From \u3cem\u3eTGS\u3c/em\u3e Conservatorships to Sarbanes-Oxley Fair Funds

While the TGS duo is justly known for its foundational work on the application of Rule 10b-5 to insider trading and corporate misstatements, two other aspects of the two cases are the focus of this contribution. The first is the development of the role of the SEC as conservator, derived originally from the equity side of federal bankruptcy law, but expanded to function as a general equitable remedy. That remedy faced difficult issues concerning the ranking of different victims of insider trading, in particular the status of an entity as a claimant in competition with victimized market participants. The second, often overlooked, is the two cases’ pioneering role in the management of individual and in particular of class actions laid in a number of different jurisdictions, which is an issue that, for the first time, called into play the then-new Judicial Panel on Multidistrict Litigation. The first aspect leads in a fairly straight line to the Fair Funds component of the Sarbanes-Oxley Act of 2002 (as amended by the Dodd-Frank Act of 2010), and to the doctrinal development of that component in practice. The second aspect, however, was impacted over the following three decades by the growing judicial and statutory hostility to broadening the role of the private class action generally, and of its Rule 10b-5 segment specifically. Therefore, this article also contributes to the newer discourse about the respective roles of private versus public litigation in the field of securities regulation