supreme Court and its members.