Banking and Finance Law Commons^™

Table Of Contents, Seattle University Law Review

Seattle University Law Review

Table of Contents

"Don't Go Chasing Waterfalls": Fiduciary Duties In Venture Capital Backed Startups, Sarath Sanga, Eric L. Talley

Faculty Scholarship

We develop a model of venture capital contracting and use it to evaluate an emergent set of judicial precedents in corporate law, which we label the Trados doctrine. In our model, founders hold common stock, while venture capital investors hold convertible preferred stock. We show that preferred shareholders have inefficient incentives to liquidate low-valued firms and to continue high-valued firms, while common shareholders inefficiently favor the opposite. The extent of incentive misalignment depends on the firm’s intrinsic and outside valuations, and it is most severe around preferred shareholders’ liquidation preference and conversion point. Although legal liability rules can rectify these …

Paying For Performance? Attorneys' Fees In Securities Fraud Class Actions, Jessica M. Erickson

Law Faculty Publications

This Article studies whether plaintiffs’ lawyers matter in securities class actions. We use inverse propensity score weighting (IPW) to compare the results in cases led by top-tier firms against those brought by lower-tier firms. This technique addresses case selection effects by using all of the cases led by a top-tier firm and then weighting the cases led by lower-tier firms based on how similar these cases are to the cases led by top-tier firms. We do find that top-tier lawyers obtain better outcomes for shareholders in a subset of securities class actions, specifically the cases against the larger (although not …

The Meme Stock Fenzy: Origins And Implications, Dhruv Aggarwal, Albert H. Choi, Yoon-Ho Alex Lee

Articles

In 2021, several publicly traded companies, such as GameStop, Bed Bath & Beyond, and AMC, became “meme stocks,” experiencing a sharp rise in their stock prices through a dramatic influx of retail investors into their shareholder base. Analyses of the meme stock surge and its implications for corporate governance have focused on the idiosyncratic creation of online communities around particular stocks during the COVID-19 pandemic. In this Article, we argue that the emergence of meme stocks is part of longer-running and more structural digital transformations in trading, investing, and governance. On the trading front, the abolition of commissions by major …

Uncovering Elon's Data Empire, Carliss Chatman, Carla L. Reyes

Faculty Journal Articles and Book Chapters

In 2022, Elon Musk publicly announced that he would purchase Twitter after acquiring a five percent stake in the company. His failure to report this acquisition—and the company’s failure to notice—allowed Musk to continue purchasing stock at a deflated price, costing the company more than $156 million. After the signing of a merger agreement, the details of the transaction caused wild fluctuations in Tesla’s stock price. Musk’s complaints about the management of Twitter and the existence of bots on the platform led Twitter’s stock to also drop in value, as did Musk’s attempts to withdraw from the transaction. Even after …

Law’S Detrimental Reliance On Intermediaries, Carla L. Reyes

Faculty Journal Articles and Book Chapters

Emerging technology is law’s magic mirror. Even as law seeks to cabin the effects of emerging technology in society, when we hold emerging technology up to law, emerging technology often reflects flaws or gaps in legal constructs. Of course, rather than recognizing those flaws or gaps, law retorts back “mirror, mirror, on the wall, who is the fairest of them all?,” demanding that all other disciplines and constructs bow before law’s mighty, near-perfect reach. Often, no matter how strongly emerging technology demands that law bend, legal evolution only occurs after regulatory failures harm individuals on a massive scale. One emerging …

Special Issues In Support Of Evidence-Based Policy Making In Sustainable Banking And Finance, Lucia Alessi, Theodor Florian Cojoianu, Declan French, Andreas G. F. Hoepner

Research Collection College of Integrative Studies

BackgroundIn December 2015, 195 countries around the world signed the Paris Agreement and pledged to work towards limiting global greenhouse gas emissions in order to limit the average global temperature increase to 1.5 °C above preindustrial levels. From a scientific perspective, the stabilisation of global warming under any target requires the achievement of a net-zero emissions economy (Matthews & Caldeira, 2008). In support of global investors looking to provide capital towards green solutions andSustainability disclosures – a means to what end?A significant body of literature has suggested that many of the voluntary sustainability disclosures of companies come from the need …

Book Review On From The Great Recession To The Covid-19 Pandemic By Professor Jerry W. Markham, Ronald Filler

FIU Law Review

A review of Professor Jerry Markham's book "From the Great Recession to the COVID-19 Pandemic."

