Law Commons^™

Democratizing Startups, Seth C. Oranburg

Seth C Oranburg

The Jumpstart Our Business Startups Act of 2012 intends to “help entrepreneurs raise the capital they need to put Americans back to work and create an economy that’s built to last.” The goal is to “democratize startups” by making capital available to diverse entrepreneurs in new geographies. Yet the net effect of securities regulations and market conditions is the opposite. Startup companies are encouraged to stay private so capital is consolidating in large, mature firms instead of recycling into new startups. Evidence of consolidation is that once-rare “Unicorns” (billion-dollar startups) now number over 111. More money is going into huge …

An Approach To The Regulation Of Spanish Banking Foundations, Miguel Martínez

Miguel Martínez

The purpose of this paper is to analyze the legal framework governing banking foundations as they have been regulated by Spanish Act 26/2013, of December 27th, on savings banks and banking foundations. Title 2 of this regulation addresses a construct that is groundbreaking for the Spanish legal system, still of paramount importance for the entire financial system insofar as these foundations become the leading players behind certain banking institutions given the high interest that foundations hold in the share capital of such institutions.

Broker-Dealer: A Fiduciary By Any Other Name?, William Alan Nelson Ii

William Alan Nelson II

Broker-dealers, unlike investment advisers, are not regulated as fiduciaries when providing investment advice, even though broker-dealers are holding themselves out as financial advisors and offering virtually identical services to investors. The lack of consistent regulation of financial service providers arises from the structure in which advice historically has been delivered. Financial services regulation since the Great Depression has developed along roughly dual tracks: laws governing the sale of financial products, which may or may not require that the products be suitable for the customer, and laws governing investment advice, which impose a fiduciary requirement on the adviser to act solely …

Optimized Theft: Why Some Controlling Shareholders “Generously” Expropriate From Minority Shareholders, Sang Yop Kang

Sang Yop Kang

Although controlling shareholder agency problems have been well studied so far, many questions still remain unanswered. In particular, an important puzzle in a bad-law jurisdiction is: why some controlling shareholders (“roving controllers”) loot the entire corporate assets at once, and why others (“stationary controllers”) siphon a part of corporate assets on a continuous basis. To solve this conundrum, this Article provides analytical frameworks exploring the behaviors and motivations of controlling shareholders. To begin with, I reinterpret Olson’s political theory of “banditry” in the context of corporate governance in developing countries. Based on a new taxonomy of controlling shareholders (“roving controllers” …

Present At The Creation: Reflections On The Early Years Of The National Association Of Corporate Directors, Lawrence J. Trautman

Lawrence J. Trautman Sr.

Effective corporate governance is critical to the productive operation of the global economy and preservation of our way of life. Excellent governance execution is also required to achieve economic growth and robust job creation in any country. In the United States, the premier director membership organization is the National Association of Corporate Directors (NACD). Since 1978, NACD plays a major role in fostering excellence in corporate governance in the United States and beyond. The NACD has grown from a mere realization of the importance of corporate governance to become the only national membership organization created by and for corporate directors. …

Boilerplate Shock, Gregory Shill

Gregory Shill

No nation was spared in the recent global downturn, but several countries in the Eurozone arguably took the hardest punch, and they are still down. Doubts about the solvency of Greece, Spain, and a number of their neighbors are increasing the likelihood of a breakup of the common European currency. Observers believe a single departure and sovereign debt default might set off a “bank run” on the euro, with devastating regional and global consequences.

What mechanisms are available to address—or ideally, to prevent—such a disaster?

One unlikely candidate is boilerplate language in the contracts that govern Eurozone sovereign bonds. As …

E-Commerce And Electronic Payment System Risks: Lessons From Paypal, Lawrence J. Trautman

Lawrence J. Trautman Sr.

What are the major risks perceived by those engaged in e-commerce and electronic payment systems? What development risks, if they become reality, may cause substantial increases in operating costs or threaten the very survival of the enterprise? This article utilizes the relevant annual report disclosures from eBay (parent of PayPal), along with other eBay and PayPal documents, as a potentially powerful teaching device. Most of the descriptive language to follow is excerpted directly from eBay’s regulatory filings. My additions include weaving these materials into a logical presentation and providing supplemental sources for those who desire a deeper look (usually in …

Present At The Creation: Reflections On The Early Years Of The National Association Of Corporate Directors, Lawrence J. Trautman

Lawrence J. Trautman Sr.

