Law Commons^™

"Keep To The Code”: A Global Code Of Conduct For Third-Party Funders, Victoria Sahani

Faculty Scholarship

Global commercial third-party funding has given rise to wide-ranging regulatory approaches worldwide. Consequently, funders can engage in cross-border regulatory arbitrage by exploiting regulatory gaps within and among nations. This Article argues that the global community of nations should articulate a universal approach to the behavioral expectations of third-party funders operating transnationally, independent of local laws regarding the technical business of funding. It asserts that the key to fostering the ethical development of the third-party funding industry is to develop a globally applicable but locally enforced code of conduct or professional responsibility for the industry. Moreover, a successful regime for funder …

Extraterritoriality Of The Regulations And Interconnections Of The Derivatives Market: Legal Implications For East And Southeast Asia, Christopher C. H. Chen

Research Collection Yong Pung How School Of Law

This article examines the legal implications of the interconnections of the global derivatives market, such as the exchange and over-the-counter (OTC) markets, in East and Southeast Asia. First, we introduce the interconnectedness of the global derivatives market. We then examine some legal implications of such interconnectedness from several angles, such as the extraterritoriality of relevant regulations (notably the reporting, clearing and trading mandates prescribed by the G20 and the new initial margin rule), standard product documentation, the effect of substituted compliance, the potential competition effect due to shifting OTC trades to exchange trading and the effect of consolidating exchanges and/or …

Credit Default Swaps And The Empty Creditor Hypothesis—If It Ain’T Broke, Don’T Fix It, Florian Gamper

The Journal of Business, Entrepreneurship & the Law

An empty creditor is a creditor who, through the use of derivatives, especially credit default swaps (CDSs), takes a position where she retains the legal rights of a creditor but has little or no economic exposure to a borrower. Thus far, the debate on empty creditors has focused mainly on how the law should react to the perceived problem of empty creditors. The debate also covers the prominent argument that empty creditors violate the underlying corporate law assumption that creditors and shareholders hold their legal rights in proportion to their economic exposure to a company. This article argues that the …

Whose Claim Is It Anyway?—Direct And Derivative Claims In The Context Of Bankruptcy Litigation, Kristen M. Lasak

Bankruptcy Research Library

(Excerpt)

In bankruptcy litigation, the line between direct and derivative claims may be a thin one, and courts are often entrusted with the task of determining whether the claims creditors set forth are actually derivative of claims owned by the bankruptcy estate. Companies entering into bankruptcy proceedings have the option of creating litigation trusts, which are authorized to pursue any claims the bankruptcy estate may own. A release of claims is often part of any settlement agreement, and such an agreement combined with the ownership of claims by the bankruptcy estate, often controlled through a litigation trust, can leave defrauded …

Glen W. Rollings Et Al., Order On Defendants' Motion To Dismiss And For Judgment On The Pleadings, Melvin K. Westmoreland

Georgia Business Court Opinions

No abstract provided.

Post-Citizens United: Using Shareholder Derivative Claims Of Corporate Waste To Challenge Corporate Independent Political Expenditures, William Alan Nelson Ii, Esq.

Nevada Law Journal

No abstract provided.

Caremark's Irrelevance, Mercer E. Bullard

Mercer E Bullard

In re Caremark Int’l Inc. Derivative Litig. is commonly held out as the iconic corporate law case on liability for a failure of legal compliance, but the true source of corporate law as to legal compliance is the higher standard established by other sources of law. The expected cost of liability, both criminal and civil, for violations of federal healthcare regulations, for example, is a far stronger determinant of corporate compliance systems than potential liability under Caremark. Other areas of industry-specific regulation, such as for financial services, telecommunications and energy, similarly play a greater role than state corporate law in …

Caremark's Irrelevance, Mercer E. Bullard

Mercer E Bullard

In re Caremark Int’l Inc. Derivative Litig. is commonly held out as the iconic corporate law case on liability for a failure of legal compliance, but the true source of corporate law as to legal compliance is the higher standard established by other sources of law. The expected cost of liability, both criminal and civil, for violations of federal healthcare regulations, for example, is a far stronger determinant of corporate compliance systems than potential liability under Caremark. Other areas of industry-specific regulation, such as for financial services, telecommunications and energy, similarly play a greater role than state corporate law in …

Equity Swaps And Disclosure Of Shareholding Of Major Shareholders, Christopher Chao-Hung Chen

Christopher Chao-hung Chen

Equity swaps are derivative instruments linking to the performance of stocks or stock indices. In theory, equity swaps would result in the separation of economic interests of shareholders from their stock ownership. Equity swaps have also been used as a weapon in a battle for corporate control in other countries. Thus, the subsequent question is whether a party to an equity swap must disclose his swap positions pursuant to article 43-1 of the Securities Exchange Act if the amount of shares linked in the swap has passed a certain threshold. This paper argues that current disclosure rules under Taiwan law …

A Review Of The Proposed Amendments To Be Made To S 216a Of The Companies Act, Linus Koh

Linus Koh

No abstract provided.

