Banking and Finance Law Commons^™

Winning, Defined? Text-Mining Arbitration Decisions, Charlotte S. Alexander, Nicole G. Iannarone

Cardozo Law Review

Who wins in consumer arbitration? Historically, this question has been nearly impossible to answer, as most arbitration proceedings are a private black box, and arbitral forums release only limited summary statistics. One exception is the Financial Industry Regulatory Authority (FINRA), which arbitrates virtually all disputes between investors and stockbroker-dealers, and makes all of its nearly 60,000 written arbitration decisions publicly available in an online database. This Article is the first to use computational text analysis tools to study these decisions, and to construct a measure of the claimants’ win, loss, and settlement rates. It is the first installment in an …

The Growth & Regulatory Challenges Of Decentralized Finance, Aaron J. Wright

Articles

The article explores the rapid growth and regulatory challenges of decentralized finance (DeFi), a blockchain-based sector that replaces traditional financial intermediaries with automated smart contracts. DeFi platforms, such as decentralized exchanges (DEXes) and lending protocols, offer financial services like trading, lending, and asset management without centralized control. While DeFi promises lower costs, greater accessibility, and financial inclusion, it also raises significant regulatory questions, particularly around compliance, liability, and oversight. The article highlights the tension between DeFi's decentralized nature and the need for legal frameworks to address risks such as fraud, market manipulation, and systemic instability.

Session 3: Access To Financial Services - The Promise (And Challenges) Of Fintech, Joseph M. Vincent, Chris Adams, Lucinda Fazio, Roberta Hollinshead, Sumit Mallick, Sands Mckinley, Jonice Gray Tucker, Tonita Webb

SITIE Symposiums

For many Americans, the American Dream is a dream deferred. Recently, there has been an explosion in demand for diversity, equity, and inclusion in financial services. This has coincided with an explosion of a different kind related to delivering financial services through innovations in technology, otherwise known as FinTech. We have seen a plethora of FinTech applications on our smartphones, ranging from online lending to remote deposit making. While these applications provide potential opportunities to level the playing field for those whose dream has been deferred, there remain challenges.

Opening Session, Annette Clark, Steven Bender

SITIE Symposiums

This year's conference focuses on the social good, highlighting three access barriers fundamental in law and society - access to legal services (and more generally, justice), access to health and health care during the COVID-19 pandemic, and access to financial services for the unbanked or underbanked.

Proxy Advisors As Issue Spotters, Douglas Sarro

Brooklyn Journal of Corporate, Financial & Commercial Law

When institutional investors hire proxy advisors to prepare reports on matters up for vote at public company shareholder meetings, are they interested primarily in acquiring a bottom-line recommendation on how to vote, on which they can then blindly rely? Or in acquiring information that will help them make their own voting decisions? Supporters of controversial reforms introduced by the Securities and Exchange Commission (SEC) in 2019 and 2020 gravitate toward the former position, arguing that reform is needed to discourage undue reliance on proxy advisor recommendations. Opponents gravitate toward the latter position, arguing that additional regulation generally is unnecessary given …

Reducing Conflicts Of Interest: A "Glass-Steagall" Split Of Advisory And Consulting Services Of Proxy Advisory Firms, Austin Manna

Brooklyn Journal of Corporate, Financial & Commercial Law

This Note explores a solution to the potential problem with proxy advisory firms that involves an inherent conflict of interest arising from the structure of two services—advisory and consulting services—offered at certain proxy advisory firms in the United States. The solution proposed in this paper applies a Glass-Steagall framework to breakup these two services of the proxy advisory firms. In theory, this would eliminate the inherent conflicts of interest.

Insider Trading As A Precursor To Modern Business Ethics, Robyn Coleman

Finance Undergraduate Honors Theses

There has been a recent change in business that there is more focus on the “stakeholder approach” than shareholder primacy. This can be attributed to the early actions and illegality of insider trading that expected a step beyond a solely economic approach. This attitude was then replicated to become what we see as the modern business approach. Business now includes ethical investing, environmental focus, corporate citizenship, and emphasis on multiple stakeholders that was not always there. Companies have embraced this position while others have been criticized for not doing so. As this approach develops and changes, it will be enlightening …

Decentralized Finance: Regulating Cryptocurrency Exchanges, Kristin N. Johnson

William & Mary Law Review

Global financial markets are in the midst of a transformative movement. The creation of Bitcoin and Facebook’s proposed distribution of Diem mark a watershed moment in the evolution of the financial markets ecosystem. Purportedly, peer-to-peer distributed digital ledger technology eliminates legacy financial market intermediaries such as investment banks, depository banks, exchanges, clearinghouses, and broker-dealers.

