Banking and Finance Law Commons^™

Crowdfunding Issuers In The United States, Andrew A. Schwartz

Publications

Startup companies can now legally sell shares of stock, bonds, or other securities to the broad public using equity crowdfunding, a new type of online capital market modeled on Kickstarter and other reward crowdfunding websites. Through equity crowdfunding, entrepreneurs can go directly to the broad public (the “crowd”) for investment, without having to go through the usual (and costly) process of an initial public offering (IPO). Equity crowdfunding thus offers a chance for all entrepreneurs, regardless of their physical location, gender, or anything else, to solicit investors and raise capital.

In 2012, new federal legislation—the Jumpstart Our Business Startups (JOBS) …

Remutualization, Erik F. Gerding

Publications

Policymakers need to rediscover the organizational form of business entity as a tool of financial regulation. Recent and classic scholarship has produced evidence that financial institutions organized as alternative entity forms – including investment bank partnerships and banks and insurance companies organized as mutual or cooperatives – tend to take less risk, exploit customers/consumer less, or commit less misconduct compared to counterparts organized as investor-owned corporations. This article builds off the work of Hill and Painter on investment banks organized as partnerships, Hansmann on the history and economics of banks and insurance companies organized as mutuals and cooperatives, and other …

Negotiating The Lender Of Last Resort: The 1913 Federal Reserve Act As A Debate Over Credit Distribution, Nadav Orian Peer

Publications

“Lending of last resort” is one of the key powers of central banks. As a lender of last resort, the Federal Reserve (the “Fed”) famously supports commercial banks facing distressed liquidity conditions, thereby mitigating destabilizing bank runs. Less famously, lender-of-last-resort powers also influence the distribution of credit among different groups in society and therefore have high stakes for economic inequality. The Fed’s role as a lender of last resort witnessed an unprecedented expansion during the 2007–2009 Crisis when the Fed invoked emergency powers to lend to a new set of borrowers known as “shadow banks”. The decision proved controversial and …

The Evolution Of Entrepreneurial Finance: A New Typology, J. Brad Bernthal

Publications

There has been an explosion in new types of startup finance instruments. Whereas twenty years ago preferred stock dominated the field, startup companies and investors now use at least eight different instruments—six of which have only become widely used in the last decade. Legal scholars have yet to reflect upon the proliferation of instrument types in the aggregate. Notably missing is a way to organize instruments into a common framework that highlights their similarities and differences.

This Article makes four contributions. First, it catalogues the variety of startup investment forms. I describe novel instruments, such as revenue-based financing, which remain …

Who Needs Contracts? Generalized Exchange Within Investment Accelerators, Brad Bernthal

Publications

This Article investigates why an expert volunteers on behalf of startups that participate in a novel type of small venture capital (“VC”) fund known as a mentor-driven investment accelerator (“MDIA”). A MDIA organizes a pool of seasoned individuals – called “mentors” – to help new companies. An obvi- ous organizational strategy would be to contract with mentors. Mentors in- stead voluntarily assist. Legal studies of norm-based exchanges do not explain what this Article calls the “mentorship conundrum”—i.e., the puzzling moti- vation of a mentor to volunteer within otherwise for-profit environments. This Article is the first to bridge the insights of …

Investment Accelerators, Brad Bernthal

Publications

This Article documents and explains the legal and extralegal dimensions of Investment Accelerator (IA) systems. Accelerators are a new class of institution that supports entrepreneurs and early stage startups. Investment Accelerators take an ownership stake in companies that participate in an intensive, time-limited program. Interviews reveal the surprising extent to which parties in many Investment Accelerators exchange economic value in the absence of formal agreement. Startups share proprietary information with highly accomplished mentors who, in turn, contribute their time and connections without direct compensation. This under-contracted and informal arrangement raises concerns about opportunism. Data from an original investigation presents a …

The Nonfinancial Returns Of Crowdfunding, Andrew A. Schwartz

Publications

Securities crowdfunding — the sale of unregistered securities to the public over the Internet — has come under attack before it has even begun. Legal scholars in particular have expressed concern that investors will lose any money they invest in crowdfunding companies. Even assuming that this may be true from a purely financial perspective, these critics are missing an important point: Crowdfund investors with negative returns will not simply have lost their money, but rather they will have spent it (at least in part) on nonpecuniary benefits, including entertainment, political expression and community building. These nonfinancial returns of crowdfunding are …

