Banking and Finance Law Commons^™

Compliance Officers: Personal Liability, Protections, And Posture, Jennifer M. Pacella

Brooklyn Journal of Corporate, Financial & Commercial Law

This Symposium Article will explore the evolving nature of the regulatory and enforcement landscape as it pertains to compliance officers, specifically regarding their susceptibility to personal liability. It will examine the posture of compliance officers in three contexts: i) as a possible target for enforcement activity by regulators; ii) as a quasi-professional subject to a current regime of “non-regulation”; and iii) as an employee in need of ample whistleblower protections, each of which create implications for a compliance officer’s risk of personal liability and protections as a constituent of the organization monitored. After considering the current guidance surrounding enforcement activity …

Artificial Intelligence & Artificial Prices: Safeguarding Securities Markets From Manipulation By Non-Human Actors, Daniel W. Slemmer

Brooklyn Journal of Corporate, Financial & Commercial Law

Securities traders are currently competing to use Artificial Intelligence (A.I.) in order to make more profitable decisions in the marketplace. While A.I. provides superior abilities in recognizing market patterns, its complexity can obscure its decision-making process beyond human comprehension. Problematically, the current securities laws prohibiting manipulation of securities prices rest liability for violations on a trader’s intent. In order to prepare for A.I. market participants, both courts and regulators need to accept that human concepts of decision-making will be inadequate in regulating A.I. behavior. However, the wealth of case law in the market manipulation doctrine need not be cast aside. …

Foreign Direct Investments Into Fintech And Blockchain Technology Startups In Latin America, Y. Tatiana Clavijo, Hernán Pantaleón

University of Miami Inter-American Law Review

Technology is changing our everyday lives at a faster rate every minute from artificial intelligence and medical advances in robotics to the upcoming self-driving cars. Every sector of our lives is being impacted, disrupted, and constantly altered by innovations, including our finances. In the developed markets, fintech, or financial technology, is the new and exciting area of product innovation for financial services. The innovations rely on the internet, blockchain technology, and the new and highly controversial digital currencies. Consequently, new digital platforms and mobile applications create new possibilities while being accessible to more people at a lower cost across borders. …

Conspiracy Allegations In The Stock Loan Market: Why Plaintiffs Should Be Seeking A Remedy In Congress And Not In Court, Danielle P. Katz

Et Cetera

This Article first provides a comprehensive analysis of conspiracy allegations in over-the-counter markets, focusing on the stock loan market as an exemplar.

Multiple conspiracy claims, implicating antitrust law, have been brought regarding over the counter markets since the financial crisis of 2008. The biggest banks in the country have been the center of novel complaints, new regulations, and innovative legislation in the recent years. But, despite regulation and legislation, Sherman Act litigation alleging conspiracy has endured as plaintiffs claim that big banks are conspiring to fix markets when, in fact, they are exercising economies of scale to provide unique, tailored …

Washington’S 'Cutting-Edge' Solution To Combat Sales Tax Fraud, Richard Thompson Ainsworth, Robert Chicoine, Andrew Leahey, Sunder Gee

Faculty Scholarship

Globally, consumption tax compliance (value added tax and retail sales tax) has gone digital – digital invoices are becoming mandatory, centralized monitoring of transactions and tax payments are increasingly common, and artificial intelligence is assessing fraud risks in real-time. When tax is collected, it is increasingly being remitted in near-real-time. This is the trajectory for the modern retail sales tax (RST) imposed by most states in the US. While this may appear to be revolutionary to the average American, it is a well-worn path among global nations using the value added tax (VAT). The RST will eventually be following suit. …

Tax Policy For The Wider Cryptoverse, Arild B. Doerge

Student Scholarship

The rapid rise of Bitcoin and other “cryptoassets” offers many interesting technological capabilities but also comes with uncertainty and volatility in the markets for these assets. The diversity of types of cryptoassets is increasing rapidly, while public understanding and government policy have generally been slow to take account of this diversity. In regard to taxation policy related to cryptoassets, current IRS guidance merely categorizes cryptoassets as general property. The policy implications of this classification run contrary to fundamental goals of tax policy by inhibiting how people use cryptoassets, making compliance more complex and ambiguous than necessary, and taxing cryptoasset transactions …

Aligning Investment Treaties With Sustainable Development Goals, Lise Johnson, Lisa E. Sachs, Nathan Lobel

Columbia Center on Sustainable Investment Staff Publications

Policy makers and other stakeholders are currently asking fundamental questions about whether and to what extent international investment agreements (IIAs) are consistent with and are helping to advance sustainable development objectives at home and abroad.

