failure family

investor protection gap

43 claims across 19 works.

• undifferentiated-guidance: Existing international proposals and guidelines on hedge fund valuation fail because they do not adequately distinguish between retail and qualified i
• wealth-as-sophistication-proxy: Unless an investor's business is primarily to invest in hard-to-value assets, that investor's sophistication cannot be assumed regardless of personal
• threshold-raising-futility: Raising the Regulation D numerical tests by adding an investable assets requirement would probably not address how to remedy investors' lack of unders
• retail-only-targeting: Regulation targeted only at retail investors is misdirected, because incomplete and asymmetric information, bounded rationality, and moral hazard make
• numeracy-threshold-failure: Recent SEC proposals to toughen the numerical wealth requirements for hedge fund investing fail, because they do not ascertain the appropriate level o
• true-conflict-of-laws: If US law requires disclosure of information that another country's law prohibits from being disclosed, whether for privacy or other reasons, there co
• wealth-as-sophistication-proxy: The numerical wealth requirements used to define qualified hedge fund investors fail as a regulatory device, because investors who meet the wealth thr
• small-case-settlement-gap: The WCAM's structural limits could reduce the number of successful settlements: while the largest cases such as Shell and Fortis give plaintiffs enoug
• Nonexistent hedge fund investor remedy: Hedge fund investors have almost no statutory remedy: the regime establishing a hedge fund investor's rights is severely limited, nearly to the point
• Return replication shortfall: Alternative mutual funds generally cannot deliver the same absolute returns as hedge funds, a shortfall some attribute to the lighter touch regulation
• industry standard shortfall does not plead scienter: Failing to check publicly available documentation on an investment is irresponsible but insufficient to plead fraudulent intent, and failing to perfor
• hindsight second guessing fails: Claims in which investors use hindsight to second guess due diligence practices often fail, even when the manager was clearly incompetent.
• unwritten and inexpert diligence process: Expert testimony identifies recurring failures in private fund due diligence, including the absence of any written policy or process to ensure complia
• Both remedies for sales pressure underperform: Neither obvious remedy for the increased sales pressure created by the Rule 506 amendment works well: added disclosure obligations such as filing all
• No performance premium for added risk: Unconstrained mutual funds have not delivered superior performance: Morningstar data for funds with three years of investing history offer no evidence
• Private fund risk without private fund reward: Unconstrained mutual funds take on private fund-like risk without a corresponding return advantage: private funds' incentives and investment flexibili
• Regulatory halo effect: Retail investors may be led to believe that unconstrained mutual funds are safe relative to other fixed income mutual funds precisely because they are
• False transfer of prior fund experience: A retail investor's experience investing in traditional mutual funds is likely to be a poor indicator of whether that investor will understand the ris
• Statutory protections misaligned with actual fund risk: The Company Act's retail investor protection policies do not take sufficiently into account the investment strategy and risk attributes that unconstra
• Unconstrained use of ICO proceeds: The 2012 to 2017 ICO model allowed cryptocurrencies to be raised through a token sale without any conditions, landmark requirements, or security measu
• Token holder governance void: Token holders, unlike shareholders in the traditional corporate infrastructure, cannot vote for or against directors or nominate directors, so ordinar
• Unfulfilled product promise: Crypto platforms typically launch an ICO when they have only an intangible product based on a basic crypto idea, so token holders invest in the future
• Reserve token dilution: Because the token supply is controlled by ICO promoters who must reserve tokens for future funding needs, token holders can be diluted by later issuan
• Weak legal protection for open source code: Legacy businesses own their code and can sue competitors who copy it, whereas open source crypto start-ups rely only on licenses, and this weaker ince
• No liquidity preference in insolvency: On bankruptcy or termination of the platform, token holders typically have no liquidity preference and no recourse at all once debt holders and outsid
• Zombie ICO: Zombie ICOs, which have little chance of creating a successful market for their tokens, became increasingly common in 2017 and are identifiable by the
• Uncapped raise without underlying product: An ICO that proposes an uncapped raise without an underlying product is a very serious red flag, because uncapped raises are perceived by the crypto c
• Retail access to private fund risk without suitability gate: The proliferation of unconstrained mutual funds calls into question the effectiveness of retail investor protections under the Investment Companies Ac
• consent-does-not-waive-fiduciary-claim: Contractual consent to a cash out does not extinguish fiduciary claims: a minority shareholder who agreed to receive cash for shares may still challen
• standstill-disenfranchisement-of-nonparties: Standstill agreements defraud shareholders who are not parties to them in two distinct ways: by violating the shareholder's right to the best availabl
• absence-of-investor-control: Unlike shareholders in traditional corporate structures who can vote for or nominate directors, ICO investors have no control whatsoever over promoter
• mid-offering-rule-change: ICO promoters can alter the smart contract to change the sales rules mid-course during the ICO.
• no-anti-dilution-protection: ICO investors have no preemptive rights or other anti-dilution protections, so they may be diluted if promoters later issue more reserve tokens to add
• no-liquidity-preference: Token holders typically receive no liquidity preference protecting them if the platform they invested in goes bankrupt or terminates.
• fair-dealing-gap: If a digital token security falls outside Monetary Authority of Singapore regulation, no duty of fair dealing applies to it.
• Diversification loss from the retreat to venture funding: The shift of the digital asset market back from the ICO model to the venture model since late 2017 has reduced, not increased, diversification for inv
• mid course alteration of sale terms: ICO sale terms are not fixed at launch: promoters can alter the smart contract to change the sales rules mid course during an offering, a risk factor
• missing consumer protection: Because the decentralized economy currently lacks many of the civil institutions available in the larger economy, the average person should not invest
• no client recourse for flawed reviews: There is little or no recourse for clients when reviewed code proves to be flawed even after functionality and quality review.
• redeemed investor loses inspection remedy: An investor who has been fully redeemed loses the ability to test the fund's valuation of his interest: the court held that Greenhouse retained no equ
• Trading before product exists: ICOs that allowed their token to trade before the underlying product existed, at least in beta, created significant risk for investors because the pro
• coercive over-rewarding: If LER rewards are set so generously that they effectively purchase shareholder votes, the program becomes disproportionate or coercive and courts wil
• Revlon tiering defect: In a change of control setting, LER issuance that favors long-term holders over other shareholders is impermissible under Revlon because it can underm