Quarterback By Committee: A Response In Memory Of Dan Markel, Andrew A. Schwartz

Publications

In Catalyzing Fans, Dan Markel, Michael McCann and Howard Wasserman propose so-called “Fan Action Committees” (“FACs”), whereby fans would crowdfund a sum of money and then spend it to influence the personnel decisions of their favorite teams. This Response — dedicated to the memory of Dan Markel — suggests that an effective FAC could upset a team’s overall hiring and compensation system, thereby risking a downturn in team performance to the detriment of all concerned.

The Digital Shareholder, Andrew A. Schwartz

Publications

Crowdfunding, a new Internet-based securities market, was recently authorized by federal and state law in order to create a vibrant, diverse, and inclusive system of entrepreneurial finance. But will people really send their money to strangers on the Internet in exchange for unregistered securities in speculative startups? Many are doubtful, but this Article looks to first principles and finds reason for optimism.

Well-established theory teaches that all forms of startup finance must confront and overcome three fundamental challenges: uncertainty, information asymmetry, and agency costs. This Article systematically examines this “trio of problems” and potential solutions in the context of crowdfunding. …

Teenage Crowdfunding, Andrew A. Schwartz

Publications

Teenage startups are in the public interest and should be encouraged, yet the federal CARD Act of 2009 eliminated credit card financing for many such companies, cutting off an important source of early-stage business capital for teenage entrepreneurs. Since then, however, Congress passed the CROWDFUND Act of 2012 which will allow teenagers to raise early-stage financing through Internet crowdfunding. Teens, being masters of the Internet, are well positioned to exploit this new opportunity, with the upshot being that securities crowdfunding may become an important way for youthful entrepreneurs to fund their business dreams.

Crowdfunding Securities, Andrew A. Schwartz

Publications

A new federal statute authorizes the online "crowdfunding" of securities, a new idea based on the concept of "reward" crowdfunding practiced on Kickstarter and other websites. This method of selling securities had previously been banned by federal securities law but the new CROWDFUND Act overturns that prohibition.

This Article introduces the CROWDFUND Act and explains that it can be expected to have two primary effects on securities law and capital markets. First, it will liberate startup companies to use peer networks and the Internet to obtain modest amounts of capital at low cost. Second, it will help democratize the market …

Rural Crowdfunding, Andrew A. Schwartz

Publications

One reason that economic development in rural America lags behind its urban counterpart is the persistent lack of venture capital for rural entrepreneurs. Geography deserves much of the blame, as angel investors and venture capitalists tend to live and work in metropolitan areas on the coasts, in places like Silicon Valley and Boston. Many rural areas are literally thousands of miles away, with the result that venture capital has rarely found its way to rural regions.

Recent federal legislation, however, has the potential to change this dynamic. The JOBS Act authorizes the sale of securities over the Internet to large …

Happiness In Business Or Law, Peter H. Huang

Publications

This article provides a short introduction to recent happiness research and its applications to business or law that is organized as follows. Section I briefly considers: (1) troubling and not so troubling reservations about happiness research, and (2) how money and happiness are related. Section II concisely surveys two sets of applications of happiness research to business, namely: (1) workplace well-being and meaning, and (2) marketing. Section III succinctly reviews two categories of happiness research implications for law: (1) business regulation, and (2) law student and lawyer happiness.

Corporate Finance, Corporate Law And Finance Theory, Peter H. Huang, Michael S. Knoll

Publications

No abstract provided.

Teaching Corporate Law From An Option Perspective, Peter H. Huang

Publications

No abstract provided.

Thoughts Evoked By "Accounting And The New Corporate Law", Ted J. Fiflis

Publications

No abstract provided.

Making America Competitive, Mark J. Loewenstein

Publications

No abstract provided.

Responsibility Of Investment Bankers To Shareholders, Ted J. Fiflis

Publications

No abstract provided.