A 2019 paper from CCSI examines the alignment of IIAs with the 2030 Sustainable Development Agenda, arguing that while FDI will play an important role in advancing development outcomes, existing treaties must be reformed and future IIAs reimagined in order to achieve deep alignment with the sustainable development goals.

The paper proposes that IIAs should be designed and evaluated with respect to their ability to …

Modern Waste Law, Bankruptcy, And Residential Mortgages, Jill M. Fraley

Cardozo Law Review

Around the time of the subprime mortgage collapse, lenders began in earnest to sue borrowers by adapting the traditional law of waste. Today, these claims continue to rise in frequency and to expand to more jurisdictions. Lender waste claims provide a "work around" for state mortgage laws that prohibit personal deficiency judgments after foreclosure and are potentially non-dischargeable in bankruptcy.

While a recent wave of scholarship has addressed the problems of how the bankruptcy system handles mortgages, scholars have not yet explored the use of waste actions by lenders and how waste judgments intersect with bankruptcy and foreclosure. Using new …

Follow The Money? A Proposed Approach For Disclosure Of Litigation Finance Agreements, Maya Steinitz

Faculty Scholarship

Litigation finance is the new and fast-growing practice by which a non-party funds a plaintiff’s litigation either for-profit or for some other motivation. Some estimates placed the size of the litigation finance market at 50–100 billion dollars. Both proponents and opponents of this newly -emergent phenomenon are in agreement that the it is the most important development in civil justice of this era. Litigation finance is already transforming civil litigation at the level of the single case as well as, incrementally, at the level of the civil justice system as a whole. It is also beginning to transform the way …

Nipped In The Bud: How Legal Disparities Create Financial Growth Hurdles In The State-Sanctioned Marijuana Industry And Why Bankruptcy Courts Can Provide A Remedy, Caitlyn Cullen

University of Miami Law Review

A new marijuana industry has emerged in the United States in the wake of state-by-state legalization of marijuana, and entrepreneurs, investors, and other advisory services are increasingly viewing the marijuana industry as an area of legitimate business opportunity. However, potential investors have been hesitant to establish formal relationships with marijuana businesses that operate legitimately in the eyes of the state but in a cloud of legal uncertainty at the federal level because the Controlled Substances Act criminalizes marijuana. This Note identifies two economic consequences of the conflicts of state and federal law and suggests a temporary solution that would allow …

European Banking Union D: Cross-Border Resolution—Dexia Group, Rosalind Z. Wiggins, Natalia Tente, Andrew Metrick

Journal of Financial Crises

In September 2008, Dexia Group, SA, the world’s largest provider of public finance, experienced a sudden liquidity crisis. In response, the governments of Belgium, France, and Luxembourg provided the company a capital infusion and credit support. In February 2010, the company adopted a European Union (EU)-approved restructuring plan that required it to scale back its businesses and cease proprietary trading. In June 2011, Dexia withdrew from the government-sponsored credit support program before its expiration date, and in July, the company announced that it had passed an EU stress test. However, just three months later, Dexia wrote down its substantial position …

European Banking Union C: Cross-Border Resolution–Fortis Group, Rosalind Z. Wiggins, Natalia Tente, Andrew Metrick

Journal of Financial Crises

In August 2007, Fortis Group, Belgium’s largest bank, acquired the Dutch operations of ABN AMRO, becoming the fifth largest bank in Europe. Despite its size and its significant operations in the Benelux countries, Fortis struggled to integrate ABN AMRO. Fortis’s situation worsened with the crash of the US subprime market, which impacted its subprime mortgage portfolio. By July 2008, Fortis’s CEO had stepped down, its stock had lost 70% of its value, and it was on the verge of collapse due to a severe liquidity crisis. The governments of Belgium, Luxembourg, and the Netherlands quickly came together and agreed to …

European Banking Union B: The Single Resolution Mechanism, Rosalind Z. Wiggins, Michael Wedow, Andrew Metrick

Journal of Financial Crises

The options available to European governments to respond to a multinational bank in financial trouble have been severely limited since each country has its own unique laws and authority applicable to banks operating within its borders. The Bank Recovery & Resolution Directive (BRRD), which was adopted in 2013 and scheduled to go into effect January 2015, harmonizes rules across EU countries for how to restructure and resolve failing banks. However, the directive would maintain the existing system of individual national resolution authorities and resolution funds. To better secure the Eurozone banks and to compliment the Single Supervisory Mechanism, which was …

European Banking Union A: The Single Supervisory Mechanism, Rosalind Z. Wiggins, Michael Wedow, Andrew Metrick

