Law and Economics Commons^™

The Political Economy Of Dodd-Frank: Why Financial Reform Tends To Be Frustrated And Systemic Risk Perpetuated, John C. Coffee Jr.

Faculty Scholarship

A good crisis should never go to waste. In the world of financial regulation, experience has shown – since at least the time of the South Sea Bubble three hundred years ago – that only after a catastrophic market collapse can legislators and regulators overcome the resistance of the financial community and adopt comprehensive "re-form" legislation. U.S. financial history both confirms and conforms to this generalization. The Securities Act of 1933 and the Securities Exchange Act of 1934 were the product of the 1929 stock-market crash and the Great Depression, with their enactment following the inauguration of President Franklin Roosevelt …

Securities Class Actions Against Foreign Issuers, Merritt B. Fox

Faculty Scholarship

This Article addresses the fundamental question of whether, as a matter of good policy, it is ever appropriate that a foreign issuer be subject to the U.S. fraud-on-the-market private damages class action liability regime, and, if so, by what kinds of claimants and under what circumstances. The bulk of payouts under the U.S. securities laws arise out of fraud-on-the-market class actions – actions against issuers on behalf of secondary market purchasers of their shares for trading losses suffered as a result of issuer misstatements in violation of Rule 10b-5. In the first decade of this century, foreign issuers became frequent …

The Law And Economics Of Blockholder Disclosure, Lucian A. Bebchuk, Robert J. Jackson Jr.

Faculty Scholarship

The Securities and Exchange Commission is currently considering a rulemaking petition that advocates tightening the rules under the Williams Act, which regulates the disclosure of large blocks of stock in public companies. In this Article, we explain why the Commission should not view the proposed tightening as a merely "technical" change needed to meet the objectives of the Williams Act, provide market transparency, or modernize its regulations. The drafters of the Williams Act made a conscious choice not to impose an inflexible 5% cap on pre-disclosure accumulations of shares to avoid deterring investors from accumulating large blocks of shares. We …

Institutionalization, Investment Adviser Regulation, And The Hedge Fund Problem, Anita Krug

All Faculty Scholarship

This Article contends that more effective regulation of investment advisers could be achieved by recognizing that the growth of hedge funds, private equity funds, and other private funds in recent decades is a manifestation of institutionalization in the investment advisory context. That is, investment advisers today commonly advise these “institutions,” which have supplanted other, smaller investors as advisory clients. However, the federal securities statute governing investment advisers, the Investment Advisers Act of 1940, does not address the role of private funds as institutions that now intermediate those smaller investors’ relationships to investment advisers. Consistent with that failure, investment adviser regulation …

Memo To The Sec On The Proposed Rule On Disclosure Of Payments By Resource Extraction Issuers, Perrine Toledano

Columbia Center on Sustainable Investment Staff Publications

CCSI strongly supports the transparency of contracts and tax flows. CCSI shares the belief of many stakeholders that transparency is essential to leverage extractive industries for sustainable development and is in the mutual interest of all stakeholders. However, some industry players continue to voice the concern that increased transparency would be harmful for their business. Therefore, CCSI is working to also establish the business case for transparency.

In one such case, some industry players have been lobbying against the regulations developed by the Security and Exchange Commission to implement the mandatory disclosure provisions of the Dodd Frank Wall Street Reform …

Wider Role For Our Miners In Africa, Lisa E. Sachs, Joel Negin, Glenn Denning

Columbia Center on Sustainable Investment Staff Publications

The Australian government is rapidly increasing aid to Africa. But the real story about the country's engagement in Africa is the massive investment by Australian companies in extractive industries.

More than 150 Australian resource companies are active in more than 40 African countries with a total investment greater than $20 billion, including in coal in Mozambique, copper and uranium in Zambia, gold in Eritrea and uranium in Malawi.

The Wider Context: The Future Of Capital Markets Regulation In Developed Markets, Cally Jordan

Faculty Papers & Publications

At a time of such great turbulence, looking to the future directions of capital markets and their regulation in developed economies is a particularly risky business. We are in the midst of a great sea change. Nevertheless, there are several current, and readily observable, phenomena which are likely to shape capital markets regulation in the near future. First of all, the blurring of the distinctions between developed and developing markets themselves, as well as that between domestic and international markets, has put into question the adequacy of existing regulatory frameworks. Also, the transatlantic dialogue, London – New York, has given …

Deconstructing Corporate Governance: Director Primacy Without Principle?, René Reich-Graefe

Fordham Journal of Corporate & Financial Law

For almost eighty years now, corporate law scholarship has centered around two elementary analytical findings made in what has once been described as the “last major work of original scholarship”within the field.

Lessons For Competition Law From The Economic Crisis: The Prospect For Antitrust Responses To The “Too-Big-To-Fail” Phenomenon, Jesse W. W. Markham, Jr.

