Securities Law Commons^™

The Sovereign-Debt Listing Puzzle, Elisabeth De Fontenay, Josefin Meyer, Mitu Gulati

Faculty Scholarship

The claim that stock exchanges perform certification and monitoring roles in securities offerings is pervasive in the legal and financial literatures. This article tests the validity of this “bonding hypothesis” in the sovereign-bond market—one of the oldest and largest securities markets in the world. Using data on sovereign-bond listings for the entire post-World War II period, we provide the first comprehensive report on sovereigns’ historical listing patterns. We then test whether a sovereign bond issue’s listing jurisdiction affects its yield at issuance, as the bonding hypothesis would predict. We find little evidence of bonding in today’s sovereign-debt market. Instead, we …

Shadow Banking And Regulation In China And Other Developing Countries, Steven L. Schwarcz

Faculty Scholarship

The rapid but largely unregulated growth in shadow banking in developing countries such as China can jeopardize financial stability. This article discusses that growth and argues that a regulatory balance is needed to help protect financial stability while preserving shadow banking as an important channel of alternative funding. The article also analyzes how that regulation could be designed.

Sovereign Debt Restructuring: A Model-Law Approach, Steven L. Schwarcz

Faculty Scholarship

The existing contractual framework for sovereign debt restructuring is sorely inadequate. Whether or not their fault, nations sometimes take on debt burdens that become unsustainable. Until resolved, the resulting sovereign debt problem hurts not only those nations (such as Greece) but also their citizens, their creditors, and—by posing serious systemic risks to the international financial system—the wider economic community. The existing contractual framework functions poorly to resolve the problem because it often leaves little alternative between a sovereign debt bailout, which is costly and creates moral hazard, and a default, which raises the specter of systemic financial contagion.

Most observers …

The Enduring Legacy Of Modern Efficient Market Theory After Halliburton V. John, Mark Klock

Georgia Law Review

In 1988 the U.S. Supreme Court approved the fraud on the market theory for securities trading in an efficient market thus enabling securities class action plaintiffs to establish their required reliance element of the case through a rebuttable presumption. Basic v. Levinson held that efficient markets incorporate publicly disseminated information and investors who purchased or sold securities in an efficient market therefore relied on any publicly disseminated misinformation. For more than a quarter century since Basic, the efficient market theory has sustained a barrage of assaults from commentators who object to the use of economic theory in legal decision making …

“Ev’Ry American Experiment Sets A Precedent”: Why One Florida State Court’S Bitcoin Opinion Is Everyone’S Business, Allison Caffarone, Meg Holzer

Scholarly Works

Part I of this article seeks to explain in largely non-technical terms the design of the Bitcoin network. Part II explains the guidance and administrative rulings provided by the United States Department of the Treasury's Financial Crimes Enforcement Network in relation to the issues in the Espinoza case. Additionally, Part II surveys different approaches taken by state legislatures and regulators in seeking to address decentralized virtual currencies, including bitcoin. Careful attention is paid to how the terms "monetary value" and "virtual currency" are defined, and how those definitions have been interpreted. Part II further explores the differences in the way …

Political Uncertainty And The Market For Ipos, Jay B. Kesten, Murat C. Mungan

Faculty Scholarship

This Article presents a simple theory and model of the effects of political uncertainty on the market for IPOs. Our model generates four central predictions: (i) increased political uncertainty reduces the frequency of IPOs; (ii) firms that choose to conduct an IPO during periods of political uncertainty are, on average, of higher quality and generate greater return on investment in the secondary market; (iii) political uncertainty increases the cost of capital for IPO firms; but (iv) underpricing is less pronounced during periods of heightened political uncertainty. We demonstrate that each of these predictions is consistent with available empirical evidence.

Our …

The Vanishing Supervisor, James A. Fanto

Faculty Scholarship

No abstract provided.

Drafting And Securitizing Participation Mortgages: A Re-Introduction, Spencer J. Coopchik, Yildiray Yildirim

The Journal of Business, Entrepreneurship & the Law

This Paper will reintroduce, explore, and expand on the financing arrangement known as a Participation Mortgage. First, this Paper will cover the features, history, and policy purposes behind the mortgage. Second, the Paper will focus on legal mechanics and drafting considerations of Participation Mortgages, so they may later be securitized. Finally, the Paper will explore the possibility and legality of creating Participation Mortgaged Backed Securities to be sold in the secondary market.

Trending @ Rwulaw: Susan Schwab Heyman's Post: Defining The Boundaries Of Insider Trading, Susan Schwab Heyman

Law School Blogs

No abstract provided.

Securities Laws Implications For Savings Associations Acting As Trustees For Ira's And Keoghs

Akron Law Review

This article will focus on the major problem area which has resulted from the above legislation. That problem is whether or not a savings association must register with the Securities and Exchange Commission (SEC) pursuant to the Securities Act of 1931 or the Investment Company Act of 1940, as a consequence of acting as trustee for an IRA or Keogh plan.

