Banking and Finance Law Commons^™

Retail Investors And Corporate Governance: Evidence From Zero-Commission Trading, Dhruv Aggarwal, Albert H. Choi, Yoon-Ho Alex Lee

Law & Economics Working Papers

We examine the effects of the sudden abolition of trading commissions by major online brokerages in 2019, which lowered stock market entry costs for retail investors, on corporate governance. Firms already popular with retail investors experienced positive abnormal returns around the abolition of commissions. Firms with positive abnormal returns in response to commission-free trading subsequently saw a decrease in institutional ownership, a decrease in shareholder voting, and a deterioration in environmental, social, and corporate governance (ESG) metrics. Finally, these firms were more likely to adopt bylaw amendments to reduce the percentage of shares needed for a quorum at shareholder meetings. …

Decentralized Autonomous Organizations: To Statutorily Organize Or Not?, David M. Grant, Eric M. Kirby, Steven Hawkins

Wyoming Law Review

This Article explores the evolving concept of decentralized autonomous organizations (DAOs) in the context of Web3 technology. It raises critical questions about whether DAOs truly represent a step forward in limiting liability in entity governance structures or if they risk centralizing the decentralized. The text discusses the potential of DAOs to address regulatory and tax challenges while also highlighting concerns about their legitimacy and security. It compares the governance structures of traditional entities to DAOs and contemplates the reasons for formal organization pursuant to state statute. The Article further delves into some of the statutory laws in specific states recognizing …

Wanted: A Prudential Framework For Crypto Assets, Lee Reiners, Sangita Gazi

Arkansas Law Review

This Article summarizes the limited publicly available data on banks’ exposure to crypto assets and offers several specific examples of how U.S. banks engage in crypto-related businesses. It then examines past guidance issued by U.S. bank regulators and explains why this guidance lacks sufficient detail to clarify the prudential requirements associated with the various crypto-related activities in which banks are engaged. The Article then assesses the adequacy of the Basel Committee on Banking Supervision’s final prudential standard for crypto-asset exposures, issued in December 2022, and finds that the measure fails to adequately address the unique risks various crypto-asset activities pose …

Just Because They Say It: Does The U.S. Really Have The “First-Ever Comprehensive Framework” For Digital Assets?, Carol R. Goforth

Arkansas Law Review

On March 9, 2022, President Biden made history by signing an Executive Order on Ensuring Responsible Development of Digital Assets. On September 16, 2022, the White House released a fact sheet proclaiming that it had produced the “First Ever Comprehensive Framework for Responsible Development of Digital Assets,” based on nine reports stemming from the Executive Order. This Article is divided into two main parts. Part one reviews the reports received by the White House, explaining what they address while pointing out open issues for which no particular direction is established. Part two assesses regulatory gaps in the crypto space in …

Keynote Address By Cftc Commissioner Kristin Johnson, Kristin N. Johnson

Arkansas Law Review

Today, our markets are witnessing a transformative moment marked by exceptional, rapidly evolving innovation. To better understand this transformation, we might inquire about the nature of these novel financial instruments, intermediaries, and the underlying technologies that fuel an ever-expanding adoption. Thinking critically about these issues may inform our understanding of the intermediaries or lack thereof, and financial products that characterize this moment in the history and evolution of financial markets.

The Global Corporate Minimum Tax And Mne Home Countries, Reuven S. Avi-Yonah

Other Publications

This Perspective explores the implications for the home countries of large MNEs of the agreement reached by over 140 countries in 2021 to enact a corporate minimum tax of 15%. It argues that the corporate minimum tax complements the trend to reduce the negative impact of unfettered globalization on labor, and it protects the ability of home countries to finance a robust social safety net. Home countries should adopt the corporate minimum tax, and that includes the US, which last year failed to adapt its Global Intangible Low-Taxed Income approach to the corporate minimum tax.

Translating A Cbdc Dollar Into A Constitutional Dollar, Christopher P. Guzelian

St. Mary's Law Journal

The constitutional Dollar was a silver coin. Federal and state paper moneys were

unconstitutional, and gold and copper coins were not Dollars. Consequently, notable

constitutional originalists claim any Dollar not constructed from silver—including the

current widely circulating paper Federal Reserve note—is unconstitutional. But the Dollar

soon may undergo an unprecedented technological metamorphosis: in 2022, the White

House and the Federal Reserve Bank Board of Governors advocated the possible adoption

of a U.S. Central Bank Digital Currency (“CBDC” Dollars). Private commercial

electronic bank credits have been issued for some time, but a CBDC Dollar would be

America’s first electronic government currency. …

Public Law 86-272 And The Texas Margin Tax, Marvin J. Williams

St. Mary's Law Journal

No abstract provided.

