Zachary Dayno

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Lasting over two years, the 2008 financial crisis touched almost every American, as well as individuals, families, and companies all over the world.[1] Americans lost $17 trillion in net wealth.[2] Thirteen million Americans lost their homes.[3] Neighborhoods in Florida and Nevada were left desolate and empty, skeletons of the housing boom.[4]

No corporate executive or officer went to jail for their acts leading up to the 2008 financial crisis.[5] In fact, no corporate officer was ever criminally charged for their role in the crisis.[6] While the Financial Crisis Inquiry Commission (FCIC) found evidence of “reckless” executive behavior and referred nine individuals to the Department of Justice (DOJ) for prosecution,[7] the DOJ never filed a single charge against these or any other corporate executive.[8]

Since the DOJ’s failure to prosecute high-level corporate officers in the wake of the 2008 financial crisis, public outrage over “corporate greed” and favorable treatment of executives has become a popular narrative in the ethos of modern America.[9]

This Note will provide background information on the 2008 financial crisis, explore how corporate malfeasance and perverse incentives led to the crises, and then examine different ways in which “private justice”[10] can lead to regulation. Part I will offer an overview of the 2008 financial crises and explain why the corporate regulatory mechanisms in place today are insufficient to protect the American public and our economy from another financial crisis. Part II will explore the concept of “private justice,” as espoused in Pamela Bucy’s seminal law review article.[11] Part III will examine the private civil-litigation side of Section 10b of the Securities and Exchange Commission (SEC) Act of 1934—the anti-fraud section of that act.[12] Finally, Part IV of the Note will offer a novel approach to securities regulations, incorporating effective incentive mechanisms for private individuals into a proposal for new legislation that could potentially be used by states to offer greater protections to their citizens.

[1]See Financial Crisis Inquiry Comm’n, The Financial Crisis Inquiry Report: Final Report of the Nat’l Comm’n on the Causes of the Financial and Econ. Crisis in the U.S. 393 (2011), https://www.gpo.gov/ fdsys/pkg/GPO-FCIC/pdf/GPO-FCIC.pdf (“[S]tock prices worldwide plummeted more than 40% in 2008 . . . .”) [hereinafter FCIC Report].

[2] Id.

[3] Id. at 402.

[4] Id. at 409.

[5] See Letter from Senator Elizabeth Warren, U.S. Senator, Mass., to the Honorable Michael E. Horowitz, Inspector General, Dep’t of Justice (Sept. 15, 2016), http://www.warren.senate.gov /files/documents/2016-9-15_Referral_DOJ_IG_letter.pdf (“Not one of the nine has gone to prison or been convicted of a criminal offense.”) [hereinafter Warren Letter].

[6] See id. (“Not a single one has even been indicted or brought to trial.”).

[7] FCIC Report, supra note 1, at xix.

[8] Warren Letter, supra note 5.

[9] Tim Dickinson, Bernie Sanders’ Political Revolution, Rolling Stone (Nov. 18, 2015), http://www. rollingstone.com/politics/news/bernie-sanders-political-revolution-20151118.

[10] See Pamela H. Bucy, Private Justice, 76 S. Cal. L. Rev. 1, 4 (2002) (“‘Private justice’ occurs when private persons initiate lawsuits to detect, prove, and deter public harms.”).

[11] Id.

[12] 17 C.F.R. § 240.10b (2011).