Securities Law Commons^™

Reprofiling Sovereign Debt, Lee C. Buchheit, Mitu Gulati, Ignacio Tirado

Faculty Scholarship

• The IMF staff’s 2013 proposal to reprofile (i.e., stretch out for a short period without haircutting principal or interest) the maturing debt of a country that has lost market access is a sensible policy in cases where the IMF is uncertain whether the country’s debt stock is sustainable.

• The motivation for the policy is to avoid situations, such as occurred during the Eurozone debt crisis, in which Fund resources are used to bail-out commercial creditors in full.

• But a debt reprofiling is a species of debt restructuring and as such is susceptible to holdout creditor behaviour.

• …

Through The Looking Glass To A Shared Reflection: The Evolving Relationship Between Administrative Law And Financial Regulation, Gillian E. Metzger

Faculty Scholarship

Administrative law and financial regulation have an uneasy relationship today. It was not always so. Indeed, the two were closely intertwined at the nation's birth. The Treasury Department was a major hub of early federal administration, with Alexander Hamilton crafting the first iterations of federal administrative law in his oversight of revenue generation and customs collection. One hundred and fifty years later, administrative law and financial regulation were conjoined in the New Deal's creation of the modern administrative state. This time it was James Landis, Chair of the newly formed Securities and Exchange Commission (SEC) and author of the leading …

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

Faculty Scholarship

Unresolved sovereign debt problems are hurting debtor nations, their citizens and their creditors, and also can pose serious systemic threats to the international financial system. The existing contractual restructuring approach is insufficient to make sovereign debt sustainable. Although a more systematic legal resolution framework is needed, a formal multilateral approach, such as a treaty, is not currently politically viable. An informal model-law approach should be legally, politically and economically feasible. This informal approach would not require multilateral acceptance. Because most sovereign debt contracts are governed by either New York or English law, it would be sufficient if one or both …

Evaluating The 2013 Euro Cac Experiment, Elena Carletti, Paolo Colla, Mitu Gulati

Faculty Scholarship

On January 1, 2013, it became mandatory that every new sovereign bond issued by a member of the European Monetary Union include a new contract clause called a Collective Action Clause or CAC. This, we believe, constituted the biggest one-time change to the terms of sovereign debt contracts in history, impacting a market of many trillions of euros. And it was not just that the change was big in terms of the size of the market it impacted; it was big in terms of its impact on the documentation of each individual Euro area sovereign bond contract. To illustrate, prior …

The Relevance Of Law To Sovereign Debt, W. Mark C. Weidemaier, Mitu Gulati

Faculty Scholarship

The literature on sovereign debt treats law as of marginal significance, largely because the doctrine of sovereign immunity leaves creditors few potent legal remedies against sovereign borrowers. Although sovereign debts can indeed by hard to enforce, the goal of this Essay is to demonstrate that law plays a central, and constantly evolving, role in structuring sovereign debt markets. To list just a few examples, legal rules and institutions (i) decide when a borrower is sovereign, (ii) define the consequences of sovereignty by drawing (or refusing to draw) artificial boundaries between the sovereign and other legal entities, (iii) play some role …

Banking And Financial Regulation, Steven L. Schwarcz

Faculty Scholarship

This chapter provides a basic overview of banking and financial regulation for the forthcoming Oxford Handbook of Law and Economics (Francesco Paris, ed.). Among other things, the chapter compares traditional and shadow banking and their regulation, differentiating “micro prudential” regulation (which focuses on protecting individual components of the financial system, such as banks) and “macro prudential” regulation (which focuses on protecting against systemic risk). The chapter also examines how regulation can help to correct market failures that undermine financial efficiency. In that context, it discusses, among other things, capital requirements, ring-fencing, and stress testing. Finally, the chapter examines how regulation …

Brief Of Prof. Steven L. Schwarcz As Amicus Curiae, Steven L. Schwarcz

Faculty Scholarship

No abstract provided.

Politics In Securities Enforcement, Urska Velikonja

Georgia Law Review

American securities enforcement agencies often face charges that they use their enforcement power to further political goals.' Most recently, Standard & Poor's credit rating agency claimed that the U.S. Department of Justice unfairly singled it out for prosecution for fraudulent credit ratings after it downgraded U.S. sovereign debt. The U.S. Securities and Exchange Commission (SEC or the Commission), too, has been accused of using its enforcement politically: of bringing enforcement actions to improve its political standing, to punish its detractors, or to deflect attention from negative reports about its activities; and of holding back investigations of politically-connected figures.

The Financial Industry's Plan For Resolving Failed Megabanks Will Ensure Future Bailouts For Wall Street, Arthur E. Wilmarth Jr.