Yet careful examination reveals that cryptocurrency issuers and the firms that offer secondary market cryptocurrency trading services have not quite lived up to their promise. Notwithstanding cryptoenthusiasts’ calls for disintermediation, evidence reveals that platforms that facilitate cryptocurrency trading frequently employ the long-adopted intermediation practices of their …

The Rescue Of Fannie Mae And Freddie Mac – Module A: The Conservatorships, Daniel Thompson, Rosalind Z. Wiggins

Journal of Financial Crises

Two government-sponsored enterprises (GSEs), the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), dominated the secondary mortgage market during the US housing crisis, collectively holding or guaranteeing $5.3 trillion in mortgage assets by late 2007. As the crisis escalated, the two GSEs began to report substantial losses and their survival became uncertain. On September 6, 2008, the GSEs’ new regulator, the Federal Housing Finance Agency (FHFA), placed the firms into indefinite conservatorships, one step of a four-part government intervention to stabilize the enterprises. This case study evaluates the purpose and efficacy of the …

Profiting From Our Pain: Privileged Access To Social Impact Investing, Cary Martin Shelby

Scholarly Articles

Social impacting investing has become the latest trend to permeate the financial markets. With massive anticipated funding gaps for sustainable development goals, and a millennial-driven thirst for doing good while doing well, this trend is likely to continue in the coming decades. This burgeoning industry is poised to experience yet an additional boost, since it provides an alternative mechanism for private actors to “profit from our pain,” particularly in the wake of the COVID-19 pandemic and the Black Lives Matter movement.

As to be expected, the law has not sufficiently adapted to this new wave of innovation. Scholars have thus …

Looking Forward: Professor Roberta Karmel's Prescient Views On The Transformation Of Self-Regulatory Organizations And Of The Securities Market Structure At The Turn Of The Last Century, James Fanto

Faculty Scholarship

No abstract provided.

The Alarming Legality Of Security Manipulation Through Shareholder Proposals, Artem M. Joukov, Samantha M. Caspar

Seattle University Law Review

Shareholder proposals attract attention from scholars in finance and economics because they present an opportunity to study both quasidemocratic decision-making at the corporate level and the impact of this decision-making on firm outcomes. These studies capture the effect of various proposals but rarely address whether regulations should allow many of them in the first place due to the possibility of stock price manipulation. Recent changes to shareholder proposal rules, adopted in September 2020, sought to address the potential for exploitation that some proposals create (but ultimately failed to do so). This Article shows the potential for apparently legal stock price …

To Innovate Or Regulate: How To Regulate Cloud Service Providers Within Financial Institutions, Morgan Willard

Catholic University Journal of Law and Technology

The purpose of this article is to analyze whether cloud service providers should be considered Systemically Important Financial Market Utilities (SIFMU), subjecting them to increased oversight. It also considers the risks and benefits associated with the use of the technology by financial institutions, as well as potential alternatives. Overall, this article argues that cloud service providers do not fall under the current SIFMU framework, and any regulation of the technology should strive to strike a balance between innovation and safe regulation.

Table Of Contents, Seattle University Law Review

Seattle University Law Review

Table of Contents and Special Thanks.

Stock Buyback Ability To Enhance Ceo Compensation: Theory, Evidence, And Policy Implications, Nitzan Shilon

Lewis & Clark Law Review

I report that stock buyback ability to enhance CEO compensation has reached a record high amount corresponding to one-third of total pay. Also, I refute the common wisdom that this ability is attributed mainly to buyback impact on per share criteria that determine annual bonuses. Instead, I show that because of recent reforms in executive compensation design, the ability of buybacks to boost the amount of CEO stock-based compensation has become ten times higher than their potential to increase annual bonuses. I argue, first, that the potential of stock buybacks to enhance their compensation provides CEOs with incentives to conduct …

Bending The Investment Advisers Act's Regulatory Arc, Joseph A. Franco

Fordham Journal of Corporate & Financial Law

The Investment Advisers Act of 1940 (“IAA”) and its regulatory purview have changed dramatically over the life of the statute. The statute began as a simple registration scheme with barebones conduct integrity prohibitions for wealth managers and purveyors of investment newsletters. Although the statute’s original minimalist cast was deficient, the IAA’s regulatory scope has undergone a fundamental transformation, both in terms of the expanding class of advisers covered by the statute’s substantive provisions and the statute’s expansive structural integrity requirements. Over a span of decades, the IAA’s focus has been reoriented so that it is directed at least as much, …