Post-Citizens United: Using Shareholder Derivative Claims Of Corporate Waste To Challenge Corporate Independent Political Expenditures, William Alan Nelson Ii

William Alan Nelson II

The Supreme Court’s recent decision in Citizens United v. FEC allows companies to spend unlimited sums from their treasuries on advertisements that promote or oppose political candidates. This issue has taken the main stage in American politics, especially with the current Republican primary race and the Presidential election in November. This article discusses how shareholders may use derivative claims of corporate waste to challenge independent political expenditures that they believe are detrimental to the corporation. The article begins by discussing the history of the corporate waste doctrine and looks at the standard for pleading a claim of corporate waste. The …

Judges Who Settle, Hillary A. Sale

Hillary A Sale

This Article develops a construct of judges as gatekeepers in corporate and securities litigation, focusing on the last-period, or settlement stage of the cases. Many accounts of corporate scandals have focused on gatekeepers and the roles they played or, in some cases, abdicated. Corporate gatekeepers, like investment bankers, accountants, and lawyers, function as enablers and monitors. They facilitate transactions and enable corporate actors to access the financial and securities markets. Without them the transactions would not happen. In class actions and derivative litigation, judges are the monitors and enablers. They are required to oversee the litigation arising from bad transactions …

The Road Not Taken: Rethinking Securities Regulation And The Case For Federal Merit Review, Daniel J. Morrissey

University of Richmond Law Review

No abstract provided.

Partnership Derivative Suits: Jennings V. Kay Jennings Ltd. P'Ship, Patricia Collins Mccullagh

University of Richmond Law Review

No abstract provided.

The Shareholder Derivative Suit As A Response To Stock Option Backdating, Christy L. Abbott

Saint Louis University Law Journal

No abstract provided.

Hedge Funds’ Empty Voting In Mergers And Acquisitions: A Fiduciary Duties Perspective, Andrea Zanoni

Andrea Zanoni

Hedge funds have become lately active also in the market for corporate control. Their active involvement has been propelled by a tactic allowing them to decouple voting rights from economic ownership and labelled in the literature as “encumbered shares” or “empty voting”.

The aim of this Article is twofold. On the one hand, I address the impact of hedge funds’ activism on the financial markets and on the portfolio companies. In general terms, hedge funds’ activism should be seen as a neutral element. After a cost-benefit analysis, I show that the costs implied by hedge funds’ activism are at least …

Code, Crash, And Open Source: The Outsourcing Of Financial Regulation To Risk Models And The Global Financial Crisis, Erik F. Gerding

Erik F. Gerding

The widespread use computer-based risk models in the financial industry in the last two decades enabled the marketing of more complex financial products to consumers, the growth of securitization and derivatives, and the development of sophisticated risk management strategies by financial institutions. Over this same period, regulators increasingly delegated or outsourced vast responsibility for regulating risk in both consumer finance and financial markets to these private industry models. The proprietary risk models of financial institutions thus came to serve as a “new financial code” that regulated transfers of risk among consumers, financial institutions, and investors.

The spectacular failure of financial …

Code, Crash, And Open Source: The Outsourcing Of Financial Regulation To Risk Models And The Global Financial Crisis, Erik F. Gerding

Publications

The widespread use of computer-based risk models in the financial industry during the last two decades enabled the marketing of more complex financial products to consumers, the growth of securitization and derivatives, and the development of sophisticated risk-management strategies by financial institutions. Over this same period, regulators increasingly delegated or outsourced vast responsibility for regulating risk in both consumer finance and financial markets to these privately owned industry models. Proprietary risk models of financial institutions thus came to serve as a "new financial code" that regulated transfers of risk among consumers, financial institutions, and investors.

The spectacular failure of financial-industry …

Erisa Misrepresentation And Nondisclosure Claims: Securities Litigation Under The Guise Of Erisa?, Clovis Trevino Bravo

Georgetown Law Student Series

In the wake of recent corporate scandals and dramatic market downturns, many employees whose retirement savings plans were heavily invested in the stock of their employer have seen their account balances substantially depleted. To recover for their losses, plan participants have filed lawsuits under the Employee Retirement Income Security Act (ERISA) alleging that plan fiduciaries made misrepresentations or failed to disclose material information about the suitability of investing in the company stock. These suits are generally derivative or companion cases to securities class actions based on the same allegations of misrepresentations or nondisclosures. Even though there is a significant overlap …

Risk Distribution In The Capital Markets: Credit Default Swaps, Insurance And A Theory Of Demarcation, Robert F. Schwartz

Fordham Journal of Corporate & Financial Law

No abstract provided.

