Law Commons^™

Ucc Update: 2013 Case Law Updates And Examples Of How A Bank May Be Able To Reduce Exposure On Potential Future Losses, William P. Huttenbach

William P. Huttenbach

No abstract provided.

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 …

Janus Capital Group, Inc. V. First Derivative Traders: The Culmination Of The Supreme Court’S Evolution From Liberal To Reactionary In Rule 10b-5 Actions, Charles W. Murdock

Charles W. Murdock

“Political” decisions such as Citizens United and National Federation of Independent Business (“Obamacare”) reflect the reactionary bent of several Supreme Court justices. But this reactionary trend is discernible in other areas as well. With regard to Rule 10b-5, the Court has handed down a series of decisions that could be grouped into four trilogies. The article examines the trend over the past 40 years which has become increasingly conservative and finally reactionary.

The first trilogy was a liberal one, arguably overextending the scope of Rule 10b-5. This was followed by a conservative trilogy which put a brake on such extension, …

Janus Capital Group, Inc. V. First Derivative Traders: The Culmination Of The Supreme Court’S Evolution From Liberal To Reactionary In Rule 10b-5 Actions, Charles W. Murdock

Charles W. Murdock

“Political” decisions such as Citizens United and National Federation of Independent Business (“Obamacare”) reflect the reactionary bent of several Supreme Court justices. But this reactionary trend is discernible in other areas as well. With regard to Rule 10b-5, the Court has handed down a series of decisions that could be grouped into four trilogies. The article examines the trend over the past 40 years which has become increasingly conservative and finally reactionary.

The first trilogy was a liberal one, arguably overextending the scope of Rule 10b-5. This was followed by a conservative trilogy which put a brake on such extension, …

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 …

False Security: How Securitization Failed To Protect Arrangers And Investors From Borrower Claims, Kathleen C. Engel, Thomans J. Fitzpatrick

kathleen c engel

False Security: How Securitization Failed to Protect Arrangers and Investors from Borrower Claims

by Kathleen C. Engel and Thomas J. Fitzpatrick IV

The future of housing finance is in a state of flux. Fannie Mae and Freddie Mac, the two largest loan arrangers in the United States, are in conservatorship. Private sector securitization of mortgages has almost completely stopped. As a result, Fannie, Freddie and Ginnie Mae now own or guarantee almost all new residential mortgage loans. In February 2011, the Obama Administration released a proposal outlining three plans for the future of housing finance. In all three plans, Freddie …

Learning From Our History: Evaluating The Modern Housing Finance Market In Light Of Ancient Principles Of Justice, Brian M. Mccall

Brian M McCall

Since I first accepted an invitation to join this symposium, the subprime mortgage crisis has exploded into a systemic financial crisis. Analysis and pundits alike seem on a quest to outdo each other in using dramatic phrases to describe its historic proportions. The causes of a crisis so large must have a multiplicity of causes lying in the realms of bank regulation and supervision, the operation and regulation of the securitization market and the derivatives and insurance markets. Yet, the root and spark of the various financial reverberations initiated in the home mortgage finance market. My presentation will focus on …

It's Just Secured Credit: The Natural Law Case In Defense Of Some Forms Of Secured Credit, Brian M. Mccall

Brian M McCall

For decades scholars have been debating whether of not the institution of security can be explained and justified. After much discussion from varying points of view and hermeneutics, although some insights have been gained, the answer to the original question remains unresolved. This article attempts to bring new life to this debate by building on Professors Mooney and Harris’ idea of security interest as property right while taking account of the valid concerns of scholars such as Elizabeth Warren and Lyn Lopucki that certain results produced by the current system seem unjust. This reconciliation of these two strands of secured …

Changing The Paradigm Of Stock Ownership From Concentrated Towards Dispersed Ownership? Evidence From Brazil And Consequences For Emerging Countries, Erica Gorga

Cornell Law Faculty Working Papers

This paper analyzes micro-level dynamics of changes in ownership structures. It investigates a unique event: changes in ownership patterns currently taking place in Brazil. It builds upon empirical evidence to advance theoretical understanding of how and why concentrated ownership structures can change towards dispersed ownership.

Commentators argue that the Brazilian capital markets are finally taking off. The number of listed companies and IPOs in the Sao Paulo Stock Exchange (Bovespa) has greatly increased. Firms are migrating to Bovespa’s special listing segments, which require higher standards of corporate governance. Companies have sold control in the market, and the stock market has …

Contractarianism, Contractualism, And The Law Of Corporate Insolvency, Riz Mokal

ExpressO

What is the appropriate way of theorising about corporate bankruptcy law? That lies, argues this paper, in rejecting Pareto and Kaldor-Hicks efficiency in favour of a particular conception of transaction cost efficiency, and in rejecting the ‘contractarian’ Creditors’ Bargain Model in favour of the ‘contractualist’ Authentic Consent Model. The paper vindicates these arguments with an analysis of the automatic stay which characterises the collective liquidation regime, of the pari passu principle often said to be at the heart of this regime, and of the liability imposed in some jurisdictions on the managers of terminally distressed companies for failing to take …

A Complete Property Right Amendment, John H. Ryskamp

ExpressO

The trend of the eminent domain reform and "Kelo plus" initiatives is toward a comprehensive Constitutional property right incorporating the elements of level of review, nature of government action, and extent of compensation. This article contains a draft amendment which reflects these concerns.

