Securities Regulation, 11 vols.

• Author: Poser, Norman S.

By Louis Loss and Joel Seligman. Boston: Little, Brown and Co. 1993. Eleven volumes. Pp. xxv, 5713. $1,295.

Professor Louis Loss(1) has been justly described as "the intellectual father of securities law."(2) He is also without doubt the foremost scholar in this increasingly complex field. His career spans virtually the entire era of federal securities regulation. Loss joined the Securities and Exchange Commission (SEC) as a staff attorney in 1937, only four years after the enactment of the first federal securities legislation, the Securities Act of 1933,(3) and only three years after the establishment of the SEC. Beginning in 1952, Loss taught at Harvard Law School until his retirement from active teaching a few years ago. Fortunately for us, he has not retired from active scholarship.

With the publication in 1951 of the first edition of his treatise on securities regulation, Loss created and defined the field as a separate area of the law, distinct from, although closely related to, corporate law. The subsequent history of Loss's treatise both parallels and reflects the explosive growth of the securities markets and, not entirely coincidentally, of securities regulation. The one-volume first edition was followed by a three-volume second edition in 1961 and then by a three-volume supplement to the second edition -- probably the largest "pocket part" ever published -- eight years later. During the 1970s, Loss took a break from treatise writing to serve as Reporter for the American Law Institute's Federal Securities Code, which not only codified the six major federal securities statutes(4) but also suggested solutions to many difficult and unresolved issues. Although never enacted into law, the Code has profoundly influenced judicial decisions and SEC rulemaking. In 1983 Loss published a marvelously concise and useful one-volume Fundamentals of Securities Regulation, which he updated in 1988.

Thus, while Loss has continued to shape and influence securities law using other avenues, twenty-five years have passed since the publication of the updated second edition of his first treatise. As a result, the third edition, written by Loss in collaboration with Professor Joel Seligman of the University of Michigan Law School, has been eagerly awaited. Publication of this eleven-volume treatise, begun in 1989, was completed in 1993. Seligman is a worthy collaborator. Thirty-six years younger than Loss, he obviously cannot claim an equally prolonged association with the field of securities regulation. Nevertheless, as the author of The Transformation of Wall Street,(5) the definitive history of the SEC, Seligman has experienced the SEC's long and interesting history vicariously. Both authors are superb scholars, and the new edition does not disappoint. It is an immeasurable contribution to the field and, what is unusual for a legal treatise, a joy to read.

The earlier editions of Securities Regulation and Fundamentals of Securities Regulation have profoundly influenced the law. Since 1969, no fewer than thirty-seven Supreme Court decisions(6) and countless decisions of the lower federal courts have cited these works. The third edition of Securities Regulation is bound to be at least equally influential. A personal reminiscence may illustrate one reason for the magnitude of Loss's influence on the law. I first met Loss in 1956 when, fortunately enough, I was a student in his Corporations course. My clearest recollection of the course today is of Loss reflecting aloud on the results of hypothetical lawsuits, some of which would not be brought -- much less decided -- until many years in the future. In particular, I recall his comments regarding insider trading, which he taught as part of Corporations. Under what circumstances, Loss asked, would a "tippee" -- a term that Loss invented to denote a person who received a "tip" of nonpublic corporate inforination -- be liable under SEC rule lob-5,(7) the principal antifraud provision of the federal securities laws?(8) It was by no means clear back in 1956 that a corporate officer or director -- let alone a tippee -- could violate the securities laws by trading in the public securities markets while in possession of nonpublic information about his company.(9)

The following year, I took Professor Loss's course in securities regulation. My class notes, which I still have, give an indication of his extraordinary wisdom and prescience. Again, he was not content simply to teach the existing law; he insisted on discussing difficult issues of law whose resolution lay well in the future. Many of them have since been decided by the Supreme Court: When does a note fall within the definition of a "security"?(10) How should the sometimes competing goals of the securities laws and the antitrust laws be reconciled?(11) How broad is the definition of a "seller" under section 12 of the Securities Act of 1933,(12) which gives buyers a private right of action against sellers under some circumstances?(13) What is the relationship between the express civil liability provisions of the federal securities laws and civil liability implied by the courts under rule 10b-5?(14) Is the SEC permitted to

suspend trading in a security without notice or hearing beyond the ten-day period expressly set forth in the statute, by tacking on additional ten-day suspensions?(15) What is the appropriate statute of limitations governing a civil action brought under rule 10b-5?(16)

In a similar fashion, Loss and Seligman's treatise concerns itself with many unresolved issues as well as with existing law. Securities Regulation views federal securities regulation not so much as a body of black-letter law but rather as an evolving set of principles and doctrines, informed by the past and peering questioningly into the future. Just as in Loss's Corporations and Securities Regulation classes, the treatise focuses on the uncertainties in the law and the issues that the cases have thus far left unresolved. The issue of whether scienter is required under rule lob-5 provides an example. Loss and Seligman point out that although the Supreme Court held in the landmark decision of Ernst & Ernst v. Hochfelder(17) that scienter, or "intent to deceive, manipulate, or defraud"(18) is a necessary element of a private action brought under rule lob-5, "[t]he majority opinion in Ernst Ernst is puzzling, and it leaves as many questions as it answers" (p. 3663). The authors then devote several pages to a provocative discussion of the questions that Ernst & Ernst failed to resolve, including the relationship between the meanings of the term scienter under the securities laws and under the common law tort of deceit and whether scienter includes reckless as well as intentional conduct (pp. 3663-77).

The complex and interesting history of federal securities regulation goes back to the common law of England and the United States and to English statutes of the nineteenth century, as well as to the efforts of state legislatures in the early twentieth century to regulate the...