Fordham Journal of Corporate & Financial Law

This article examines whether, and the extent to which, antitrust law could contribute to a broader regulatory effort to control the too-big-to-fail problem. The article begins by exploring the nature of the problem. Against this backdrop, it considers antitrust policy and rules to evaluate whether antitrust might play a meaningful role. The article concludes that antitrust law, if vigorously enforced with an emphasis on avoiding too-big-to-fail problems, can be a useful public policy tool to address the problem. However, it can come nowhere near solving it or preventing recurrences of recent systemic failures.

Clearing And Trade Execution Requirements For Otc Derivatives Swaps Under The Frank-Dodd Wall Street Reform And Consumer Protection Act, Willa E. Gibson

Akron Law Faculty Publications

This paper examines Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act entitled the “Wall Street Transparency and Accountability Act of 2010” (the “Act”). The Act provides a comprehensive regulatory framework for swap transactions that designates the Commodities Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) as the primary regulators of the OTC derivatives swap market. The Act provides a very broad definition of swaps to include most OTC derivatives transactions, and it grants the CFTC regulatory jurisdiction over them with the exception of security-based swaps to which the SEC is granted regulatory jurisdiction. …

Investment Promotion Agencies And Sustainable Fdi: Moving Toward The Fourth Generation Of Investment Promotion, Columbia Center On Sustainable Investment, World Association Of Investment Promotion Agencies

Columbia Center on Sustainable Investment Staff Publications

In April and May 2010, CCSI supported WAIPA to conduct its annual survey. This report, Investment Promotion Agencies and Sustainable FDI: Moving toward the Fourth Generation of Investment Promotion, benchmarks the responses of IPAs regarding sustainable FDI and its four dimensions (economic development, environmental sustainability, social development, governance) and finds, among other things, that these are unevenly addressed by investment promotion strategies and investment incentives. The report also draws attention to the desirability of attracting sustainable FDI, rather than focusing on volume of investment alone.

In 2017, CCSI also helped the World Association of Investment Promotion Agencies (WAIPA) to conduct …

Evolving Regulation Of Corporate Governance And The Implications For D&O Liability: The United States And Australia, Joan T.A. Gabel, Nancy R. Mansfield, Paul Von Nessen, Austin W. Hall, Andrew Jones

San Diego International Law Journal

This Article compares the modern corporate regulatory environments in the United States and Australia, including an analysis of the climate for Directors & Officers (D & O) liability coverage. Comparing these regulations across two large markets with similar historical bases for assessing director and officer liability allows us to explore which reforms may be more effective as new scandals emerge.

Reframing Financial Regulation, Charles K. Whitehead

Cornell Law Faculty Publications

Financial regulation today is largely framed by traditional business categories. The financial markets, however, have begun to bypass those categories, principally over the last thirty years. Chief among the changes has been convergence in the products and services offered by traditional intermediaries and new market entrants, as well as a shift in capital-raising and risk-bearing from traditional intermediation to the capital markets. The result has been the reintroduction of old problems addressed by (but now beyond the reach of) current regulation, and the rise of new problems that reflect change in how capital and financial risk can now be managed …

An Insight Into Insider Trading In Greater China, Greg Tzu Jan Yang

Maryland Series in Contemporary Asian Studies

No abstract provided.

Trusts Versus Corporations: An Empirical Analysis Of Competing Organizational Forms, A. Joseph Warburton

College of Law - Faculty Scholarship

This paper studies the effects of organizational form on managerial behavior and firm performance, from an empirical perspective. Managers of trusts are subject to stricter fiduciary responsibilities than managers of corporations. This paper examines the ramifications empirically, by exploiting data generated by a change in British regulations in the 1990s that allowed mutual funds to organize as either a trust or a corporation. I find evidence that trust law is effective in curtailing opportunistic behavior, as trust managers charge significantly lower fees than their observationally equivalent corporate counterparts. Trust managers also incur lower risk. However, evidence suggests that trust managers …

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.

Keynote Address: The Conflicted Trustee Dilemma, Steven L. Schwarcz

NYLS Law Review

No abstract provided.

On The Continued Vitality Of Securities Arbitration: Why Reform Efforts Must Not Preclude Predispute Arbitration Clauses, Alicia J. Surdyk

NYLS Law Review

No abstract provided.

Guilty By Association? Regulating Credit Default Swaps, Houman B. Shadab

Articles & Chapters

A wide range of U.S. policymakers initiated a series of actions in 2008 and 2009 to bring greater regulation and oversight to credit default swaps (CDSs) and other over-the-counter derivatives. The policymakers’ stated motivations echoed widely expressed criticisms of the regulation, characteristics, and practices of the CDS market, and focused on the risks of the instruments and the lack of public transparency over their utilization and execution. Certainly, the misuse of certain CDSs enabled mortgage-related security risk to become overconcentrated in some financial institutions.

Yet as the analysis in this Article suggests, failing to distinguish between CDS derivatives and the …

Private Fund Adviser Registration Act Hr-3818, Anita Krug

All Faculty Scholarship

This paper comments on the Obama administration's 2009 proposal for the regulation of hedge fund investment advisers.

Disquiet On The Home Front: Disturbing Crises In The Nation's Markets And Institutions, Shelby D. Green

Pace Law Review

No abstract provided.