Essay -- Preemption, Agency Cost Theory, And Predatory Lending By Banking Agents: Are Federal Regulators Biting Off More Than They Can Chew?, Christopher L. Peterson

ExpressO

A pitched battle is currently being waged for control of the American banking industry. For over a hundred years, the federal and state governments have maintained a complex, but relatively stable truce in their contest for power. At the beginning of our republic, state governments were the primary charterers and regulators of banks. In the wake of the Civil War, the National Bank Act created parity between federal and state banks, cementing the notion of a “dual banking system” that endured through the twentieth century. But in the past five years, the federal government has increasingly used its powers under …

China’S Market Participation: The Case For A Paradigm Shift In Analyzing China’S Capital Market Regulation, David P. Finn

ExpressO

This paper deals with recent reforms governing China’s state owned enterprises and how those reforms affect both the domestic and international markets

Predatory Structured Finance, Christopher L. Peterson

ExpressO

Predatory lending is a real, pervasive, and destructive problem as demonstrated by record settlements, jury awards, media exposes, and a large body of empirical scholarship. Currently the national debate over predatory mortgage lending is shifting to the controversial question of who should bear liability for predatory lending practices. In today’s subprime mortgage market, originators and brokers quickly assign home loans through a complex and opaque series of transactions involving as many as a dozen different strategically organized companies. Loans are typically transferred into large pools, and then income from those loans is “structured” to appeal to different types of investors. …

Explaining The Value Of Transactional Lawyering, Steven L. Schwarcz

ExpressO

This article attempts, empirically, to explain the value that lawyers add when acting as counsel to parties in business transactions. Contrary to existing scholarship, which is based mostly on theory, this article shows that transactional lawyers add value primarily by reducing regulatory costs, thereby challenging the reigning models of transactional lawyers as “transaction cost engineers” and “reputational intermediaries.” This new model not only helps inform contract theory but also reveals a profoundly different vision than existing models for the future of legal education and the profession.

Finding Nemo: Rediscovering The Virtues Of Negotiability In The Wake Of Enron, Adam J. Levitin

ExpressO

Creditors have long understood that any claims they submit for repayment in a bankruptcy might be valid, but subject to subordination in the order of payment of the bankruptcy estate’s limited funds if the creditor behaved inequitably as the debtor failed. A groundbreaking opinion in Enron’s on-going bankruptcy has expanded the practice of equitable subordination far beyond its traditional reach. According to the court, buyers of bankruptcy claims are now subject to subordination, not just for their own conduct, but also for conduct of previous owners of the claims, regardless of whether the conduct related to the claims.

In a …

Recent Defined Benefit Pension Reform: Reasons And Results, Daniel B. Klaff

ExpressO

In the face of corporate bankruptcies, the Pension Benefit Guaranty Corporation (“PBGC”) assures workers that their defined benefit pensions will be protected. It is this fact which has motivated recent reform of the PBGC and the overarching defined benefit plan system by Congress. This paper explores those reforms by addressing the reasons for and results of the most recent reform which had as its primary aim restoring the fiscal solvency of the PBGC. The paper challenges popular accounts of the reform process while examining the results of such reform for important stakeholders without resorting to an overly technical discussion of …

Bond Repudiation, Tax Codes, The Appropriations Process And Restitution Post-Eminent Domain Reform, John H. Ryskamp

ExpressO

This brief comment suggests where the anti-eminent domain movement might be heading next.

Priority As Pathology: The Pari Passu Myth, Riz Mokal

ExpressO

This paper aims to analyse the pari passu principle of insolvency law (which provides that the creditors of a company in liquidation are to be paid rateably), and to ask how it relates to other principles available for the treatment of claims in corporate liquidation. The discussion reveals that the principle has rather limited effect in governing distributions of the insolvent's estate. Not only do various types of secured claim fall beyond its ambit, even unsecured claims are often exempt from its application. Nevertheless, the principle thrives both in judicial rhetoric and in academic arguments. For example, many a challenge …

The Search For Someone To Save: A Defensive Case For The Priority Of Secured Credit, Riz Mokal

ExpressO

The priority of secured credit has repeatedly and famously been attacked for allowing the exploitation of certain types of unsecured creditor. It has also been blamed for creating inefficiencies. This paper examines these arguments specifically as applied to this jurisdiction, and using both theoretical analysis and recent empirical data, suggests none of them can be sustained. It is argued that security is unlikely to lead to the exploitation of involuntary, ‘uninformed’, or ‘unsophisticated’ creditors, since the perverse incentives it allegedly creates for the debtor’s management are likely to be outweighed by the managers’ liquidation-related costs. It is then pointed out …

The Chameleon Effect: Beyond The Bonding Hypothesis For Cross-Listed Securities, Cally Jordan

ExpressO

This paper is based on a presentation made at the New York Stock Exchange Conference on the Future of Global Equity Trading, March 12, 2004, Sarasota, FL.

