Law Commons^™

Article Iii And Seventh Amendment Challenges To Sec Administrative Proceedings After Dodd-Frank, Daniel P. Dwyer Esquire

Daniel P. Dwyer Esquire

This article is a discussion of the evolution of enforcement remedies available to the United States Securities & Exchange Commission and the possibility that, with the enactment of the 2010 Dodd-Frank amendments to the securities laws, Congress encroached on Article III of and the Seventh Amendment to the Constitution. Section of 929P of Dodd-Frank, which allows the SEC to pursue monetary penalties and other forms of relief against unregulated persons in administrative proceedings, is a particular focus. The article relies on a chronological analysis of these areas of law and close case reading to reconcile the disparate and sometimes seemingly …

Conflicted Counselors: Retaliation Protections For Attorney-Whistleblowers In An Inconsistent Regulatory Regime, Jennifer M. Pacella

Jennifer M. Pacella, Esq.

Attorneys, especially in-house counsel, are subject to retaliation by employers in much the same way as traditional whistleblowers, often experiencing retaliation and loss of livelihood for reporting instances of wrongdoing about their clients. Although attorney-whistleblowing undoubtedly invokes ethical concerns, attorneys who “appear and practice” before the Securities and Exchange Commission (“SEC”) are required by federal law to act as internal whistleblowers under the Sarbanes-Oxley Act (“SOX”) and report evidence of material violations of the law within the organizations that they represent. An attorney’s failure to comply with these obligations will result in SEC-imposed civil penalties and disciplinary action. Recent federal …

The Orderly Liquidation Authority: Fanatical Or Familiar? Idealistic Or Unrealistic?, Stephanie P. Massman

Stephanie P Massman

The systemic financial crisis of 2008 spurred the failure of numerous financial and non-financial entities. Regulators addressed each of these failures on an ad hoc ex-post basis, granting multiple bailouts in various forms. The refusal to extend these bailouts to one firm, Lehman Brothers, however, caused further panic and contagion throughout the already unstable market as one of the largest financial institutions of the U.S. underwent an extremely lengthy and value-destructive Chapter 11 bankruptcy. Criticism surrounding not only the bailouts, but also the decision to allow Lehman to fail under the Bankruptcy Code, led to the inclusion of the Orderly …

The Future Of The Private Label Securities Market, David J. Reiss

David J Reiss

The PLS market, like all markets, cycles from greed to fear, from boom to bust. The mortgage market is still in the fear part of the cycle and recent government interventions in it have, undoubtedly, added to that fear. In recent days, there has been a lot of industry pushback against the government’s approach, including threats to pull out of various sectors. But the government should not chart its course based on today’s news reports. Rather, it should identify fundamentals and stick to them. In particular, its regulatory approach should reflect an attempt to align incentives of market actors with …

Dodd-Frank’S Risk Retention Requirement: The Incentive Problem, Amy L. Mcintire

Amy L. McIntire

On July 21, 2010, President Barack Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act into law (Dodd-Frank). Promulgated by Congress to promote the financial stability of the United States by improving accountability and transparency in the financial system, the bill represented an almost complete overhaul of the entire financial regulation system. Specifically, a provision in the bill mandated that securitizers “retain not less than five percent of the credit risk for any asset,” and this requirement became known as the “risk retention requirement.” Legislators hoped that, by forcing securitizers to hold onto a percentage of the risk …

Has The Cftc Gone Too Far In Trying To Keep The American Economy Safe From Cross-Border Swaps?, Gabriel Lau

Gabriel Lau

With the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) in 2010, the Commodity Futures Trading Commission (“CFTC”) received the daunting task regulating swap markets. Following two iterations of proposed guidance and comment periods, the CFTC released its finalized “Interpretive Guidance and Policy Statement Regarding Compliance with Certain Swap Regulations” (“Guidance”) on July 26, 2013. In the Guidance, the CFTC gives its interpretation and policy outlook for promulgating rules with respect to the regulation of cross-border swaps. This paper examines both the critiques of the Guidance, including issues of international comity and rule promulgation procedures, and …

Bounties For Bad Behavior: Rewarding Culpable Whistleblowers Under The Dodd-Frank Act And Internal Revenue Code, Jennifer M. Pacella

Jennifer M. Pacella, Esq.