Tac Meeting Statements, Hilary J. Allen

Legislative Testimony & Comments

The Technology Advisory Committee will hold a meeting on January 8, 2024. At this meeting, the TAC will continue its discussion of issues relating to digital assets and blockchain technology, cybersecurity, and emerging and evolving technologies, here.

Shareholder Primacy Versus Shareholder Accountability, William Wilson Bratton

Articles

When corporations inflict injuries in the course of business, shareholders wielding environmental, social, and governance ("ESG") principles can, and now sometimes do, intervene to correct the matter. In the emerging fact pattern, corporate social accountability expands out of its historic collectivized frame to become an internal subject matter-a corporate governance topic. As a result, shareholder accountability surfaces as a policy question for the first time. The Big Three index fund managers, BlackRock, Vanguard, and State Street, responded to the accountability question with ESG activism. In so doing, they defected against corporate legal theory's central tenet, shareholder primacy. Shareholder primacy builds …

Are Illinois Courts Still Champions Of Fiduciary Duties?, Charles W. Murdock, Michael Huiras

Loyola University Chicago Law Journal

Illinois courts have departed from the corporate-law jurisprudence that traditionally served as a champion of fiduciary duties. Historically, Illinois courts have consistently protected minority shareholders and punished directors and those in control for engaging in unfaithful, abusive, and deceitful behavior. In recent years, however, the Illinois Supreme Court has taken a technical approach to fiduciary duties, resulting in wrongdoers getting away with unconscionable conduct. First, this Article will demonstrate why Illinois has historically been characterized as a “shareholder” state by comparing the Illinois and Delaware corporate statutes and examining Illinois courts’ favorable fiduciary duty jurisprudence. In the latter half of …

It Takes A Thief…. And A Bank: Protecting Consumers From Fraud And Scams On P2p Payment Platforms, Cathy Lesser Mansfield

University of Michigan Journal of Law Reform

This Article proposes statutory and regulatory changes to the Electronic Fund Transfer Act; Regulation E; and the Bank Secrecy Act/Anti-Money Laundering regulations to protect consumers who use instant payment platforms in the United States (such as Zelle and Venmo) from scam artists and fraudsters. After discussing current fraud scams on these payment platforms, the Article discusses the history and context of the 1978 Electronic Fund Transfer Act and Regulation E, and the definition of unauthorized payments and payments made in error therein. The second part of this Article explores changes to the Bank Secrecy Act/Anti-Money Laundering regulations that might make …

Key Developments At The World Bank Inspection Panel (2013-2024), Dilek Barlas

Perspectives

Through the lens of important cases, this essay reflects on major developments that occurred at the Panel during the tenure of the author as the Executive Secretary of the World Bank Inspection Panel and shows how the Panel has evolved to improve accessibility, has influenced overall development policies, and has become a catalyst for institutional change. The essay observes that the Panel’s success has largely been due to its structural and operational independence, reporting as it does directly to the Bank’s Board of Executive Directors. However, there are challenges facing the Panel on certain issues, including most importantly its independence, …

Ending 30 Years Of Imf Exceptionalism: A Call For An Accountability Mechanism At The International Monetary Fund, Luiz Vieria

Perspectives

This year marks the 30^th anniversary of the World Bank’s Inspection Panel (WBIP or Panel), created as the result of grass-roots and international pressure on the Bank to address the well-documented negative impacts on marginalised communities of the Bank-financed Narmada dam and similar projects.

The establishment of the world’s first independent accountability mechanism (IAM) at the World Bank led to the creation of similar mechanisms at nearly all international financial institutions (IFIs), with the IMF an important exception. The establishment of the WBIP and other IAMs was a step-change in accountability, as previously IFIs were only accountable to shareholders …

Imf Human Rights Accountability: A Pragmatic Way To Break The Deadlock, Aldo Caliari

Perspectives

In the three decades since the 1993 establishment of the World Bank Inspection Panel, almost all development finance institutions (DFIs) have established analogous panels, ombudsperson offices or other independent accountability mechanisms (IAMs) to allow people who believe they have been harmed by the DFI’s activities to directly trigger processes of fact-finding, dispute resolution, and, if applicable, redress. The primary exception has been the International Monetary Fund.