Journal of Financial Crises

At the peak of the Global Financial Crisis in fall 2008, each of the 27 member states in the European Union (EU) set many of its own banking rules and had its own bank regulators and supervisors. The crisis made the shortcomings of this decentralized approach obvious, and since its formation in January 2011, the European Banking Authority (EBA) has been developing a “Single Rulebook” that will harmonize banking rules across the EU countries. In June 2012, European leaders went even further, committing to a banking union that would better coordinate supervision of banks in the then 18-country Eurozone. A …

European Central Bank Tools And Policy Actions B: Asset Purchase Programs, Chase P. Ross, Rosalind Z. Wiggins, Andrew Metrick

Journal of Financial Crises

Beginning in August 2007, the European Central Bank (ECB) used standard and non-standard monetary policies as the global financial markets progressed from initial turmoil to a widespread sovereign debt crisis. This case describes the key features of the ECB’s asset purchase programs throughout the Global Financial Crisis and subsequent European sovereign debt crisis. These programs include the Covered Bond Purchase Programs (CBPP1, CBPP2, CBPP3), Securities Markets Program (SMP), Outright Monetary Transactions (OMT), Asset-backed Securities Purchase Program (ABSPP) and the Public Sector Purchase Program (PSPP).

In combating the crises, the ECB designed various innovative programs which it successively employed as the …

Ireland And Iceland In Crisis C: Iceland’S Landsbanki Icesave, Arwin G. Zeissler, Thomas Piontek, Andrew Metrick

Journal of Financial Crises

At year-end 2005, almost all of the total assets of Iceland’s banking system were concentrated in just three banks (Glitnir, Kaupthing, and Landsbanki). These banks were criticized by certain financial analysts in early 2006 for being overly dependent on wholesale funding, much of it short-term, that could easily disappear if creditors’ confidence in these banks faltered for any reason. Landsbanki, followed later by Kaupthing and then Glitnir, responded to this criticism and replaced part of their wholesale funding by using online accounts to gather deposits from individuals across Europe. In Landsbanki’s case, these new deposits were marketed under the name …

Ireland And Iceland In Crisis B: Decreasing Loan Loss Provisions In Ireland, Arwin G. Zeissler, Andrew Metrick

Journal of Financial Crises

All public companies in the European Union, including Ireland’s major banks, were required to adopt IAS 39 for their annual accounting periods beginning on or after January 1, 2005. Under the “incurred loss” model of IAS 39, banks could set aside reserves for loan losses only when objective evidence existed that a loan was impaired, not in anticipation of future losses. As a result, Irish banks saw their aggregate reserve for bad loans drop from 1.2% of loan balances at the end of 2000 to only 0.4% by 2006-07, just before the collapse of the banking industry caused loan losses …

Ireland And Iceland In Crisis A: Increasing Risk In Ireland, Arwin G. Zeissler, Karen Braun-Munzinger, Andrew Metrick

Journal of Financial Crises

Ireland went from being the poorest member of the European Economic Community in 1973 to enjoying the second highest per-capita income among European countries by 2007. Healthy growth in the 1990s eventually gave way to a concentrated boom in property-related lending in the 2000s. The growth in the aggregate loan balances of Ireland’s six major banks greatly exceeded the growth in gross domestic product (GDP); as a result, bank loan balances grew from 1.1 times GDP in 2000 to over 2.0 times GDP by 2007. Given the small size of the domestic retail depositor base, the Irish banks increasingly funded …

Making Money Safe, John Crawford

Notre Dame Law Review Reflection

Providing better options to hold money safely is desirable and feasible; failure to do so is a serious but fixable flaw in the legal architecture of money and payments in the United States. There have been a handful of proposals to mitigate this problem. The Federal Reserve (the Fed), however, is currently resisting an attempt to contribute to this effort. The project involves a new bank called “TNB USA Inc.” (TNB), which proposes to hold as its sole investment asset a reserve account at the Fed. (One of the Fed’s principal functions is to serve as a banks’ bank, providing …

Unlimited Liability For Banks: Deposits As Fraudulent Transfers, Katherine Zampas

St. Mary's Law Journal

One of a trustee’s most valuable resources in bankruptcy proceedings is his avoidance powers. A trustee is charged with the duty to recover and recapture any property wrongfully removed from the estate by way of fraudulent transfer or preference. In some cases, a trustee has attempted to treat a debtor’s deposit into a bank account as a transfer, rendering it subject to his avoidance powers. Such a result will leave banks collaterally responsible as a transferee for a debtor’s conduct despite their lack of culpability and control over the funds.

The definition of transfer within the Bankruptcy Code is comprehensive …