Investing And Pretending, Anita Krug

All Faculty Scholarship

One of the more prominent components of Dodd–Frank’s regulatory changes was Title VII, providing for the regulation of the over-the-counter derivatives known as “swaps.” A swap is a financial instrument whose value is based on an asset—the “reference asset”—that is wholly unrelated to the swap itself. Although there was much ado about swap regulation immediately after Dodd–Frank’s enactment, the same cannot be said of the many rules that the Commodity Futures Trading Commission (“CFTC”) has subsequently adopted pursuant to its authority under Title VII. This Article critically evaluates the CFTC’s “swap rules” and identifies the regulatory vision that they reflect. …

Summary Of Munoz V. Branch Banking & Trust Co., 131 Nev. Adv. Op. No. 23 (Apr. 30, 2015), Michael S. Valiente

Nevada Supreme Court Summaries

NRS 40.459(1)(c)’s limitation on the amount of deficiency judgment that a successor can recover conflicts with the federal Financial Institutions Reform, Recovery and Enforcement Act’s (“FIRREA”) purpose of facilitating the transfer of assets of failed banks to other institutions. Because NRS 40.459(1)(c) limits the value a successor can recover on a deficiency judgment, its application to assets transferred by the Federal Deposit Insurance Corporation (“FDIC”) frustrates FIRREA’s purpose. Therefore, NRS 40.459(1)(c) is preempted by FIRREA to the extent that NRS 40.459(1)(c) limits deficiency judgment that may be obtained from loans transferred by the FDIC.

Chinese Companies And U.S. Class Actions: Securities Litigation And Product Liability, Geoffrey Sant, Charles M. Yablon, Stephen A. Radin, Kayvan Sadeghi, Christopher A. Seeger, Richard H. Silberberg

Cardozo Journal of International and Comparative Law

The symposium examines the challenges Chinese companies face when navigating U.S. class actions and corporate governance rules, emphasizing the importance of understanding jurisdictional complexities, cultural differences, and legal strategies to mitigate risks. It highlights how Chinese companies must adapt to U.S. legal standards to compete globally while addressing enforcement difficulties and settlement dynamics. The analysis underscores the need for transparency, internal controls, and strategic legal counsel to manage these challenges effectively.

Crowdfunding Human Capital Contracts, Max Vogel

Cardozo Law Review

No abstract provided.

Superior Supererogation: Why Credit Default Swaps Are Securities Under The Investment Advisers Act Of 1940, J. Tyler Kirk

William & Mary Business Law Review

No abstract provided.

Securities Regulations Investigations - United States-Swiss Treaty Attempts To Increase Cooperation In Releasing Names Of Swiss-Based Account Holders Involved In United States Securities And Exchange Commission Investigations, Daniel B. Simon Iii

Georgia Journal of International & Comparative Law

No abstract provided.

The Export Trade Note: A New Instrument For International Trade, Eugene A. Ludwig, Michael J. Coursey

Georgia Journal of International & Comparative Law

No abstract provided.

Disaggregated Classes, Benjamin P. Edwards

Faculty Scholarship

No abstract provided.

Closed-End Fund Ipo Considerations, Benjamin P. Edwards

Faculty Scholarship

No abstract provided.

When Governments Write Contracts: Policy And Expertise In Sovereign Debt Markets, W. Mark C. Weidemaier, Mitu Gulati, Anna Gelpern

Faculty Scholarship

At least three times in the past two decades, national governments and institutions at the regional and international levels have tried to reform sovereign bond contracts to facilitate debt restructuring. Increasingly, these efforts have focused on promoting majority modifications clauses, a species of collective action clause (CAC) that facilitates a binding debt restructuring. Rather than legislate or regulate, governments have convened expert commissions, produced model CACs, and aggressively marketed these clauses to debtors and creditors. When events prove the existing CAC template inadequate or irrelevant, the process begins anew. This paper considers this mode of government intervention, which has a …

Trusting Strangers: Dispute Resolution In The Crowd, Anjanette H. Raymond, Abbey Stemler

Cardozo Journal of Conflict Resolution

Hoping to be the next Pebble, entrepreneurs and businesses have flocked to various crowdfunding platforms to contribute dollars to fund initial launches of products and other investments. As readers are undoubtedly aware, Kickstarter was the first and bestknown crowdfunding website, having helped to launch more than 95,000 projects to date. On March 3, 2014, Kickstarter reported that it passed $1 billion in pledges with over 5.7 million people donating to creative projects. There are currently over 800 crowdfunding platforms, with the bulk of dollars contributed going to social campaigns. Of course, as donations grew and the number of backers surged, …

India, Kavita Mohan, Raj Barot, Aseem Chawla, Ashish Jerjurkar, Divya Ashta, Gagan Kumar, Niyati Chanana, Sharanya G. Ranga, Laxmi Joshi, Fatema Merchant, Priyanka Sharma Goswami, Poorvi Chothani

The International Lawyer

This article surveys significant legal developments in India during the year 2014.