Markham’S Opus Remembering The Past—Watching It Repeat From The Great Recession To The Covid-19 Pandemic: A Financial History Of The United States 2010–2020 (By Jerry W. Markham 2022), Christian A. Johnson

FIU Law Review

This article discusses the impact and significance of Professor Jerry Markham's financial history entitled "From the Great Recession to Covid-19 Pandemic: A Financial History of the United States 2010-2020. The article describes how this volume 7 to his series on the financial history of the United States captures the significance of the financial events and tumult that occurred between 2010 and 2020.

Rational Investing Or Speculative Fever?: Spacs, Robinhood, And Digital Assets—Securities Markets Or Casinos?, Thomas Lee Hazen

FIU Law Review

This article focuses a recurring theme – speculation in the financial markets. The 2010-2020 decade set the stage for a new round of speculative activity starting in 2021. In the article that follows I reflect on a new wave of speculation and three current examples of speculative activity. The article concludes that regulators should be cautious about over-regulation of SPACs and gamified trading. The article also supports the regulation of digital assets (crypto currencies and NFTs) as securities.

From The Great Recession To The Covid-19 Pandemic: A Financial History Of The United States 2010-2020—A Comparison Of The Government’S Response To The Two Financial Crises That Bookended The 2010 To 2020 Decade, Lissa Lamkin Broome

FIU Law Review

This article compares the government's legislative and regulatory response to each of the two financial crises that bookended the 2010-2020 decade and how the response to the COVID-19 crisis was affected by various provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act enacted in 2010 in response to the 2008 financial crisis. The article concludes with six lessons we learned from these two financial crises experienced in relatively short order: act fast, act with force, act on multiple fronts, regain or retain citizens' confidence in the financial system, ensure access to liquidity, and aid those who are struggling.

Celebrating Markham’S Approach To Financial History: Getting At The Macro One Deal At A Time, José Gabilondo

FIU Law Review

Professor Markham's financial history does an excellent job of reviewing and analyzing financial history for the period from the Great Recession to the COVID pandemic. His granular approach to financial history conveys macro-trends by focusing on the most defining transactions and episodes from this period.

Book Review From The Great Recession To The Covid-19 Pandemic A Financial History Of The United States, Rigers Gjyshi

FIU Law Review

A review of Professor Jerry Markham's book "From the Great Recession to the COVID-19 Pandemic."

Entre La Espada Y La Pared: Obstacles To U.S. Investment In Cuba, Thais Lopez

FIU Law Review

Investing in Cuba poses several obstacles to U.S. investors. Cuba’s new Law of Foreign Investment and new Constitution do not provide remedies or protections against the state’s takings of private property or imprisonment without charge. On the U.S. side, Title III of the Helms-Burton Act has made U.S. investors the most vulnerable to claims worth billions in damages under the Act.

Expanding Mfw: Delaware Law Should Offer A Business Judgment Rule Safe Harbor For All Conflicted Controller Transactions, Alex Lindsey

Fordham Journal of Corporate & Financial Law

While courts usually defer to a board’s business decisions under the business judgment rule, courts will apply a much less deferential standard of review due to loyalty concerns if a conflicted controller is involved in a business decision such as a merger. However, in Kahn v. M & F Worldwide (“MFW”) when a squeeze out merger was challenged by a minority stockholder, the Delaware Supreme Court reviewed the transaction under the deferential business judgment rule standard because the Court found that the structure of the transaction neutralized the controller loyalty concerns. Building on this reasoning, the Court developed a checklist …

Loophole Entrepreneurship, Brian M. Sirman

Fordham Journal of Corporate & Financial Law

All entrepreneurs seek favorable legal or regulatory treatment for their businesses. Sometimes this leads an entrepreneur to build a business within a gap in the law—a loophole. In so doing, these “loophole entrepreneurs” may avoid steep regulatory compliance costs that otherwise would beset (or perhaps prohibit) their businesses, thereby gaining advantages over competitors. Despite these benefits, loophole entrepreneurship is fraught with risks. Loopholes, by nature, are fragile, and their contours are often uncertain. Moreover, the stigma of “exploiting a loophole” (which connotes unfairness or deception) can provoke ill will among competitors, policymakers, and the public.

