Survivor Funds, 2017 University of Oklahoma
Survivor Funds, Jonathan Barry Forman, Michael J. Sabin
Pace Law Review
This Article explains how to create “survivor funds”—short-term investment funds that would pay more to those investors who live until the end of the fund’s term than to those who die before then. For example, instead of just investing in a ten-year bond and dividing the proceeds among the investors at the end of the bond term, a survivor fund would invest in that ten-year bond but divide the proceeds only among those who survived the full ten years. These survivor funds would be attractive investments because the survivors would get a greater return on their investments, while ...
The Lender As Unconventional Fiduciary, 2017 California Western School of Law
The Lender As Unconventional Fiduciary, Niels Schaumann
This Article examines one kind of fiduciary relationship—one that develops from an ordinary, arms-length commercial relationship between a lender and a borrower. Although this prototype relationship exists in the broader context of “lender liability,” to which academic commentators and the practicing bar have paid a good deal of attention in recent years, the suggested analysis has as much to do with fiduciary relationships generally as it does with issues of lender liability. The unconventional fiduciary relationship examined here differs in several respects from the conventional fiduciary relationship, for example that of trustee-beneficiary. Perhaps the most obvious difference is that ...
A New Coalescence In The Housing Finance Reform Debate?, 2017 Boston College Law School
A New Coalescence In The Housing Finance Reform Debate?, Patricia Mccoy, Susan Wachter
Patricia A. McCoy
This policy brief examines recent proposals for reform of the housing finance system.
Representations And Warranties: Why They Did Not Stop The Crisis, 2017 Boston College Law School
Representations And Warranties: Why They Did Not Stop The Crisis, Patricia Mccoy, Susan Wachter
Patricia A. McCoy
During the run-up to the 2008 financial crisis, representations and warranties (contractual statements enforceable through legal action) may have given investors false assurance that mortgage loans were being properly underwritten. This assurance in turn may have contributed to overinvestment in mortgage-backed securities in two ways. First, the assumption that legally enforceable penalties associated with reps and warranties would deter lax underwriting may have led to less monitoring of these contracts than would otherwise have occurred. In turn, the lack of monitoring of actual underwriting practices enabled the spread of lax lending practices. The existence of these reps and warranties and ...
Investment Treaties Are About Justice, 2017 Boston College Law School
Investment Treaties Are About Justice, Frank J. Garcia
Frank J. Garcia
This Perspective argues that investment law is ripe for a paradigm shift away from pure capital protection. Rather, investment law should be recognized as part of a comprehensive global economic governance system for ensuring justice and the rule of law, in this case in the allocation of investment capital.
Regulating Robo Advice Across The Financial Services Industry, 2017 University of Pennsylvania Law School
Regulating Robo Advice Across The Financial Services Industry, Tom Baker, Benedict G. C. Dellaert
Automated financial product advisors – “robo advisors” – are emerging across the financial services industry, helping consumers choose investments, banking products, and insurance policies. Robo advisors have the potential to lower the cost and increase the quality and transparency of financial advice for consumers. But they also pose significant new challenges for regulators who are accustomed to assessing human intermediaries. A well-designed robo advisor will be honest and competent, and it will recommend only suitable products. Because humans design and implement robo advisors, however, honesty, competence, and suitability cannot simply be assumed. Moreover, robo advisors pose new scale risks that are different ...
Remedies For Breach Of A Buyer’S Obligation To Open A Letter Of Credit In Cisg Contracts—Part I, 2017 Universidad Panamericana, Guadalajara
Remedies For Breach Of A Buyer’S Obligation To Open A Letter Of Credit In Cisg Contracts—Part I, Edgardo Muñoz
The New Bond Workouts, 2017 University of Pennsylvania Law School
The New Bond Workouts, William W. Bratton, Adam J. Levitin
Bond workouts are a famously dysfunctional method of debt restructuring, ridden with opportunistic and coercive behavior by bondholders and bond issuers. Yet since 2008 bond workouts have quietly started to work. A cognizable portion of the restructuring market has shifted from bankruptcy court to out-of-court workouts by way of exchange offers made only to large institutional investors. The new workouts feature a battery of strong-arm tactics by bond issuers, and aggrieved bondholders have complained in court. The result has been a new, broad reading of the primary law governing workouts, section 316(b) of the Trust Indenture Act of 1939 ...