Mandatory Disclosure And Individual Investors: Evidence From The Jobs Act, Colleen Honisberg, Robert J. Jackson Jr., Yu-Ting Forester Wong

Faculty Scholarship

One prominent justification for the mandatory disclosure rules that define modem securities law is that these rules encourage individual investors to participate in stock markets. Mandatory disclosure, the theory goes, gives individual investors access to information that puts them on a more equal playing field with sophisticated institutional shareholders. Although this reasoning has long been cited by regulators and commentators as a basis for mandating disclosure, recent work has questioned its validity. In particular, recent studies contend that individual investors are overwhelmed by the amount of information required to be disclosed under current law, and thus they cannot and do …

The New Stock Market: Sense And Nonsense, Merritt B. Fox, Lawrence R. Glosten, Gabriel Rauterberg

Faculty Scholarship

How stocks are traded in the United States has been totally transformed. Gone are the dealers on NASDAQ and the specialists at the NYSE. Instead, a company’s stock can now be traded on up to sixty competing venues where a computer matches incoming orders. High-frequency traders (HFTs) post the majority of quotes and are the preponderant source of liquidity in the new market.

Many practices associated with the new stock market are highly controversial, as illustrated by the public furor following the publication of Michael Lewis’s book Flash Boys. Critics say that HFTs use their speed in discovering changes in …

The Macroprudential Turn: From Institutional 'Safety And Soundness' To Systematic 'Financial Stability' In Financial Supervision, Robert C. Hockett

Cornell Law Faculty Publications

Since the global financial dramas of 2008-09, authorities on financial regulation have come increasingly to counsel the inclusion of macroprudential policy instruments in the standard ‘toolkit’ of finance-regulatory measures employed by financial supervisors. The hallmark of this perspective is its focus not simply on the safety and soundness of individual financial institutions, as is characteristic of the traditional ‘microprudential’ perspective, but also on certain structural features of financial systems that can imperil such systems as wholes. Systemic ‘financial stability’ thus comes to supplement, though not to supplant, institutional ‘safety and soundness’ as a regulatory desideratum.

The move from primarily micro- …

Banker Loyalty In Mergers And Acquisitions, Andrew F. Tuch

Scholarship@WashULaw

When investment banks advise on merger and acquisition (M&A) transactions, are they fiduciaries of their clients, gatekeepers for investors, or simply arm’s-length counterparties with no other-regarding duties? Scholars have generally treated M&A advisors as arm’s-length counterparties, putting faith in the power of contract law and market constraints to discipline errant bank behavior. This Article counters that view, arguing that investment banks are rightly characterized as fiduciaries of their M&A clients and thus required to loyally serve client interests.

This Article also develops an analytical framework for assessing the liability rules that will most effectively deter disloyalty on the part of …

The New Financial Order: An Essay For Alan Bromberg - Tributes To Professor Alan R. Bromberg, Joel Seligman

Scholarship@WashULaw

In the aftermath of the 2008-2009 financial crisis, I characterized its causes broadly:

First, there was an ongoing economic emergency, initially rooted in the housing and credit markets, which has been succeeded by the collapse of several leading investment and commercial banks and insurance companies, dramatic deterioration of stock market indices, and a rapidly deepening recession.

Second, there were serious breakdowns in the enforcement and fraud deterrence missions of federal financial regulation, notably as illustrated by matters involving Bear Stearns and the other four then independent investment banks subject to the SEC's former Consolidated Supervised Entities program, the government creation …

Liquidity, Systemic Risk, And The Bankruptcy Treatment Of Financial Contracts, Rizwaan J. Mokal

Brooklyn Journal of Corporate, Financial & Commercial Law

No abstract provided.

Conduct Of Business Regulation, Andrew F. Tuch

Scholarship@WashULaw

This chapter provides a survey and comparative analysis of conduct of business (COB) regulation. COB regulation governs financial intermediaries’ conduct toward their clients, that is, toward the actors – whether individuals or institutions – with whom financial intermediaries transact in providing financial products and services. Modal regulatory strategies include anti-fraud rules, and duties of care, loyalty, fair-dealing and best-execution – and variants of these duties.

The chapter describes the justifications for COB regulation, the modal regulatory strategies used and the complex frameworks within which COB regulation operates. It then generally assesses US COB regulation, focusing on the regulation of broker-dealers …

Disclaiming Loyalty: M&A Advisors And Their Engagement Letters, Andrew F. Tuch

Scholarship@WashULaw

Are investment banks fiduciaries of their merger and acquisition clients? If not, what rules, if any, constrain the conflicts of interest M&A advisors may face when advising their clients? These questions are rarely asked but central to the regulation of investment banking activities. In their article Bankers and Chancellors, 93 TEX. L. REV. 1 (2014), Professors William W. Bratton & Michael L. Wachter contend that M&A advisors effectively contract out of fiduciary duties in their client engagement letters, “emerging] in practice as arm’s-length counterparties constrained less by rules of law than by a market for reputation.” They also regard recent …