The SEC and the Failure of Federal Takeover Regulation

Abstract

In this Article, I argue that the current federal takeover law is a failure. I do this by first exploding the commonly accepted academic myth of the federal government as an active regulator of takeovers. Rather, since the twilight of the 1980s, the SEC has abandoned its earlier presence as the nation's primary takeover regulator. The consequence of this abstention is that the federal takeover code has become obsolete. It oftentimes regulates incongruously, does not regulate important areas, or regulates in a manner inconsistent with the welfare of its relevant parties. Moreover, in the SEC absence the Delaware courts have emerged as the nation's takeover regulator. Yet, Delaware's interests are narrower and more manager-oriented than the federal government's. The consequence is that today's Delaware-erected takeover code is suboptimal and contrary to national interests. This Article exposes these deficits and argues that they can be cured through an SEC-initiated review and update of the federal takeover law and a going-forward active, reengaged SEC as a principal regulator of takeovers.

Keywords: Williams Act, Takeovers, SEC, Mergers and Acquisitions, Delaware

JEL Classification: K22, G34