Banking and Finance Law Commons^™

Split Derivatives: Inside The World's Most Misunderstood Contract, Dan Awrey

Cornell Law Faculty Publications

Derivatives are the "bad boys" of modern finance: exciting, dangerous, and fundamentally misunderstood. These misunderstandings stem from the failure of scholars and policymakers to fully appreciate the unique legal and economic structure of derivative contracts, along with the important differences between these contracts and conventional equity and debt securities. This Article seeks to correct these misunderstandings by splitting derivative contracts open, identifying their constituent elements, and observing how these elements interact with one another. These elements include some of the world's most sophisticated state-contingent contracting, the allocation of property and decision-making rights, and relational mechanisms such as reputation and the …

New Tech V. New Deal: Fintech As A Systemic Phenomenon, Saule T. Omarova

Cornell Law Faculty Publications

Fintech is the hottest topic in finance today. Recent advances in cryptography, data analytics, and machine learning are visibly "disrupting" traditional methods of delivering financial services and conducting financial transactions. Less visibly, fintech is also changing the way we think about finance: it is gradually recasting our collective understanding of the financial system in normatively neutral terms of applied information science. By making financial transactions easier, faster, and cheaper, fintech seems to promise a micro-level "win-win" solution to the financial system's many ills.

This Article challenges such narratives and presents an alternative account of fintech as a systemic, macro-level phenomenon. …

Pertuis V. Front Roe Restaurants, Inc.: Equity Restores The Corporate Veil In Single-Business Enterprise Theory, Adair B. Patterson

South Carolina Law Review

No abstract provided.

An Empirical Investigation Of Third Party Consumer Litigant Funding, Ronen Avraham, Anthony J. Sebok

Articles

This is the first large-scale empirical study of consumer third-party litigation funding in the United States. Despite being part of the American legal system for more than two decades there has been almost no real data-driven empirical study to date. We analyzed funding requests from American consumers in over 100,000 cases over a twelve year period. This proprietary data set was provided to us by one of the largest consumer litigation funder in the United States.

Our results are striking and important. We find that the funder plays an important role in the American legal system by screening cases. Our …

Theory, Evidence And Policy On Dual-Class Shares: A Country-Specific Response To A Global Debate, Aurelio Gurrea-Martinez

Research Collection Yong Pung How School Of Law

Dual-class shares have become one of the most controversial issues in today´s capital markets and corporate governance debates around the world. Namely, it is not clear whether companies should be allowed to go public with dual-class shares and, if so, which restrictions (if any) should be imposed. Three primary regulatory models have been adopted to deal with dual-class shares: (i) prohibitions, existing in countries like the United Kingdom, Germany, Spain, Colombia, or Argentina; (ii) the permissive model adopted in several jurisdictions, including Canada, Sweden, the Netherlands, and particularly the United States; and (iii) the restrictive approach recently implemented in Hong …

Things Fall Apart (Next Door): Discriminatory Maintenance And Decreased Home Values As The Next Fair Housing Battleground, Michelle Y. Ewert

Brooklyn Law Review

Banks that once preyed on communities of color through predatory lending now drive property values down by failing to adequately maintain foreclosed properties they own in those neighborhoods. Declining home values are especially destructive in communities of color because the family home is often a household’s most significant asset and, thus, the key to accumulating wealth and creating opportunity. This article argues that neighboring homeowners whose property values have declined as a result of banks’ discriminatory maintenance of foreclosed properties have standing to sue those banks under the Fair Housing Act (FHA). This article explores historic barriers to homeownership in …

Securities Treatment Of Tokenized Offerings Under U.S. Law, Carol Goforth

Pepperdine Law Review

This article considers how the SEC currently approaches the question of regulating cryptoassets and ICOs. It includes a brief overview and history of cryptotransactions (including problems of terminology), and then looks at the current crypto space to consider the kinds of interests being promoted today in comparison to Bitcoin and the original altcoins. It then examines the traditional approach taken by the SEC with regard to these interests and explains briefly the kinds of compliant offerings that are currently possible. It then covers the range of reasons why a specialized regulatory approach is called for, rather than simply relying on …

Should The United States Adopt Crs?, Noam Noked

Michigan Law Review Online

The United States' one-sided approach to tax transparency might lead to an unprecedented clash with the European Union (EU) in the near future. In light of the EU's deadline for the United States, the U.S. Treasury and Congress should urgently engage in a discussion on whether the United States should adopt the Common Reporting Standard (CRS) for automatic exchange of financial account information. A recent report from the U.S. Government Accountability Office considered this issue and did not recommend adopting CRS. This Essay discusses the contents of the report, as well as important considerations that were left out of the …

Cwa In-Lieu Fee Mitigation: Project And Programmatic Risks, Erin Okuno, Rebecca Kihslinger, Royal C. Gardner, Christina Libre

Articles

No abstract provided.

An Agent-Based Model Of Financial Benchmark Manipulation, Gabriel Virgil Rauterberg, Megan Shearer, Michael Wellman

Articles

Financial benchmarks estimate market values or reference rates used in a wide variety of contexts, but are often calculated from data generated by parties who have incentives to manipulate these benchmarks. Since the the London Interbank Offered Rate (LIBOR) scandal in 2011, market participants, scholars, and regulators have scrutinized financial benchmarks and the ability of traders to manipulate them. We study the impact on market quality and microstructure of manipulating transaction-based benchmarks in a simulated market environment. Our market consists of a single benchmark manipulator with external holdings dependent on the benchmark, and numerous background traders unaffected by the benchmark. …