Looking back, was it a momentary enthusiasm? The dramatic increase in cross-listed securities, particularly in the United States, was one of the remarkable phenomena of the 1990s capital markets. The bonding, or corporate governance, hypothesis was one of the more intriguing theories to surface to explain the phenomenon. Cross-listing, the hypothesis suggested, might be a bonding mechanism by which firms, incorporated in a jurisdiction with “weak protection” of minority shareholder rights or poor …

The Floating Charge – An Elegy, Riz Mokal

ExpressO

This paper argues that the usual way of conflating floating with fixed charges as small variations on a single theme – as priority-based devices differing only in degree – fundamentally misunderstands its true nature. The floating charge plays a distinctive role as a residual management displacement device which can only be effective if coupled with an appropriate set of fixed security that enables its holder to gather information about the competence of the debtor’s managers and to control their incentives to misbehave. The floating charge allows the debtor free use of its circulating assets while its management is doing well, …

Administrative Receivership And Administration - An Analysis, Riz Mokal

ExpressO

This paper argues that the Enterprise Act 2002 has changed the way those dealing with distressed companies are required to behave much more significantly than most commentators realise. The motivation for this change lies in the ways in which administrative receivership is destructive of social value (in terms of unnecessary job losses and other resource misallocations). The paper identifies three such ways, all linked with the fact that receivership ties the office-holder’s duties to the interests of the debtor’s main bank. This is undesirable because the bank (a) is usually oversecured and thus has little incentive, once receivership is underway, …

Charges Over Chattels – Issues In The Fixed/Floating Jurisprudence, Stephen Atherton, Riz Mokal

ExpressO

Much of the recent debate as to the criteria which determine whether a charge is properly characterised as fixed or floating has revolved around charges over book debts or other receivables. Charges over chattels have received somewhat less attention, even though an attempt to create a fixed charge over chattels gives rise to interesting questions, some of which do not arise when the collateral consists simply of receivables. While some of these questions have received judicial attention in recent years, others are only now starting to be considered. In this paper, we provide an overview of some of the most …

Managing Risk On A $25 Million Bet: Venture Capital, Agency Costs, And The False Dichotomy Of The Corporation, Robert P. Bartlett Iii

ExpressO

An implicit dichotomy of the corporation exists in legal scholarship. On one side of the dichotomy rests the publicly-held corporation suffering from a significant conflict of interest between its managers and dispersed shareholders; on the other side, the closely-held corporation plagued by inter-shareholder conflict.

This Article argues that understanding the agency problems that can exist within a firm demands a rejection of this traditional dichotomy and the theories of the firm built upon it. Using venture capital finance, this Article demonstrates for the first time how this dichotomy obscures how all firms - public and private - often face the …

Attorneys As Gatekeepers: Sec Actions Against Lawyers In The Age Of Sarbanes-Oxley, Lewis D. Lowenfels, Alan R. Bromberg, Michael J. Sullivan

ExpressO

Following the enactment of the Sarbanes-Oxley Act on July 30, 2002, the Securities and Exchange Commission has substantially increased the number of actions it has initiated against lawyers. And a substantial number of these recent SEC actions against counsel to public companies (both internal and external) have highlighted the SEC’s resolve to hold lawyers accountable for not performing adequately their SEC-conceived role as “gatekeepers” to prevent fraud and other violations of the federal securities laws. This “gatekeeper” concept has been and is being implemented through SEC actions addressing a wide variety of alleged transgressions in a wide diversity of factual …

The Different Tax Treatment Of Investment Advisory Fees And Brokerage Fees; The Lower The Fiduciary Duty The Better The Tax Consequences, Barry W. Rickert

ExpressO

The current tax laws favor brokerage fees as compared to investment advisory fees, even though investment advisors are held to a higher standard of fiduciary duty. My article examines the different tax treatment of investment advisory fees and brokerage fees, analyzes the policy considerations of such treatment and proposes alternatives to the current system. Considering the large number of American investing in the securities markets, it is important that our tax laws be written in a way that encourages taxpayers to seek investment professionals who are held to higher standards of conduct. The policy implications of brokerage fees receiving preferable …