The Insider Trading Prohibition Act: A Small Step Towards A Codified Insider Trading Law, Kayla Quigley

Fordham Journal of Corporate & Financial Law

Many have called for reform to insider trading law, as the current judge-made doctrine is ambiguous, complicated, and ultimately permissive of many instances of trading on nonpublic information. Indeed, Congress has attempted several times to pass a uniform insider trading statute. Most recently, in December 2019, the House of Representatives passed the Insider Trading Prohibition Act (“ITPA”). The legislation codifies many current principles of insider trading jurisprudence while also expanding potential insider trading liability. Moreover, it attempts to fix gaps in the law that various cases, such as United States v. Newman, have declined to address.

Among other flaws, …

Emerging Circuit Split Over Modification Of Mortgages On Multi-Use Real Properties, Michal Zabadal

Fordham Journal of Corporate & Financial Law

For many decades, healthy levels of residential mortgage loans (“RMLs”) and their regulation have been among the major drivers of the economy. Because of the importance of RMLs for the condition of the national financial system and the general well-being of the society, it is essential that lenders are reasonably incentivized to originate these loans. A well-designed promise of higher recovery on RMLs in times of distress can be a compelling motivator. The Bankruptcy Code seeks to deliver on that promise by treating RMLs more favorably. It does that by barring the debtor-in-bankruptcy from modifying a claim secured by a …

The Virus, Risk, And Commercial Mortgage-Backed Securities: Examining Dodd-Frank’S Impact In The Midst Of A Pandemic, Owen Haney

Fordham Journal of Corporate & Financial Law

When lawmakers sought to reshape the financial industry through the passage of the Dodd-Frank Act in 2010, they specifically attacked the “moral hazard” in the asset-backed securities market that they believed was partly responsible for the collapse of global financial markets. Congress identified several practices in asset-backed securitizations that posed a risk to the world economy. In particular, regulators believed that the “originate-to-distribute” model, whereby loan originators—those parties armed with the best knowledge regarding the quality of the loans in the transaction and who consequently set underwriting standards—could sell off the loans without bearing any risk should those borrowers (homeowners …

Table Of Contents, Seattle University Law Review

Seattle University Law Review

Table of Contents

Post-Etherdelta: Clarifying Liabilities For Cryptocurrency Exchanges And Market Participants, Robert Sistoso

Cardozo Arts & Entertainment Law Journal

The rise of cryptocurrencies has led to the development of both centralized and decentralized exchanges, which face significant regulatory challenges under U.S. securities laws. The SEC has applied the Howey test to determine whether tokens qualify as securities, and its enforcement actions, such as against EtherDelta, highlight the need for clarity on the liabilities of developers, operators, and users in decentralized systems. The article advocates for the SEC to refine its regulatory approach to balance investor protection with the promotion of innovation in blockchain technology.

M&A Advisor Misconduct: A Wrong Without A Remedy?, Andrew F. Tuch

Scholarship@WashULaw

Merger and acquisition ("M&A") transactions are among the most high profile of corporate transactions. They are also among the most contentious, with around eighty percent of all completed deals litigated in recent years. And yet investment banks—essential advisors on these deals—have generally succeeded spectacularly in avoiding liability, an anomaly considering the routine nature of deal litigation and the frequency with which they face lawsuits in their other activities. This article examines this anomaly, explaining the doctrinal and practical reasons why it arises. In doing so, it puts in context aiding and abetting liability, a recently-successful shareholder strategy to bring M&A …

A General Defense Of Information Fiduciaries, Andrew F. Tuch

Scholarship@WashULaw

Countless high-profile abuses of user data by leading technology companies have raised a basic question: should firms that traffic in user data be held legally responsible to their users as “information fiduciaries”? Privacy legislation to impose fiduciary-like duties of care, confidentiality, and loyalty on data collectors enjoys bipartisan support but faces strong opposition from scholars. First, critics argue that the information fiduciary concept flies in the face of fundamental corporate law principles that require firms to prioritize shareholder interests over those of users. Second, it is said that the overwhelming self-interest of digital companies makes fiduciary loyalty impossible as a …