Georgia Law Review

Wall Street has achieved a remarkable political comeback from the financial crisis of 2007-2009. Public anger over bailouts of large financial institutions spurred Congress to pass the Dodd- Frank Wall Street Reform and Consumer Protection Act (Dodd- Frank) in July 2010.1 Megabanks, however, used their political influence to weaken Dodd-Frank's provisions, and they have pursued a determined campaign since 2010 to undermine Dodd- Frank's implementation. A primary goal of Dodd-Frank is to end "too big to fail" (TBTF) treatment for systemically important financial institutions (SIFIs) and their creditors. During the debates over Dodd-Frank, however, Wall Street defeated two major initiatives …

Bank Regulation And Securitization: How The Law Improved Transmission Lines Between Real Estate And Banking Crises, Erik F. Gerding

Georgia Law Review

Financial crises take many forms. Real estate crises can devastate economies.' So too can bank crises. Stock market crashes can precipitate crises of their own. The "subprime crisis" represents the confluence and worst of all three; like three cyclones merging together in warm offshore waters, these three kinds of crises generated even more destructive force when conjoined. The panic that took shape in U.S. real estate and capital markets in 2007 represents another example in a long historical line of intertwined banking and real estate crises. Securitization served as a new coupling rod joining cycles in real estate and banking …

The Evolving Role Of Economic Analysis In Sec Rulemaking, Joshua T. White

Georgia Law Review

Recently, the SEC has come under great scrutiny for how it conducts economic analysis around rulemakings, especially those associated with the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank or the Dodd-Frank Act) Dodd-Frank tasked the SEC with more than 100 rulemaking provisions. Perhaps no criticism had a more profound effect than the D.C. Circuit's decision in Business Roundtable v. SEC, which struck down the SEC's proxy access rule due to inadequate economic analysis.

Regulations are imperfect. They cannot be costlessly executed or enforced. Regulators also lack full information on the actual costs and benefits of proposed policies. For …

The Nonfinancial Returns Of Crowdfunding, Andrew A. Schwartz

Publications

Securities crowdfunding — the sale of unregistered securities to the public over the Internet — has come under attack before it has even begun. Legal scholars in particular have expressed concern that investors will lose any money they invest in crowdfunding companies. Even assuming that this may be true from a purely financial perspective, these critics are missing an important point: Crowdfund investors with negative returns will not simply have lost their money, but rather they will have spent it (at least in part) on nonpecuniary benefits, including entertainment, political expression and community building. These nonfinancial returns of crowdfunding are …

Private And Public Ordering In Safe Asset Markets, Anna Gelpern, Erik F. Gerding

Publications

An influential literature in economics explores the phenomenon of “safe assets” – when participants across financial markets act “as if” certain debt is risk free – as well as its role in the global financial crisis and its implications for post-crisis reform.

We highlight the role of private ordering in constructing safe assets. Private ordering, including contractual devices and transaction structures, contributes to the creation of these debt contracts, to their collective treatment in financial markets as low risk investments, and to the making of deep and liquid markets in them. These contracts and transaction structures also provide a template …

The Digital Shareholder, Andrew A. Schwartz

Publications

Crowdfunding, a new Internet-based securities market, was recently authorized by federal and state law in order to create a vibrant, diverse, and inclusive system of entrepreneurial finance. But will people really send their money to strangers on the Internet in exchange for unregistered securities in speculative startups? Many are doubtful, but this Article looks to first principles and finds reason for optimism.

Well-established theory teaches that all forms of startup finance must confront and overcome three fundamental challenges: uncertainty, information asymmetry, and agency costs. This Article systematically examines this “trio of problems” and potential solutions in the context of crowdfunding. …

The Development Of A Global Market-Based Debt Strategy To Regulate Private Lending To Developing Countries, Bradley K. Boyd

Georgia Journal of International & Comparative Law

No abstract provided.

Aml In The Spotlight: Compliance Risks For Broker-Dealers And Investment Advisers, John H. Walsh, Cecilia Baute Mavico

The Journal of Business, Entrepreneurship & the Law

In light of regulators' renewed attention, this article discusses recent events, reviews AML enforcement actions against securities firms, and identifies the compliance risks they suggest. The article concludes that the time has come for broker-dealers and advisers alike to take a holistic view of compliance and their AML risks, and to prepare for enhanced oversight and regulation.

China - A National Regulatory Framework For The Prc's Stock Markets Begins To Emerge, Benjamin R. Tarbutton

Georgia Journal of International & Comparative Law

No abstract provided.

The Value Of Public-Notice Filing Under Uniform Commercial Code Article 9: A Comparison With The German Legal System Of Securities In Personal Property, Jens Hausmann Dr.

Georgia Journal of International & Comparative Law

No abstract provided.

Secured Credit And Insolvency Law In Argentina And The U.S.: Gaining Insight From A Comparative Perspective, Guillermo A. Moglia Claps, Julian B. Mcdonnell

Georgia Journal of International & Comparative Law

No abstract provided.