In 2012, Bradley Birkenfeld received a $104 million reward or “bounty” from the Internal Revenue Service (“IRS”) for blowing the whistle on his employer, UBS, which facilitated a major offshore tax fraud scheme by assisting thousands of U.S. taxpayers to hide their assets in Switzerland. Birkenfeld does not fit the mold of the public’s common perception of a whistleblower. He was himself complicit in this crime and even served time in prison for his involvement. Despite his conviction, Birkenfeld was still eligible for a sizable whistleblower bounty under the IRS Whistleblower Program, which allows rewards for whistleblowers who are convicted …

Prudential Regulation And The Knowledge Problem: Towards A New Paradigm Of Systemic Risk Regulation, Michael T. Cappucci

Michael T Cappucci

In this article I examine the regulatory structure created by Title I of the Dodd-Frank Act and ask whether the prudential regulatory authority given to the Financial Stability Oversight Council is an effective tool for accomplishing the mission of identifying and containing risk in the financial system. Prudential regulation, the principal tool at the disposal of the FSOC, was developed in the 19th century to counteract moral hazard in the banking system. Over time, prudential supervision has become policymakers’ regulation of choice, to the point where it is now employed in the oversight and regulation of non-bank financial firms. However, …

Who Should Be Providing Mortgage Credit To American Households?, David J. Reiss

David J Reiss

Who should be providing mortgage credit to American households? Given that the residential mortgage market is a ten-trillion-dollar one, the answer we come up with had better be right, or we may suffer another brutal financial crisis sooner than we would like. Indeed, the stakes are as high as they were in the Great Depression when the foundation of our current system was first laid down. Unfortunately, the housing finance experts of the 1930s seemed to have a greater clarity of purpose when designing their housing finance system. Part of the problem today is that debates over the housing finance …

The Need For Federal Preemption Of Executive Compensation Reform: How Corporate Governance And Economic Justice Objectives Are Only Achievable Through Comprehensive Federal Regulation Of Executive Compensation, Cory Howard

Cory Howard

Since the beginning of the most recent economic downturn, there has been an increased level of attention on the pay that executives at publicly traded companies have received. Numerous reforms, including the Dodd-Frank Act and the Troubled Asset Relief Program (TARP), imposed transient, although included some permanent limitations, on executive compensation packages. However, given the importance of executive compensation reform to both corporate governance and economic/social justice initiatives, it is imperative that the federal legislature do more. This article will explore some of the patchwork of regulations that the federal government has enacted and the methods that the states use …

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 …

Hola Preemption And The Original Intent Of Congress: Are Federal Thrifts Necessary To Stabilize The Housing Market?, Carliss N. Chatman

Carliss N Chatman

This article studies legislation, regulations, and case law to analyze whether the Homeowners Loan Act, as well as other measures taken to stabilize federal thrifts in the last forty years, have served their original purpose. It also examines the impact of federal intervention on states and homeowners and the role that federally-chartered institutions such as banks and savings and loan associations played in the 2008 market collapse. Over the course of this analysis, particular attention is given to Title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act. This act has numerous goals including implementing stronger consumer protections, …

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 …

Dodd-Frank Act And National Bank Preemption: Much Ado About Nothing, Raymond Natter, Katie Wechsler

Raymond Natter

Federal preemption of state law has been a contentious issue since 1819, when the Supreme Court upheld the right of the Federal Government to charter a national bank and preempted a state attempt to tax that institution. In 1863, the National Bank Act (NBA) established the national bank system, with the goal of having federally chartered institutions eventually supersede state banks. Efforts by the states to prevent this result and to enforce state laws on national banks led to a continuing debate over the preemptive effect of the National Bank Act over the past 150 years.

More recently, those opposed …

The Importance Of Being Earnest: An Environmental Whistleblower’S Guide To Protection Under Sox § 806 And Dodd-Frank, John J. Tollefsen

John J. Tollefsen

This paper argues that the reason so few whistleblowers have won in court is because counsel failed to focus on SEC rule violations. It lays out a strategy for reversing that trend by identifying 13 SEC rules that could be cited by environmental whistleblowers under SOx §806 and its Dodd-Frank cousin.

Ending The Silence: Shareholder Derivative Suits And Amending The Dodd-Frank Act So “Say On Pay” Votes May Be Heard In The Boardroom, William Alan Nelson Ii

William Alan Nelson II

The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) has broad and deep implications that will touch every corner of the financial services industry, as well as multiple other industries. This article is the first to fully examine shareholder derivative lawsuits filed after a negative “say on pay” vote on executive compensation under the Dodd-Frank Act. The article begins by providing a history of “say on pay” votes and examining the “say on pay” provisions of the Dodd-Frank Act. The article transitions into a discussion of how the Dodd-Frank “say on pay” provisions are currently being utilized by …

Consumer Protection Out Of The Shadows Of Shadow Banking: The Role Of The Consumer Financial Protection Bureau, David J. Reiss

David J Reiss

Consumer protection remains the stepchild of financial regulation. Notwithstanding the fact that the economic doldrums we find ourselves in originated in the under-regulated subprime mortgage sector, relatively few academic commentators focus on the role that consumer protection can play in reducing such risks as well as in restoring the balance between consumer and producer in the financial markets. This essay suggests that consumer protection regulation has an important role to play in the regulatory structure of the shadow banking sector.

