68 No. 78 JUSTICE Securities Law and Public Companies Finally, U.S. securities law plays a more indirect, but no less important, role in the legal fight against boycotts of Israel. American securities law, built on the 1933 Securities Act and 1934 Securities Exchange Act, is a disclosurebased system.47 Public corporations subject to these laws must make public disclosures to the Securities Exchange Commission (“SEC”), which investors, especially sophisticated institutional investors, use to manage their portfolios.48 Securities laws require disclosure of all sorts of corporate transactions, policies, and decisions.49 A corporation that boycotts Israel shuts itself off from an active, growing market and risks the possibility that the company could harness Israeli (or even Israeli-adjacent) technology to grow its business. Moreover, as we have seen, a company that boycotts or divests from Israel violates the laws of 37 states. Most importantly, when corporations fail to disclose, or make material misstatements about an active Israel boycott, securities laws can provide avenues for punishment.50 The SEC has its own enforcement mechanisms and shareholders may also sue privately.51 For example, public announcement of the Ben & Jerry’s boycott decision triggered a shareholder lawsuit against Unilever for failure to disclose it in a timely fashion a year earlier, when the boycott decision was taken.52 One of the bases for that suit was that the company continued stating that “compliance with laws and regulations is an essential part of Unilever’s business operations” after having already decided to boycott Israel, which violated the state anti-BDS laws noted above.53 By the time the lower court dismissed the claim, Unilever had sold Ben & Jerry’s Israeli business to its Israeli licensee, resolving the underlying dispute and rendering an appeal largely moot. Still, publicly declaring that you follow the law while hiding the fact that you don’t is a legally dangerous course for any public company to take. It makes boycotts of Israel more difficult, including “stealth” boycotts – in which the company actually boycotts Israel while not saying so – as the boycotting company must ensure that its public statements are true, or not a misleading half-truth. Conclusion Collectively, these bodies of law provide an important line of defense against boycotts or divestment from Israel by institutional investors and corporations. Retirement and pension funds together represent a massive portion of the U.S. capital market. Preventing trustees of such funds from undertaking boycotts significantly impedes the effectiveness of political boycott campaigns. ERISA and counter-divestment state laws combine to create the most direct barrier to boycott or divestment attempts. In particular, those laws ensure that certain decisions are taken away from trustees, guaranteeing that state pension funds avoid supporting companies boycotting Israel. State pension codes further protect trustees from violating their fiduciary responsibilities by making legislative judgments that supersede the trustees’ discretion. Finally, while securities laws play an indirect role, their disclosure requirements place pressure on corporations to act honestly and not mislead shareholders about boycotts that they have implemented or will implement. This multifaceted approach serves as a crucial safeguard against boycotts of and divestment from Israel by some of the most powerful financial institutions in the country.n David H. Webber is Professor of Law and Paul M. Siskind Scholar at Boston University School of Law. Levi Trestan is a JD candidate at Boston University School of Law in the Class of 2027. 47. “Securities law history” (Oct. 2023), available at https://www.law.cornell.edu/wex/securities_law_history 48. Id. 49. Id. 50. Macquarie Infrastructure Corp. v. Moab Partners, L.P., 601 U.S. 257, 264-65 (2024). 51. “Securities law history,” supra note 47. 52. City of St. Clair Shores Police v. Unilever PLC, 2023 U.S. Dist. LEXIS 152144, 5-6 (S.D.N.Y 2023), available at https://law.justia.com/cases/federal/district-courts/new-york/nysdce/1:2022cv05011/581611/41/ 53. Id.
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