SEC enforcement in the PIPE market: Actions and consequences
Na Dai and
Journal of Banking & Finance, 2014, vol. 42, issue C, 213-231
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.
Keywords: Private Investment in Public Equity (PIPE); Regulation; The SEC (search for similar items in EconPapers)
JEL-codes: G14 G18 G24 K12 K22 K42 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:42:y:2014:i:c:p:213-231
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