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SEC enforcement in the PIPE market: Actions and consequences

Bengtsson, Ola LU ; Dai, Na and Henson, Clifford (2014) In Journal of Banking & Finance 42. p.213-231
Abstract
In 2002, the SEC launched enforcement actions against investors involved in PIPE (Private Investments in Public Equity) transactions. We describe the legal ramifications of this enforcement initiative, and document dramatic contemporaneous market-wide changes in the contractual structure of PIPEs. PIPEs in the post-action period included fewer aggressive repricing rights and more trading restrictions. However, PIPEs in the post-action period also included more investor protections and fewer issuer rights. These results suggest that the SEC's enforcement enticed investors to substitute non-SEC-targeted contractual features for targeted ones. Our paper sheds new light on the role of legal enforcement on financial contract design. Published... (More)
In 2002, the SEC launched enforcement actions against investors involved in PIPE (Private Investments in Public Equity) transactions. We describe the legal ramifications of this enforcement initiative, and document dramatic contemporaneous market-wide changes in the contractual structure of PIPEs. PIPEs in the post-action period included fewer aggressive repricing rights and more trading restrictions. However, PIPEs in the post-action period also included more investor protections and fewer issuer rights. These results suggest that the SEC's enforcement enticed investors to substitute non-SEC-targeted contractual features for targeted ones. Our paper sheds new light on the role of legal enforcement on financial contract design. Published by Elsevier B.V. (Less)
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author
organization
publishing date
type
Contribution to journal
publication status
published
subject
keywords
Private Investment in Public Equity (PIPE), Regulation, The SEC
in
Journal of Banking & Finance
volume
42
pages
213 - 231
publisher
Elsevier
external identifiers
  • wos:000334089100017
  • scopus:84894676372
ISSN
1872-6372
DOI
10.1016/j.jbankfin.2014.02.002
language
English
LU publication?
yes
id
3578bc09-30c6-44e5-b450-693f9f5bf284 (old id 4439503)
date added to LUP
2014-05-20 12:58:12
date last changed
2017-01-01 03:01:49
@article{3578bc09-30c6-44e5-b450-693f9f5bf284,
  abstract     = {In 2002, the SEC launched enforcement actions against investors involved in PIPE (Private Investments in Public Equity) transactions. We describe the legal ramifications of this enforcement initiative, and document dramatic contemporaneous market-wide changes in the contractual structure of PIPEs. PIPEs in the post-action period included fewer aggressive repricing rights and more trading restrictions. However, PIPEs in the post-action period also included more investor protections and fewer issuer rights. These results suggest that the SEC's enforcement enticed investors to substitute non-SEC-targeted contractual features for targeted ones. Our paper sheds new light on the role of legal enforcement on financial contract design. Published by Elsevier B.V.},
  author       = {Bengtsson, Ola and Dai, Na and Henson, Clifford},
  issn         = {1872-6372},
  keyword      = {Private Investment in Public Equity (PIPE),Regulation,The SEC},
  language     = {eng},
  pages        = {213--231},
  publisher    = {Elsevier},
  series       = {Journal of Banking & Finance},
  title        = {SEC enforcement in the PIPE market: Actions and consequences},
  url          = {http://dx.doi.org/10.1016/j.jbankfin.2014.02.002},
  volume       = {42},
  year         = {2014},
}