Banks And Banking–12 U.S.C. Section 85–The Broadened Power Of National Banks Regarding Interest Rates On Credit Card Transactions, Lucrecia Ann Henderson
No abstract provided.
Finding The Pearl In The Oyster: Supercharging Ipos Through Tax Receivable Agreements, 2017 Northwestern University School of Law
Finding The Pearl In The Oyster: Supercharging Ipos Through Tax Receivable Agreements, Christopher B. Grady
Northwestern University Law Review
A new, “supercharged” form of IPO has slowly developed over the last twenty years. This new form of IPO takes advantage of several seemingly unrelated provisions of the tax code to multiply pre-IPO owners’ proceeds from a public offering without reducing the amount public investors are willing to pay for the stock. Supercharged IPOs use a tax receivable agreement to transfer tax assets created by the IPO back to the pre-IPO ownership, “monetizing” the tax assets. As these structures have become more efficient, commentators have expressed concerns that these agreements deceive shareholders who either ignore or do not understand the ...
The New Era Of Doing Business With Iran: Iran’S International Commercial Transactions And Global Security, John Changiz Vafai
Pace International Law Review
On January 17, 2016, in a statement following his signing of the Joint Comprehensive Plan of Action (JCPOA) with Iran, President Obama addressed that country’s people, stating that “yours is a great civilization, with a vibrant culture that has so much to contribute to the world – in commerce, and in science and the arts.” While the former U.S. President’s evaluation of the Iranian people’s greatness is indisputable, there are questions concerning doing business with Iran which transcend conventional legal issues and commercial problems.
Given the juxtaposition of Iran’s duopolistic government structure and ideologically oriented decision-making ...
The Alliance Between Payday Lenders And Tribes: Are Both Tribal Sovereignty And Consumer Protection At Risk?, Nathalie Martin, Joshua Schwartz
No abstract provided.
The Potential Effect Of The Department Of Labor’S New Fiduciary Rule On Broker-Dealers And The Middle Income Retirement Investors Who Rely On Them, 2017 The Catholic University of America, Columbus School of Law
The Potential Effect Of The Department Of Labor’S New Fiduciary Rule On Broker-Dealers And The Middle Income Retirement Investors Who Rely On Them, Nadia Yoon
Catholic University Law Review
On April 6, 2016, the U.S. Department of Labor issued a final rule aimed at increasing the reach of the definition of fiduciary status under the Employee Retirement Income Security Act of 1974 (ERISA). This rule closed a loophole that had allowed broker-dealers to avoid becoming investment advisers under ERISA, allowing them to provide bad advice to their retirement clients without disclosing material conflicts of interest. This note begins by laying out the fiduciary rules and standards under ERISA and the U.S. Securities and Exchange Commission’s oversight regime before the final rule. It then lays out the ...
Who Bleeds When The Wolves Bite? A Flesh-And-Blood Perspective On Hedge Fund Activism And Our Strange Corporate Governance System, 2017 University of Pennsylvania
Who Bleeds When The Wolves Bite? A Flesh-And-Blood Perspective On Hedge Fund Activism And Our Strange Corporate Governance System, Leo E. Strine Jr.
This paper examines the effects of hedge fund activism and so-called wolf pack activity on the ordinary human beings—the human investors—who fund our capital markets but who, as indirect of owners of corporate equity, have only limited direct power to ensure that the capital they contribute is deployed to serve their welfare and in turn the broader social good.
Most human investors in fact depend much more on their labor than on their equity for their wealth and therefore care deeply about whether our corporate governance system creates incentives for corporations to create and sustain jobs for them ...