World Bank's Roadmap And The Inspection Panel's Human Rights Responsibilities, Juan Pablo Bohoslavsky, C.P. Chandrasekhar

Perspectives

The World Bank has been under pressure to devise a process for “evolving” its mission, operations, and resources, acknowledging that decades of engagement with low- and middle-income countries has resulted, paradoxically and contrary to its official mission, in a “crisis of development.” The Bank bluntly notes in the opening to its paper “Evolving the World Bank Group’s Mission, Operations, and Resources: A Roadmap,” issued in December 2022, “after decades of progress, growth and poverty reduction have stalled.” Indeed, this “crisis of development” threatens to unleash political instability around the world.

Algorithmic Financial Regulation: Limits Of Computing Complex Adaptive Systems, Shuping Li

American University Business Law Review

This article examines the potential of and limits to the use of machine learning for financial regulation. Ideally, if we could fully understand the financial system and agree on long- and short-term regulatory goals, we would be able to write code that carries out the computation that extracts proper representations from the data and makes correct regulatory decisions. We cannot do this yet because of limited sources of data, the bias brought by human beings and algorithmic models, and the difficulty of improving uninterpretable models. Furthermore, since law is a combination of merits and facts, there are difficulties in establishing …

Are The Mdbs Accountable? Reflecting On The Independent Accountability Mechanisms Of The Multilateral Development Banks, Susan Park

Perspectives

The International Accountability Mechanisms of the Multilateral Development Banks provide important insights into how to hold intergovernmental organizations to account for their environmental and social impacts. This perspective identifies how the IAMs hold the Banks to account according to the six standard questions of accountability: who is accountable, to whom, for what are they accountable, and what are the standards, processes, and sanctions employed to demonstrate that the MDBs are accountable. This highlights what the IAMs can and cannot hold the MDBs to account for, and how this might shape further international grievance mechanisms for people seeking to defend their …

The River Of Accountability Mechanisms: Then And Now, Suresh Nanwani

Perspectives

In 1993, the river of international accountability mechanisms (IAMs) commenced from its source – the World Bank Inspection Panel (The Panel). In its journey the river was fed by the tributaries of similar accountability mechanisms from other development institutions, including four regional development banks – the Inter-American Development Bank in 1994, the Asian Development Bank in 1995, the European Bank for Reconstruction and Development in 2003, and the African Development Bank in 2006. It also welcomed other entities – bilateral institutions like Japan Bank for International Cooperation (2003) and Proparco (2018), United Nations Development Program (2014) and other organizations like …

Unacceptable Means: The Inspection Panel Actions On World Bank Forcible Resettlement, Lori Udall

Perspectives

This essay reviews the World Bank’s Inspection Panel’s work on cases involving involuntary resettlement. Since its Inception, the Panel has received 89 requests involving resettlement (over half of all cases) and has investigated 32. It traces Panel cases, lessons learned, and advisory reports on resettlement and livelihood restoration. Despite the growing evidence through the years of resettlement failures, the World Bank continues to violate its own safeguard policies and repeat the same omissions and mistakes in projects. The essay concludes with recommendations for empowering the Inspection Panel and for the Bank to move towards bottom-up community development that better addresses …

Thirty Years Of Accountability In International Development: Insights From The General Counsel Of The World Bank Group, Christopher H. Stephens

Perspectives

The creation of the World Bank’s Inspection Panel in 1993 was a groundbreaking moment in international development. The first accountability mechanism of its kind, it established a precedent for accountability in development that has been followed by multiple development banks and international financial institutions over the last decades. Today, the credibility of international financial institutions rests significantly on the mechanisms that they put in place to check their own behavior and the avenues they offer for affected communities and individuals to raise questions of harm related to the projects financed by these institutions. This essay is a reflection on the …

Henderson And The Objective Observer Standard: The Future Of Race-Conscious Standards Post-Students For Fair Admissions, Gabriela Dionisio

Seattle University Law Review

On June 29, 2023, the Supreme Court of the United States decided Students for Fair Admissions v. President & Fellows of Harvard College, which struck down race-conscious admissions policies. Within just a year after its ruling, Students for Fair Admissions has already had a sweeping impact, reaching beyond higher education. Although the Supreme Court did not indicate whether Students for Fair Admissions applies to sectors beyond higher education, law firms, and other employers have already modified their diversity policies and initiatives, erasing race and company diversity considerations. Given those dramatic changes, there is growing fear that Students for Fair Admissions …

Same Crime, Different Time: Sentencing Disparities In The Deep South & A Path Forward Under The Fourteenth Amendment, Hailey M. Donovan