Downstream Securities Regulation, Anita Krug

All Faculty Scholarship

Securities regulation wears two hats. Its “upstream” side governs firms in connection with their obtaining financing in the securities markets. That is, it regulates firms’ and issuers’ offers and sales of securities, whether in public offerings to retail investors or in private offerings to institutional investors. Its “downstream” side, by contrast, governs financial services providers, who assist with investors’ activities in those markets. Their services include providing advice regarding securities investments, as investment advisers do; aggregating investors’ assets for purposes of enabling those investors to invest their assets collectively, as mutual funds do; and acting as “middlemen” between buyers and …

Regulation By Hypothetical, Mehrsa Baradaran

Scholarly Works

A new paradigm is afoot in banking regulation—and it involves a turn toward the more speculative. Previous regulatory instruments have included geographic restrictions, activity restrictions, disclosure mandates, capital requirements, and risk management oversight to ensure the safety of the banking system. This Article describes and contextualizes these regulatory tools and shows how and why they were formed to deal with industry change. The financial crisis of 2008 exposed the shortcomings in each of these regimes. In important ways, the Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank”) departs from these past regimes and proposes something new: Call it …

Revamping International Securites Laws To Break The Financial Infrastructure Of Global Terrorism, Sireesha Chenmolu

Georgia Journal of International & Comparative Law

No abstract provided.

A Comparative Study Of Monitoring Of Management In German And U.S. Corporations After Sarbanes-Oxley: Where Are The German Enrons, Worldcoms, And Tycos?, Florian Stamm

Georgia Journal of International & Comparative Law

No abstract provided.

New York Stock Exchange, Bert Chapman

Libraries Faculty and Staff Scholarship and Research

Provides a historical overview of the origins and early development of the New York Stock Exchange.

Common Capital: A Thought Experiment In Cross-Border Resolution, Anna Gelpern

Georgetown Law Faculty Publications and Other Works

Cross-border bank resolution efforts focus on burden-sharing between bank owners, private creditors and the public. There is little talk of burden-sharing among governments, despite the rich history of governments trying to stick one another with the cost of financial conglomerate failures. There is an unspoken fear that acknowledging the need to allocate losses among governments would undermine post-crisis pledges of No More Bailouts. This symposium essay argues for making government stakes in private financial firms more transparent, and for using the contingent public share as a key to loss allocation among governments in cross-border banking crises.

Pawns For A Higher Greed: The Banking And Financial Services Industry’S Capture Of Federal Homeownership Policy And The Impact On Citizen Homeowners, Tracie R. Porter

Hamline Law Review

abstract

Remic Tax Enforcement As Financial-Market Regulator, Bradley T. Borden, David Reiss

Cornell Law Faculty Publications

Lawmakers, prosecutors, homeowners, policymakers, investors, news media, scholars and other commentators have examined, litigated, and reported on numerous aspects of the 2008 Financial Crisis and the role that residential mortgage-backed securities (RMBS) played in that crisis. Big banks create RMBS by pooling mortgage notes into trusts and selling interests in those trusts as RMBS. Absent from prior work related to RMBS securitization is the tax treatment of RMBS mortgage-note pools and the critical role tax enforcement should play in ensuring the integrity of mortgage-note securitization.

This Article is the first to examine federal tax aspects of RMBS mortgage-note pools formed …

An Overview Of The Fannie And Freddie Conservatorship Litigation, David Reiss

Cornell Law Faculty Publications

The fate of Fannie Mae and Freddie Mac are subject to the vagaries of politics, regulation, public opinion, the economy, and not least of all the numerous cases that have been filed in 2013 against various government entities arising from the placement of the two companies into conservatorship. This short article will provide an overview of the last of these. The litigation surrounding Fannie and Freddie’s conservatorship raises all sorts of issues about the federal government’s involvement in housing finance. These issues are worth setting forth as the proper role of these two companies in the housing finance system is …

Evaluating The Performance And Accountability Of Regulators, Colin Scott

Seattle University Law Review

The global financial crisis came in the wake of significant reforms to the structures, processes, powers, and rules of the regulatory regimes for financial markets in many of the countries adversely affected by the crash. The global financial crisis came in the wake of significant reforms to the structures, processes, powers, and rules of the regulatory regimes for financial markets in many of the countries adversely affected by the crash. In this Article, I follow the logic of an argument that regulation necessarily has political dimensions, even where it may appear technical. I am asking questions about how we might …

The Timing And Source Of Regulation, Frank Partnoy

Seattle University Law Review

The distinction between specific concrete rules and general abstract principles has engaged legal theorists for decades. This rules–principles distinction has also become increasingly important in corporate and securities law, as well as financial market regulation. This Article adds two important variables to the rules–principles debate: timing and source. Although these two variables are relevant to legal theory generally, the specific goal here is not to address and engage the rules versus principles literature directly. Rather, the goal here is to ask whether the debate about financial market regulation might benefit from a more transparent analysis of temporal and legal source …