Financial Regulatory Reform And Private Funds, Anita Krug

All Faculty Scholarship

This white paper comments on the Obama administration's June 2009 proposal for the regulation of hedge fund investment advisers.

Has Corporate Law Failed? Addressing Proposals For Reform, Antony Page

Michigan Law Review

Part I of this Review discusses the modem "nexus of contracts" approach to corporations and highlights how Greenfield's views differ. Part II examines corporate goals and purposes, suggesting that Greenfield overstates the impact of the shareholder-primacy norm and does not offer a preferable alternative. Part III critiques the means to the ends--Greenfield's proposals for changing the mechanics of corporate governance. Although several of his proposals are intriguing, they seem unlikely to achieve their pro-social aims. This Review remains skeptical, in part because-even given its problems-the U.S. "director-centric governance structure has created the most successful economy the world has ever seen." …

The Regulatory Response To Madoff, Anita Krug

All Faculty Scholarship

This white paper evaluates investor protection mechanisms in the securities regulatory regime at the time the Madoff fraud was exposed. It considers whether the post-Madoff call for additional regulation of hedge funds and/or their managers - and/or their respective activities - was warranted.

The Hedge Fund Transparency Act Of 2009, Anita Krug

All Faculty Scholarship

This white paper provides a review and critique of a bill introduced by Senators Charles Grassley (R-Iowa) and Carl Levin (D-Mich.) in the Senate in early 2009 that, if enacted, would have imposed certain registration and disclosure requirements on hedge funds and certain other private funds.

Deterring "Double-Play" Manipulation In Financial Crisis: Increasing Transaction Cost As A Regulatory Tool, Lin (Lynn) Bai, Rujing Meng

Faculty Articles and Other Publications

The sub-prime mortgage crisis that originated in the United States has triggered a global credit crunch, threatening the solvency of emerging markets that have relied heavily on foreign debt, and resulting in the devaluation of their currencies. Currency market interventions by the central banks in countries with a currency board system lead to higher short-term interest rates and further declinations in the local stock market. This economic setting invites the double-play manipulation strategy that simultaneously attacks both the local currency and the stock market. History has shown that a central bank’s stock market intervention is costly and that sustaining the …

Leverage In The Board Room: The Unsung Influence Of Private Lenders In Corporate Governance, Frederick Tung

Faculty Scholarship

The influence of banks and other private lenders pervades public companies. From the first day of a lending arrangement, loan covenants and built-in contingency provisions affect managerial decision making. Conventional corporate governance analysis has been slow to notice or account for this lender influence. Corporate governance discourse has traditionally focused only on corporate law arrangements. The few existing accounts of creditors' influence over firm managers emphasize the drastic actions creditors take in extreme cases - when a firm is in serious trouble - but in fact, private lender influence is a routine feature of corporate governance even absent financial distress. …

The Sec And The Madoff Scandal: Three Narratives In Search Of A Story, Donald C. Langevoort

Georgetown Law Faculty Publications and Other Works

This essay, part of a symposium on narrative in corporate law, considers various portrayals of the complicity of the SEC in the Bernard Madoff scandal--including the Commission's own Inspector General's report issued in September 2009. It considers possible explanations (revolving door problems, incompetence and sloth, etc.) but suggests that the story is deeper and more frustrating, arising out of the relative poverty in which the SEC operates, which in turn leads to habits of thought and action that leave too much unnoticed and undone. The interesting question, then: why the poverty? The essay concludes with a political explanation. While by …

Reforming Securities Litigation Reform: Restructuring The Relationship Between Public And Private Enforcement Of Rule 10b-5, Amanda A. Rose

Vanderbilt Law School Faculty Publications

Commentators have long debated how to reform the controversial Rule 10b-5 class action without pausing to ask whether the game is worth the candle. Is private enforcement of Rule lOb-5 worth preserving, or might we be better off with exclusive public enforcement? This fundamental but neglected question demands attention today more than ever. An academic consensus has emerged that the typical Rule 1Ob-5 class action cannot be defended on compensatory grounds. That leaves the oft-cited, but undertheorized, rationale that private enforcement is a "necessary supplement" to the securities fraud deterrence efforts of the SEC. When this justification is critically examined, …

Changing The Paradigm Of Stock Ownership From Concentrated Towards Dispersed Ownership? Evidence From Brazil And Consequences For Emerging Countries, Erica Gorga

Cornell Law Faculty Working Papers

This paper analyzes micro-level dynamics of changes in ownership structures. It investigates a unique event: changes in ownership patterns currently taking place in Brazil. It builds upon empirical evidence to advance theoretical understanding of how and why concentrated ownership structures can change towards dispersed ownership.

Commentators argue that the Brazilian capital markets are finally taking off. The number of listed companies and IPOs in the Sao Paulo Stock Exchange (Bovespa) has greatly increased. Firms are migrating to Bovespa’s special listing segments, which require higher standards of corporate governance. Companies have sold control in the market, and the stock market has …