The ranks of loophole entrepreneurs …

Pricing Corporate Governance, Albert Choi

Articles

Scholars and practitioners have long theorized that by penalizing firms with unattractive governance features, the stock market incentivizes firms to adopt the optimal governance structure at their initial public offerings (IPOs). This theory, however, does not seem to match with practice. Not only do many IPO firms offer putatively suboptimal governance arrangements, such as staggered boards and dual-class structures, but these arrangements have been gaining popularity among IPO firms. This Article argues that the IPO market is unlikely to provide the necessary discipline to incentivize companies to adopt the optimal governance package. In particular, when the optimal governance package differs …

Smart Money For The People: Using Financial Innovation And Technology To Promote Esg, Frank Emmert

Duke Law & Technology Review

Traditional fiat currencies managed by governments and central banks have had negative impacts on environmental, social, and governance (ESG) goals. Central banks in mature democracies pursue policies that prioritize economic growth and high employment. However, these policies often lead to inflation, eroding the savings and pension funds of average citizens and encouraging risky behavior by banks and entrepreneurs. The pursuit of endless growth is socially and environmentally unsustainable. Leaders in developing countries and dictatorships use expansive monetary policy to maintain their positions, further exacerbating the situation. Convertible fiat currencies moving across borders in untraceable transactions evade regulation and taxation, with …

The Structure Of Secondary Copyright Liability, Felix T. Wu

Articles

Secondary copyright liability and secondary patent liability largely parallel each other. And yet, secondary copyright cases are often quite different from secondary patent cases. Whereas most secondary patent infringers act in a way that targets a particular patent or group of related patents, secondary copyright infringement mostly arises in the context of technologies or services that work across all copyrighted works. Secondary copyright liability raises issues of platform liability in ways that secondary patent liability usually does not.

The current structure and framing of secondary copyright liability inadequately account for this distinction. The result is that secondary copyright liability tends …

After Ftx: Can The Original Bitcoin Use Case Be Saved?, Mark Burge

Faculty Scholarship

Bitcoin and the other cryptocurrencies spawned by the innovation of blockchain programming have exploded in prominence, both in gains of massive market value and in dramatic market losses, the latter most notably seen in connection with the failure of the FTX cryptocurrency exchange in November 2022. After years of investment and speculation, however, something crucial has faded: the original use case for Bitcoin as a system of payment. Can cryptocurrency-as-a-payment-system be saved, or are day traders and speculators the actual cryptocurrency future? This article suggests that cryptocurrency has been hobbled by a lack of foundational commercial and consumer-protection law that …

Debt-For-Climate Swaps And Illicit Financial Flows: A Call For Caution In Designing Climate Finance Infrastructures, Olabisi D. Akinkugbe, Morris K. Odeh

Articles, Book Chapters, & Popular Press

Ahead of COP28, there have been widespread calls for the adoption of 'debt-for nature' and 'debt-for-climate' swaps as an alternative climate finance system to address funding gaps in developing countries. Typically, these swaps involve a debtor country repurchasing its debt securities at substantial discounts or converting official bilateral debt into environmental assets, which enables more fiscal savings to be redirected toward conservation objectives. Unlike most climate finance instruments, these debt swaps avoid burdening countries in the Global South with additional unsustainable debt, thus allowing for a more effective response to the climate crisis without sacrificing spending on other development projects. …

The Digitization Of Money: Stablecoins And Cbdc, Benjamin Geva, Mohammed Muraj

Articles & Book Chapters

Whether tokens are transferable peer to peer or via third party intermediation, through automation, tokenization could deliver gains by greatly speeding up settlement and increase efficiency by ensuring all parts of a transaction occur simultaneously, in what is called atomic settlement. This article addresses only the first model, that of the digital bearer instrument transmitted from a payer to a payee typically in a discharge of a debt. [...]a digital currency transferable under a decentralized protocol - such as (but not only) over a distributed ledger and yet issued centrally - is considered to operate in a "hybrid" scheme. The …

Taxation, Craig D. Bell

University of Richmond Law Review

This Article reviews significant recent developments in the laws affecting Virginia state and local taxation. Its Parts cover legislative activity, judicial decisions, and selected opinions from the past year. Part I of this Article addresses taxes administered by the Virginia Department of Taxation (the “Tax Department” or “Department”). Part II covers local taxes, including real and tangible personal property machinery and tools, license taxes, and other discrete local taxes.