Effective corporate governance is critical to the productive operation of the global economy and preservation of our way of life. Excellent governance execution is also required to achieve economic growth and robust job creation in any country. In the United States, the premier director membership organization is the National Association of Corporate Directors (NACD). Now over 36 years old, NACD plays a major role in fostering excellence in corporate governance in the United States and beyond. Over the past thirty-six years NACD has grown from a mere realization of the importance of corporate governance to become the only national membership …

The Economics And Regulation Of Network Branded Prepaid Cards, Todd J. Zywicki

Todd J. Zywicki

General-purpose reloadable prepaid cards have been one of the fastest-growing sectors of the consumer payments marketplace in recent years. Their importance has accelerated as a consequence of new regulations enacted in the wake of the 2008 financial crisis. This increased use of prepaid cards has also increased angst among regulators, especially regarding the number and size of fees on prepaid cards. State and federal regulators as well as Congress are interested in imposing new regulations on prepaid cards. These calls for regulation, however, have proceeded in a largely fact-free environment. This paper describes the current economic and regulatory landscape for …

Case Of Interest Regarding The United States Supreme Court Upholding A Contractual Waiver Of Class Arbitration, William P. Huttenbach

William P. Huttenbach

Recent case you might find of interest regarding the United States Supreme Court upholding a contractual waiver of class arbitration. This case involves merchants filing a class action antitrust suit against American Express. See American Express Co. v. Italian Colors Restaurant, 133 S.Ct. 2304 (2013). Respondents are merchants who accepted American Express cards. The contract between parties contained a clause that required all disputes between said parties to be resolved by arbitration and that no claims could be arbitrated on a class action basis. Respondents brought a class action suit against Petitioners for violation of the federal antitrust laws due …

Rise Of The Intercontinentalexchange And Implications Of Its Merger With Nyse Euronext, Latoya C. Brown

Latoya C. Brown, Esq.

This paper examines the impending merger between the IntercontinentalExchange (ICE) and NYSE Euronext against the backdrop of the current structure of the global financial services industry. The paper concludes that the merger embodies what the financial services industry is becoming and captures the model that will allow exchanges to remain competitive in today’s marketplace: mega-exchanges with broader asset classes and electronic platforms. As technology and globalization threaten their vitality, exchanges will need to continue reinventing and adapting. Increasingly over the last decade they have done so by merging and by moving, at least a part of, their operations on screen. …

The Regulation Of U.S. Money Market Funds: Lessons From Europe, Latoya C. Brown

Latoya C. Brown, Esq.

The recent financial crisis challenged long held perceptions of money market funds (“MMFs”) as stable and highly liquid instruments. Regulators in the US and in Europe now seek to impose additional rules on MMFs to avoid another significant failure as happened to the Reserve Fund. In the US, the debate is drawing even more media attention as question of which regulatory body - such as the Securities and Exchange Commission, the Treasury Department, and the Financial Stability Oversight Council – should lead the way has taken interesting twists and turns. This paper examines primary reform options being proposed in the …

Regulation Not Prohibition: The Comparative Case Against The Insurable Interest Doctrine, Sharo Michael Atmeh

Sharo M Atmeh

American law requires an insurable interest—a pecuniary or affective stake in the subject of an insurance policy—as a predi-cate to properly obtaining insurance. In theory, the rule prevents both wagering on individual lives and moral hazard. In practice, the doctrine is avoided by complex insurance transaction structuring to effectuate both origination and transfers of insurance by individuals without an insurable interest. This paper argues that it is time to ab-andon the insurable interest doctrine. As both the English and Aus-tralian experiences indicate, elimination of the insurable interest doctrine will have little detrimental pecuniary effect on the insurance industry, while freeing …

Regulation Insurance Sales Or Selling Insurance Regulation: Against Regulatory Competition In Insurance, Daniel Benjamin Schwarcz

Daniel Benjamin Schwarcz

In certain regulatory regimes, including those governing banking and corporate law, firms are permitted to choose among multiple competing regulators. This Article examines the desirability of such regulatory competition in the context of property, casualty and life insurance markets. It analyzes various different approaches to structuring such regulatory competition, including those embodied in two recent reform proposals, the Optional Federal Charter (OFC) and the Single License Proposal (SLP). Ultimately, the Article argues that regulatory competition of any sort would undermine the core goals of insurance regulation, harming consumers, insurers, and third parties.