Running the D.C. Circuit Gauntlet on Cost Benefit Analysis after Citizens United: Empirical Evidence from SOX and the JOBS Act

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Ciara Torres-Spelliscy
Kathy Fogel
Rwan El-Khatib

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Duke Journal of Constitutional Law & Public Policy

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To require disclosure or not to require disclosure; that is the question faced by regulators, including the Securities and Exchange Commission (SEC), in light of the Supreme Court's 2010 Citizens United decision, which allows anew free flow of corporate money into the political system. Pending before the SEC since 2011 is a petition by 10 law professors asking for transparency of corporate political spending. We write this article in anticipation of the SEC's eventual promulgation of rules requiring disclosure of corporate political spending. Many of the core questions about the market's reaction to increased regulation of listed companies that we can study now are likely to be implicated in the debate about regulation within the narrower subset of corporate political spending.Corporations who do not want to disclose their political spending are likely to challenge any rule that the SEC issues on the subject. Such a legal challenge is destined to be heard by the D.C. Circuit Court, which examines federal regulations with an increasingly jaundiced eye. One of the ground on which the D.C. Circuit can dispose of a new regulation is by finding that the SEC did not do a sufficiently rigorous cost-benefit analysis.This article addresses the potential hostility that the D.C. Circuit may harbor against a new SEC rule requiring greater corporate transparency in election activities and provides some data that might assist the SEC in navigating this gauntlet.In summary, our data showed that the market reacted positively to the new regulations in SOX and reacted negatively to the deregulations embodied in the JOBS Act. In short, and as discussed more fully below, the data demonstrate that the market values transparency and distrusts opaqueness. We hope that the D.C. Circuit will find these data useful in illuminating the larger debate over what securities regulations are allowable.



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