Law Commons^™

Advisory Fees: Evolving Theories, Tamar Frankel

Faculty Scholarship

The theories on which mutual fund advisers' fiduciary and advisory fees are based have evolved over time. They were changed to justify different public policy approaches and reflect different perceptions of the relationships between advisers and investors. Three theories have developed on the subject and yet another is percolating currently. The familiar context in which these theories arose is revisited to clarify their development.

Bringing Out The Big Guns: The Usa Patriot Act, Money Laundering, And The War On Terrorism, Eric J. Gouvin

Faculty Scholarship

This Article addresses the question of whether the money laundering provisions in the Patriot Act will be effective tools in the effort to intercept terrorist financing to prevent future attacks like those suffered on September 11, 2001, or whether the legislation is instead the modern equivalent of a big noisy anti-aircraft gun -- psychologically useful for showing that something is being done, but not very effective in actually doing the task. This Article concludes that the Act's money laundering provisions will not be effective in intercepting terrorist financing. It reaches that conclusion after examining the current state of United States …

Business Divisions From The Perspective Of The U.S. Banking System , Carl Felsenfeld, Genci Bilali

Faculty Scholarship

The Bank Holding Company Act of 1956 ("Act"),' as amended, most recently in 1999 by the Gramm-Leach-Bliley Act ("GLB") divides all economic activity into five groups. These groups are: 1) banking, 2) activities closely related to and a proper incident to banking; 3) activities of a financial nature; 4) activities complimentary to those of a financial nature; and 5) activities not of a financial nature. This article will explore these five groups of activities separately. The policies behind the divisions will be analyzed and questioned whether they serve the policies behind the Act. This article will also question whether the …

Frictions And Tax-Motivated Hedging: An Empirical Exploration Of Publicly-Traded Exchangeable Securities, William M. Gentry, David M. Schizer

Faculty Scholarship

As financial engineering becomes more sophisticated, taxing income from capital becomes increasingly difficult. We offer the first empirical study of a high profile strategy known as "taxfree hedging," which offers economic benefits of a sale without tnggering tax. We explore nontax costs that taxpayers face when hedging by issuing so-called "DECS," "PHONES," and other publicly-traded exchangeable securities. Focusing on 61 transactions between 1993 and 2001, we shed light on why taxpayers might prefer to hedge through private "over-the-counter" transactions: An offering of exchangeable securities is announced in advance and implemented all at once, triggering an almost 4 percent decline in …

The Mechanisms Of Market Efficiency Twenty Years Later: The Hindsight Bias, Ronald J. Gilson, Reinier Kraakman

Faculty Scholarship

Twenty years ago we published a paper, "The Mechanisms of Market Efficiency," that sought to describe the institutional underpinnings of price formation in the securities market. Since that time, financial economics has moved forward on many fronts. The sub-discipline of behavioral finance has struggled to bring yet more descriptive realism to the study of financial markets. Two important questions are (1) how much has this new discipline changed our understanding of the efficiency and nature of the institutional mechanisms that set price in financial markets; and (2) how far does this discipline carry novel implications for the regulation of financial …

Understanding Venture Capital Structure: A Tax Explanation For Convertible Preferred Stock, Ronald J. Gilson, David M. Schizer

Faculty Scholarship

The capital structures of venture capital-backed U.S. companies share a remarkable commonality: overwhelmingly, venture capitalists make their investments through convertible preferred stock. Not surprisingly, much of the academic literature on venture capital has sought to explain this peculiar pattern. Financial economists have developed models showing, for example, that convertible securities efficiently allocate control between the investor and entrepreneur,signal the entrepreneur's talent and motivation, and align the incentives of entrepreneurs and venture capitalists.

In this Article, we examine the influence of a more mundane factor on venture capital structure: tax law. Portfolio companies issue convertible preferred stock to achieve more favorable …

What Did They Do And What Does It Mean? The Three-Judge Court's Decision In Mcconnell V. Fec And The Implications For The Supreme Court, Richard Briffault

Faculty Scholarship

My role at this symposium is to provide a brief overview of the three-judge court's decision in McConnell v. FEC, review the opinions, piece together what the court actually decided, and see how the Bipartisan Campaign Reform Act of 2002 ("BCRA") now stands. I will try to do that briefly, while giving a few general comments about what the court's opinions tell us about the state of campaign finance law today. As a preliminary matter, the three-judge court's opinions provide us with two radically different world views – almost two different intellectual universes – for thinking about campaign finance …