Seattle University Law Review

The United States has the highest incarceration rate of any country in the world. The American obsession with crime and punishment can be tracked over the last half-century, as the nation’s incarceration rate has risen astronomically. Since 1970, the number of incarcerated people in the United States has increased more than sevenfold to over 2.3 million, outpacing both crime and population growth considerably. While the rise itself is undoubtedly bleak, a more troubling truth lies just below the surface. Not all states contribute equally to American mass incarceration. Rather, states have vastly different incarceration rates. Unlike at the federal level, …

A Case For Clarity: Indication Of Collateral, Veryl Victoria Miles

Scholarly Articles

This article reviews different critiques of scholars and practitioners on the correctness of the Seventh and First Circuit Court of Appeals opinions in First Midwest Bank v. Reinbold, 938 F. 3d. 866, 100 U.C.C. Rep. Serv. 2d (7th Cir. 2019) cert. denied, 140 S. Ct. 1125, 206 L. Ed. 2d 189 (2020) and Financial Oversight & Management Board for Puerto Rico v. Andalusian Global Designate Activity Co. 914 F. 3d 694 (1st Cir. 2019), cert. denied, 140 S. Ct. 47, 205 L. Ed. 2d 29 (2019). These two decisions address the question as to whether an incorporation by reference …

A New Era Of Accountability? The Holding Foreign Companies Accountable Act’S Pursuit Of Regulatory Equality, Robert Ruelas

Northwestern Journal of International Law & Business

This paper discusses the Holding Foreign Companies Accountable Act (HFCAA) as a response to the long-standing regulatory disparities between U.S. and foreign firms listed on U.S. stock exchanges, with particular regard to foreign firms from China. The HFCAA requires that any firms listed on U.S. stock exchanges be subject to inspections by the Public Company Accounting Oversight Board (PCAOB) or face delisting, aiming to eliminate historic regulatory disparities. The paper begins by highlighting the historic regulatory gap in oversight resulting from China’s lack of cooperation with U.S. regulators and continues by discussing the investor harm from various scandals that could …

Confronting Ai-Induced Power Disparity And Emotional Disruption: Expansive Duties Of Broker-Dealers And Investment Advisers, Shuping Li, Wei Shen

Northwestern Journal of International Law & Business

The increasing use of AI models in investment services has raised concerns about ineffective responses, power disparity, and investor harm caused by emotional disruption. Generative AI-driven investment service providers often fail to address consumer issues quickly, guiding customers through superfluous and meaningless verbiage or professional terminology in infinite loops without providing an option to talk with a human customer service staff. Customers who are “stuck” in ineffective or inaccurate responses from AI agents may waste time for investors, make poor investment or trading decisions, and the platform may profit from investor rational decision-making owing to investors’ emotional disruption.

This article …

Tyrannical Hoas And How To Reign In Their Foreclosure Power And Further Protect Homeowners, Juliette Koves

Faculty Scholarship

No abstract provided.

Digital Bank Holidays, Hilary J. Allen

Scholarly Articles in Law Reviews & Journals

The March 2023 run on Silicon Valley Bank spurred renewed debate about how to structure deposit insurance to best eliminate future bank runs. This Article argues, however, that deposit insurance cannot be relied upon to eliminate all bank runs, especially if technological developments create potential new bank run triggers that deposit insurance may not be responsive to. We may be expecting too much of deposit insurance, and so it is worth considering other tools that might be useful in responding to future bank runs and broader banking panics. One such tool is the “bank holiday,” last deployed in the United …

New Tech, Old Problem: The Rise Of Virtual Rent-To-Own Agreements, Carrie Floyd

Fellow, Adjunct, Lecturer, and Research Scholar Works

This Article explores how fintech has disrupted the traditional rent-to-own (RTO) industry, giving rise to new, virtual RTO agreements (VirTOs). These VirTOs have enabled the RTO industry to expand into the service industry and to markets for products not traditionally associated with rentals, such as vehicle repairs, pet ownership, and medical devices. This Article analyzes this development.

RTO agreements purport to rent products to a consumer until the conclusion of a set number of renewable rental payments, at which point ownership transfers. The fundamental characteristic of these agreements – and why they are not regulated as loans – are that …

Regulating Crypto Intermediaries, Eric D. Chason

Marquette Law Review

Early 2024 produced a dramatic rebound in cryptocurrency markets as Bitcoin hit an all-time high price in March 2024. This surge was fueled in large part by judicial and regulatory action. After years of denials and a high-profile defeat in court, the U.S. Securities and Exchange Commission (SEC) finally approved the first exchange-traded funds (ETFs) for Bitcoin in January 2024. Many believe that these approvals will lead to a greater shift of investment funds into crypto. Crypto regulation is not, however, ready for this shift. While ETFs have clear treatment under current law, other institutions lack the same clarity or …