Is The Dodd-Frank Act Destroying What Is Left Of U.S. Thrifts?, 2017 Ursinus College
Is The Dodd-Frank Act Destroying What Is Left Of U.S. Thrifts?, Scott Deacle
Business and Economics Faculty Publications
I examine data from 1992 to 2015 to assess the Dodd-Frank Act’s impact on the performance of U.S. depository institutions, thrifts in particular. Ceteris paribus, the average FDIC-regulated institution experienced a decline in profitability as measured by pre-tax return on assets (ROA) following the Act’s passage, but the decline was concentrated among commercial banks. Small thrifts increased pre-tax profitability, after controlling for other factors including weak economic growth. Depository institution loan quality improved after Dodd-Frank, less so for small thrifts but more so for large thrifts. Efficiency ratios, which regulatory costs affect, increased, more for thrifts than ...
Differing Perceptions? Market Practice And The Evolution Of Foreign Sovereign Immunity, 2017 Duke Law School
Differing Perceptions? Market Practice And The Evolution Of Foreign Sovereign Immunity, W. Mark C. Weidemaier, Mitu Gulati
The 20th century witnessed a transformative, “tectonic” shift in international law, from “absolute” to “restrictive” theories of sovereign immunity. As conventionally understood, however, this dramatic transformation represented only a shift in the default rule. Under absolute immunity, national courts could not hear lawsuits and enforce judgments against a foreign sovereign without its consent. Under restrictive immunity, foreign sovereigns were presumptively not immune when they engaged in commercial acts. We demonstrate that market practices undermine this conventional understanding. Using an extensive, two-century data set of contracts between foreign governments and private creditors, we show that contracting parties have long treated absolute ...
Contractual Arbitrage, 2017 Duke Law School
Contractual Arbitrage, Stephen J. Choi, Mitu Gulati, Robert E. Scott
Contracts are inevitably incomplete. And standard-form or boilerplate commercial contracts are especially likely to be incomplete because they are approximations; they are not tailored to the needs of particular deals. Not only do these contracts contain gaps but, in an attempt to reduce incompleteness, they often contain clauses with vague or ambiguous terms. Terms with indeterminate meaning present opportunities for strategic behavior well after a contract has been concluded. This linguistic uncertainty in standard form commercial contracts creates an opportunity for “contractual arbitrage”: parties may argue, ex post, that the uncertainties in expression mean something that the contracting parties, ex ...
The Pdvsa Pricing Puzzle, 2017 Duke Law School
The Pdvsa Pricing Puzzle, Paolo Colla, Anna Gelpern, Mitu Gulati
Market reports in the summer of 2016 suggest that Venezuela is on the brink of default on upwards of $65 billion in debt. That debt comprises of bonds issued directly by the sovereign and those issued by the state-owned oil company PDVSA. Based on the bond contracts and other legal factors, it is not clear which of these two categories of bonds would fare better in the event of a restructuring. However, market observers are convinced — and we agree — that legal and contractual differences would likely impact the payouts on the bonds if Venezuela defaults. Using a comparison of recent ...
Too Big To Fool: Moral Hazard, Bailouts, And Corporate Responsibility, 2017 Duke Law School
Too Big To Fool: Moral Hazard, Bailouts, And Corporate Responsibility, Steven L. Schwarcz
Domestic and international regulatory efforts to prevent another financial crisis have been converging on the idea of trying to end the problem of “too big to fail”—that systemically important financial firms take excessive risks because they profit from success and are (or at least, expect to be) bailed out by government money to avoid failure. The legal solutions being advanced to control this morally hazardous behavior tend, however, to be inefficient, ineffective, or even dangerous—such as breaking up firms and limiting their size, which can reduce economies of scale and scope; or restricting central bank authority to bail ...
Regulating Complacency: Human Limitations And Legal Efficacy, 2017 Duke Law School
Regulating Complacency: Human Limitations And Legal Efficacy, Steven L. Schwarcz
This article examines how insights into limited human rationality can improve financial regulation. The article identifies four categories of limitations—herd behavior, cognitive biases, overreliance on heuristics, and a proclivity to panic—that undermine the perfect-market regulatory assumptions that parties have full information and will act in their rational self-interest. The article then analyzes how insights into these limitations can be used to correct resulting market failures. For example, requiring more robust disclosure and due diligence can help to reduce reliance on misleading information cascades that motivate herd behavior. Debiasing through law, such as requiring more specific, poignant, and concrete ...