Managing Management Buyouts: A Us-Uk Comparative Analysis, Andrew F. Tuch

Scholarship@WashULaw

This chapter comparatively assesses U.S. and U.K. law governing management buyouts (MBOs), focusing on the duties of directors and officers in these systems. The analysis casts doubt on persistent but mistaken perceptions about U.S. and U.K. corporate fiduciary duties for self-dealing. The U.K. no-conflict rule is seen as strict, the U.S. fairness rule as flexible and pragmatic. As the analysis for MBOs demonstrates, these fiduciary rules operate similarly, tasking neutral or disinterested directors with policing self-dealing, enabling commercially sensitive responses to conflicts of interest. The analysis also reveals stronger formal private enforcement of corporate law and more robust disclosure rules …

Regulating Financial Guarantors, Steven L. Schwarcz

Faculty Scholarship

To improve financial regulation, scholars have engaged in extensive research over the past decade to try to understand why systemically important financial firms engage in excessive risk-taking. None of that research fully explains, however, the unusually excessive risk-taking by financial guarantors such as bond insurers, protection sellers under credit-default-swap (CDS) derivatives, credit enhancers in securitization transactions, and even issuers of standby letters of credit. With tens of trillions of dollars of financial guarantees outstanding, the potential for failure is massive. This Article argues that financial guarantor risk-taking is influenced by a previously unrecognized cognitive bias, which it calls “abstraction bias.” …

Esg And Climate Change Blind Spots: Turning The Corner On Sec Disclosure, Cynthia A. Williams, Donna M. Nagy

Articles by Maurer Faculty

This article examines four areas in which the SEC, for more than a decade, resisted reform or impeded shareholders’ access to sought-after environmental, social, and governance (ESG) information. These areas are: (1) the SEC’s refusal to act on several rulemaking petitions submitted during the years 2009 to 2018, which called for expanded ESG disclosure; (2) the SEC’s grudging promulgation of rules concerning social disclosures as required by Congress in the Dodd-Frank Act of 2010; (3) the SEC’s 2020 revisions to SEC Rule 14a-8, which make the submission of shareholder proposals more difficult, thereby thwarting investor efforts to raise ESG concerns; …

Pension Fiduciaries And Climate Change: A Canadian Perspective, Maziar Peihani

All Faculty Publications

Climate change has emerged as a major issue of financial risk for Canadian pension funds when determining where to place investments. The author argues that while such pension funds recognize climate change as an issue that holds the potential for significant financial risk, the funds’ current approach to climate-related risks faces critical limitations. The author identifies the current practices of the five largest pension funds in Canada when faced with climate-related financial risks, then discusses the key shortcomings in current practices among the pension funds in three main areas.
First, the author examines organizational governance, which seeks to understand investment …

Securing Crypto: Exempting Certain Cryptoassets From The Arkansas Securities Act, Jesse Kloss

Arkansas Law Review

Out of fifty states in 2019, Arkansas was ranked forty-fourth for technology and innovation with a grade of “F,” thirty-sixth for economy with a grade of “D+,” and thirty-seventh for business friendliness with a grade of “D+.” It is time to make Arkansas an innovation and business friendly state. Exempting certain fully functional cryptoassets, those that have some purpose other than a speculative or investment purpose, from the Arkansas Securities Act is one step towards doing so.

The Future Of Reorganization Procedures In The Era Of Pre-Insolvency Law, Aurelio Gurrea-Martinez

Research Collection Yong Pung How School Of Law

Several countries and regions around the world, including Singapore, the United Kingdom, and the European Union, are amending their restructuring framework to implement a pre-insolvency mechanism that includes most of the features that exist in the US Chapter 11 reorganization procedure. However, unlike what happens in the United States, where unsuccessful reorganizations lead to Chapter 7 liquidations, companies using this ‘de facto Chapter 11’ (DFCH11) are still allowed to use formal reorganization procedures. This article argues that, while the rise of the DFCH11 is not necessarily undesirable provided that various protections are put in place, jurisdictions implementing this restructuring tool …

Regulation Of Securities Offerings In California: Is It Time For A Change After A Century Of Merit Regulation?, Neal H. Brockmeyer

Loyola of Los Angeles Law Review

The California securities law originated in 1913 from a populist movement that embodied a paternalistic attitude toward the protection of investors. It was characterized by the registration of offerings of securities with few exemptions and exclusions, a qualitative review of the merits of those offerings and an administrator with broad authority to implement and enforce the law. While the California securities law is still based on merit review, exclusions and exemptions have been added and expanded over the years by the California legislature and securities regulators. More recently, Congress has preempted state registration and merit review of various securities and …