The overall purpose of this Article is to provide Virginia tax and general practitioners with a concise overview of the recent developments in Virginia taxation that are most likely to impact …

Taxing The New With The Old: Capturing The Value Of Data With The Corporate Income Tax In Virginia, Coleman H. Cheeley

University of Richmond Law Review

The Commonwealth of Virginia markets itself as “The Largest Data Center Market in the World.”In 2019, the Northern Virginia market alone was the largest in the United States by inventory, with room to grow. In 2021, data centers in Northern Virginia required an estimated 1,686 megawatts of power; that number is expected to increase by 200 megawatts in the near future, reflecting data centers currently under development. For reference, in 2022, it was estimated that more than 100 homes could be powered by one megawatt of solar power in Virginia. Historically, data centers have been located in the Commonwealth due …

Assignment (Or Novation) Of Indemnity Policies, Chee Ho Tham

Research Collection Yong Pung How School Of Law

In this article Dr Chee Ho Tham suggests that terminological confusion has arisen over the use of the phrase “assignment” in connection with policies of non-marine indemnity insurance, where the “assignment” is made before the occurrence of the insured event which causes loss or damage to the subject-matter of the policy. An “assignment” of the contract of insurance entails a novation and should be referred to as such.

Open Finance: Regulatory Challenges Of The Evolution Of Data Sharing Arrangements In The Financial Sector, Nydia Remolina Leon

Research Collection Yong Pung How School Of Law

In recent years, open banking has emerged as a new form of financial intermediation, allowing third party developers to build applications and services around financial institutions. By using the financial institution's data and infrastructure through open Application Programming Interfaces (APIs), a variety of actors-including fintech companies, Bigtechs, and the traditional players in the financial system-can develop new products and services that ultimately promote innovation, competition and financial inclusion while improving consumers' experiences. The concept of open banking evolved to open finance to illustrate the possibilities of adding to the picture all types of data-driven financial products. Focusing on the opportunities …

Central Bank Immunity, Sanctions, And Sovereign Wealth Funds, Ingrid W. Brunk

Vanderbilt Law School Faculty Publications

Central bank assets held in foreign countries are entitled to immunity from execution under international law. Even as foreign sovereign immunity in general has become less absolute over time, the trend has been toward greater protection for foreign central bank assets. As countries expand their use of central banks, however, recent cases have limited immunity for certain kinds of sovereign wealth funds held by central banks. Sanctions on foreign central bank assets have also become more common, raising issues about the relation- ship between central bank immunity and the recognition of governments, the relationship between immunity and executive actions, and …

Book Review On Consumer And Sme Credit Law By Nora Beausang, Prof. (Dr.) G.S. Bajpai, Dr. Sushila

International Journal on Consumer Law and Practice

In this book review, the authors review the book titled "Consumer and SME Credit Law" by Nora Beausang which addresses in detail legal requirements applicable to the provision of financial services to consumers/SMEs and conduct of business regulatory issues relevant to consumer protection in Ireland, a highly regulated common law jurisdiction. The book analyses how the Irish regulators and courts have dealt with the consequences of, and inevitable upsurge in, civil disputes arising from the fallout from the global financial crisis and an overheated residential property market in the context of national, EU and internationally-derived regulatory requirements.

Financial Inclusion, Cryptocurrency, And Afrofuturism, Lynnise Phillips Pantin

Northwestern University Law Review

As a community, Black people consistently face barriers to full participation in traditional financial markets. The decentralized nature of the cryptocurrency market is attractive to a community that has been historically and systematically excluded from the traditional financial markets by both private and public actors. As new entrants to any type of financial market, Black people have increasingly embraced blockchain technology and cryptocurrency as a path towards the wealth-building opportunities and financial freedom they have been denied in traditional markets. This Article analyzes whether the technology’s decentralized system will lead to financial inclusion or increased financial exclusion. Without reconciling the …

Racism As A Threat To Financial Stability, Cary Martin Shelby

Northwestern University Law Review

This Article draws from several theoretical frameworks such as critical race theory, law and economics, and rule of law conceptions to argue that the Financial Stability Oversight Council (FSOC) should formally recognize racism as a threat to financial stability due to its interconnectedness with recent and projected systemic disruptions. This Article begins by first introducing a novel model created by the author through which to dissect this claim. This “Systemic Disruption Model” provides a theoretical depiction of how racism drives every phase along the life-cycle continuum of a systemic disruption.

First, with respect to the Model’s “Introduction” phase, this Article …