One of the topics covered by this Blog is the role of stock exchanges in the corporate governance process.  The exchanges impose a number of important governance obligations, including the need for a board with a majority of independent directors.  These requirements apply not only to the main exchanges (NYSE, Nasdaq, and Amex), but also to the regional exchanges such as the Boston Stock Exchange. 

Listing standards, however, are only enforceable by the stock exchanges themselves, or at least so the law has held to date.  Courts have refused to imply a private right of action for violations.  Most of the cases in this area, however, have involved broker-dealer regulation and not listing standards.  Whether courts would treat listing standards required under the Exchange Act (the audit committee requirements contained in SOX) differently is an open question.  

For now, however, enforcement rests with the stock exchanges themselves, with delisting the only real remedy for violations.  Because delisting costs the stock exchange revenue, there is an incentive not to want to delist (and, perforce, enforce listing standards).  The concern is even greater in an era when stock exchanges have become for profit entities and have a fiduciary obligation to profit maximize.  To the extent exchanges fails to enforce, it is the SEC that can bring actions.  This is, therefore, an area where the Commission needs to be particularly attentive.

The next two posts, written by a student, Armin Sarabi, examine some recent actions by the Commission against the Boston Stock Exchange.