It is not often that a new term of art comes into use in a particular field of law with the effect of simultaneously changing the face of a booming industry and testing the adequacy of an important field of federal regulatory activity. Yet the term "cash flow," of relatively recent importance in the real estate industry, has cast in a new light old questions about permissible sources of corporate distributions to shareholders, and given currency to new and revolutionary criteria of enterprise valuation. More important, the practice of measuring distributions by cash flow rather than by net income can be both misleading and susceptible of fraudulent manipulation. These possibilities in turn suggest the desirability of re-examining the disclosure philosophy underlying federal securities regulation, particularly the Securities Act of 1933.


Fraud and Deceit (A Symposium)