The Next Generation: The Revised Uniform Limited Liability Company Act, Daniel S. Kleinberger

Faculty Scholarship

In July, 2006, the National Conference of Commissioners on Uniform State Laws approved Re-ULLCA - the Revised Uniform Limited Liability Company Act. The product of a three-year drafting process, heavily influenced by 13 advisors appointed by the ABA, the new Act brings major innovations to the law of limited liability companies. This article, written by the two co-reporters for the drafting committee: (i) explains why the Conference decided to draft a new LLC statute, reviews the process through which the Conference produced and approved the new Act, and describes the Act's basic architecture; (ii) highlights the Act's major innovations; and …

Direct Versus Derivative And The Law Of Limited Liability Companies, Daniel S. Kleinberger

Faculty Scholarship

The hybrid nature of limited liability companies causes us to re-invent, or at least re-examine, many doctrinal wheels. This Article will reexamine one of the most practical of those wheels-the distinction between direct and derivative claims in the context of a closely-held limited liability company.

Case law concerning the direct/derivative distinction is still overwhelmingly from the law of corporations, although LLC cases are now being reported with some frequency. LLC cases routinely analogize to, or borrow from, the corporate law. This Article encompasses that law, analyzes LLC developments, and argues that courts should (i) avoid the "special injury" rule, (ii) …

An Overview Of Derivatives Litigation, 1994 To 2000, John D. Finnerty

Fordham Journal of Corporate & Financial Law

No abstract provided.

Securities Price Risks And Financial Derivative Markets , Peter H. Huang

Northwestern Journal of International Law & Business

The financial and popular media report almost daily on the volatility of securities market prices. Yet, many people continue to buy securities to hedge against or speculate on certain risks. People can also buy or sell derivatives to hedge against or speculate on fluctuations in securities prices. This Article discusses three regulatory policy implications of utilizing derivatives markets to reallocate the bearing of securities price risks. First, if there are too few non-redundant derivative markets, a competitive market equilibrium allocation of securities price risks is typically constrained Pareto inefficient. This financial economic result means that for typical economies, a regulator …

International Regulatory Responses To Derivative Crises: The Role Of The U.S. Commodity Futures Trading Commission , Brooksley Born

Northwestern Journal of International Law & Business

Over the past decade, as derivatives markets - and particularly the over-the-counter ("OTC") market - have become increasingly global in nature, the U.S.. Commodity Futures Trading Commission ("CFTC") - the federal regulatory agency that oversees futures and commodity option trading' - has played an active role in fostering international regulatory cooperation. The technology of the information age, allowing instant communication and electronic trading, has revolutionized financial markets, instituting around-the-clock, around-the-globe trading, globally active market users and market intermediaries, and an increasing pace of market innovation. Market crises now have the potential for widespread financial impact and require international regulatory response. …

Credit Derivatives: An Overview Of Regulatory Initiatives In The United States And Europe, Andre Scheerer

Fordham Journal of Corporate & Financial Law

No abstract provided.

A Public Choice Approach To Private Ordering: Rent-Seeking At The World's First Futures Exchange: Comments On Mark West's 'Private Ordering At The World's First Futures Exchange', Omri Yadlin

Michigan Law Review

The literature on private ordering systems has expanded exponentially over the last decade. Yet, very few scholars have actually attempted to define the term "private ordering" - a failure that sometimes leads to confusion. Some scholars identify private ordering with non-state ordering. According to this view, the private legal systems Robert Ellickson, Lisa Bernstein, McMillan & Woodruff, Mark West, and others have investigated are "private" simply because their norms are not manufactured or enforced by the state. The alternative view emphasizes the decentralized feature of private ordering systems. Robert Ellickson, for example, studied "how people manage to interact to mutual …

Private Ordering At The World's First Futures Exchange, Mark D. West

Michigan Law Review

Modern derivative securities - financial instruments whose value is linked to or "derived" from some other asset - are often sophisticated, complex, and subject to a variety of rules and regulations. The same is true of the derivative instruments traded at the world's first organized futures exchange, the Dojima Rice Exchange in Osaka, Japan, where trade flourished for nearly 300 years, from the late seventeenth century until shortly before World War II. This Article analyzes Dojima's organization, efficiency, and amalgam of legal and extralegal rules. In doing so, it contributes to a growing body of literature on commercial self-regulation while …

Direct Vs. Derivative, Or "What's A Lawsuit Between Friends In An 'Incorporated Partnership'?", Daniel S. Kleinberger

Faculty Scholarship

In any context the distinction between direct and derivative claims carries significant consequences. The procedural requirements are different, as are the available remedies. In addition, the remedies benefit different parties. A successful derivative claim typically enriches the corporate treasury, while a successful direct claim typically puts money directly in the hands of the shareholder claimant. Moreover, derivative defendants can shelter behind several powerful bulwarks-including special litigation committees and the business judgment rule-that are unavailable to direct defendants.

Under the 'internal affairs' doctrine, Minnesota law governs the direct/derivative issue for all Minnesota corporations. Current Minnesota law provides inadequate guidance when the …

The Challenge Of Derivatives, Saul S. Cohen

Fordham Law Review

No abstract provided.