This essay does four things. First, it describes the role of shadow banking in the residential mortgage market—the shadow mortgage …

Rating The Regulation Of Rating Agencies: Credit Rating Agency Reform In The Aftermath Of The Global Financial Crisis, Nan S. Ellis

Nan S Ellis

In this article, we identify five issues related to performance of credit rating agencies and consider the Dodd-Frank Act in light of these five interrelated issues. Others have commented on credit rating agency performance and offered proposed solutions. Our article is unique, however, in that it offers a comprehensive examination of these interrelated issues. We recognize that any regulatory reform must consider all aspects of the issue rather than to deal with isolated, incremental reform. Moreover, we offer an interdisciplinary approach which considers the relevant finance literature as well as legal commentary.

The End Of The Internal Compliance World As We Know It, Or An Enhancement Of The Effectiveness Of Securities Law Enforcement? Bounty Hunting Under The Dodd-Frank Act's Whistleblower Provisions, Justin R. Blount

Justin R Blount

No abstract provided.

Information Failures In Structured Finance And Dodd'frank's "Improvements To The Regulation Of Credit Rating Agencies", Steven R. Mcnamara

Steven R. McNamara

This article analyzes the credit rating agency reform provisions of the Dodd-Frank Act’s “Improvements to the Regulation of Credit Rating Agencies” in light of the massive failures in the ratings of structured finance securities leading up to the 2008 credit crisis. The primary cause of ratings failure was the flawed quantitative ratings models used by the rating agencies; conflicted behavior on the part of the rating agencies was also an important but secondary cause. The key mechanical flaw in the ratings models was the method used to determination correlation, a measure of the likelihood that one borrower would default in …

Know Your Customer - Or Not, Genci Bilali

Genci Bilali

“Know Your Customer” (KYC) is the due diligence and bank regulation that banks and other financial institutions perform in order to identify their clients and ascertain relevant information pertinent to doing financial business with them. The KYC policies are largely applied from banks and other financial institutions not only to prevent identity theft fraud, money laundering and terrorist financing but also to regulate the risk in business of lending and investment banking activities between banks and their customers.

Commercial and investment banks failed to comply and implement fully the KYC policies in lending monies and selling financial products to their …

Credit Ratings In Insurance Regulation: The Missing Piece Of Financial Reform, John P. Hunt

John P Hunt

Many commentators, including the Financial Crisis Inquiry Commission, have identified the poor quality of credit ratings as an important cause of the recent financial crisis. The leading agencies all have acknowledged poor performance in some areas. One popular explanation for agencies’ poor performance is the incorporation of ratings into regulations. Rating-dependent regulation arguably reduces agencies’ incentives to do a good job (by creating artificial demand for ratings) and amplifies the negative effects of their doing a bad job (by creating regulatory consequences for rating downgrades).

Last year’s Dodd-Frank Wall Street Reform and Consumer Protection Act apparently embraced this explanation wholeheartedly: …

Title Xi Of Dodd-Frank And Its Effort To End “Too Big To Fail”, Herbert C. Shelton Ii

Herbert C Shelton II

This article reviews Title XI of Dodd-Frank and its stated goal of ending “too big to fail.” The article examines the meaning of “too big to fail,” explains Title XI and some of its modifications to prior law, and analyzes whether Title XI achieves its stated goal. The article concludes that because federal money may be used to rescue financial institutions, “too big to fail” and “bailouts” will continue beyond this legislation.

Know Your Customer - Or Not, Genci Bilali

Genci Bilali

“Know Your Customer” (KYC) is the due diligence and bank regulation that banks and other financial institutions perform in order to identify their clients and ascertain relevant information pertinent to doing financial business with them. The KYC policies are largely applied from banks and other financial institutions not only to prevent identity theft fraud, money laundering and terrorist financing but also to regulate the risk in business of lending and investment banking activities between banks and their customers.

Commercial and investment banks failed to comply and implement fully the KYC policies in lending monies and selling financial products to their …

Is The Public Utility Holding Company Act A Model For Breaking Up The Banks That Are Too-Big-To-Fail?, Roberta S. Karmel

Roberta S. Karmel

ABSTRACT FOR “IS THE PUBLIC UTILITY HOLDING COMPANY ACT A MODEL FOR BREAKING UP THE BANKS THAT ARE TO-BIG-TO-FAIL?”

BY ROBERTA S. KARMEL

During the financial crisis of 2007-08 and the debates on regulatory reform that followed, there was general agreement that the “too-big-to-fail” principle creates unacceptable moral hazard. Policy makers divided, however, on the solutions to this problem. Some argued that the banking behemoths in the United States should be broken up. Others argued that dismantling the big banks would be bad policy because these banks would not be able to compete with universal banks in the global capital …