Financing The American Dream, David J. Reiss

Cornell Law Faculty Publications

Those who believe that government plays a positive role in the housing market by supporting affordable and sustainable homeownership have a fight ahead of them to move their agenda forward. The move to redistribute credit risk in the mortgage market from the government to the private sector should be seen as a step in the direction of creating a healthy market for mortgages that appropriately balances the role of the federal government with that of the private sector. But the jury is still out on whether the right type of regulation will be in place as the private sector gains …

Money's Past Is Fintech's Future: Wildcat Crypto, The Digital Dollar, And Citizen Central Banking, Robert C. Hockett

Cornell Law Faculty Publications

This Essay argues that crypto-currencies will soon go the way of the ‘wildcat’ banknotes of the mid-19th century. As central banks worldwide upgrade their payments systems, the Fed will begin issuing a ‘digital dollar’ that leaves no licit function for what the Author calls ‘wildcat crypto.’ But the imminent change heralds more than a shakeout in fintech. It will also make possible a new era of what the Author calls ‘Citizen Central Banking.’ The Fed will administer a national system of ‘Citizen Accounts.’ This will not only end the problem of the ‘unbanked,’ it will also simplify monetary policy. Instead …

The 'Too Big To Fail' Problem, Saule T. Omarova

Cornell Law Faculty Publications

“Too big to fail” – or “TBTF” – is a popular metaphor for a core dysfunction of today’s financial system: the recurrent pattern of government bailouts of large, systemically important financial institutions. The financial crisis of 2008 made TBTF a household term, a powerful rhetorical device for expressing the widely shared discontent with the pernicious pattern of “privatizing gains and socializing losses” it came to represent in the public’s eye. Ten years after the crisis, TBTF continues to frame much of the public policy debate on financial regulation. Yet, the analytical content of this term remains remarkably unclear.

Taking a …

Public And Private Enforcement Of Corporate And Securities Laws: An Empirical Comparison Of Hong Kong And Singapore, Wai Yee Wan, Christopher C. H. Chen, Say H. Goo

Research Collection Yong Pung How School Of Law

Current scholarship emphasises the correlation between enforcement of corporate and securities laws and strong capital markets. Yet, the issue of how private and public enforcement may achieve the objectives of compensation and optimal deterrence remains controversial. While enforcement strategies have been studied extensively in the US and the UK, comparatively less attention is placed on Asia, where concentrated shareholdings are the norm. This study fills the gap by focusing on Hong Kong and Singapore, two leading international financial centres in Asia. Post Asian financial crisis of 1997, Hong Kong and Singapore have changed their laws to strengthen the private enforcement …

The Dark Side Of Reputation, Emily Kadens

Cardozo Law Review

This Article seeks to contribute to the literature challenging the role of reputation in disciplining commerce. The historical disputes discussed here, which arose in the supposedly privately-ordered zone of the premodern merchant, add nuance to our understanding of how commerce works in the real world. Part I briefly reviews some of the problems the economic and network theory literature has identified with reputation. Part II turns to the history and demonstrates how trust could be cheaply manufactured due in part to potential partners' failure to look beyond superficial indicia of reputation. Part III then considers why reputation might have been …

The Sec's Part 205.3(D)(2) And Wadler V. Bio-Rad Labs. Should Be Revisited: The Sec Exceeded Authority In Creating A Reporting Out Provision For In-House Attorneys, Briana Sheridan

Cardozo Law Review

This Note proceeds in three parts. Part I introduces relevant statutory law. Part I discusses federal law, notably Section 307 of the Sarbanes-Oxley Act and the SEC's Part 205.3(d)(2), as well as the American Bar Association (ABA) Model Rules and conflicting state law. Part II first examines case law involving the preemption of state ethics laws, including Wadler v. Bio-Rad Laboratories, which concluded broadly that Part 205 preempts California law.23 Part II then examines the doctrine of federal preemption, which is followed by a preemption analysis of Part 205.3(d)(2). Part III recommends that Part 205.3(d)(2) should be revisited, as the …

Criminal Prosecutions And The 2008 Financial Crisis In The U.S. And Iceland: What Can A Small Town Icelandic Police Chief Teach The U.S. About Prosecuting Wall Street?, Justin Rex

Concordia Law Review

Politicians, journalists, and academics alike highlight the paucity of criminal prosecutions for senior financial executives in the US in the wake of the 2008 financial crisis. One common argument for the lack of prosecutions is that, though industry players behaved recklessly, they did not behave criminally. I evaluate this claim by detailing the civil, and small number of criminal, actions actually taken and by reviewing leading arguments about whether behavior before the crisis was criminal. Rejecting the “reckless innocence” explanation, I provide examples of criminal behavior that could have been prosecuted and review the literature on why there were few …

Blame It On The Blockchain: Cryptocurrencies Boom Amidst Global Regulations, Jorge Galavis

University of Miami International and Comparative Law Review

Blockchain technologies created the most valuable digital currency in the world; Bitcoin. Bitcoin uses a Blockchain to be decentralized and widely accessible: Blockchains work by recording all transactions into online ledgers that are saved onto many separate blocks across the internet. Coins that use Blockchain technology are inherently difficult to modify, and transactions are permanently recorded because of the redundancy and reliability of the Blockchain system. So, this widely-available means of exchange has gained appeal as an online alternative to traditional currencies and securities. Blockchain coins gain popularity as currencies where there is reason to doubt the existing traditional currencies …

Grants, Nicholson Price Ii

Articles

Innovation is a primary source of economic growth and is accordingly the target of substantial academic and government attention. Grants are a key tool in the government’s arsenal to promote innovation, but legal academic studies of that arsenal have given them short shrift. Although patents, prizes, and regulator-enforced exclusivity are each the subject of substantial literature, grants are typically addressed briefly, if at all. According to the conventional story, grants may be the only feasible tool to drive basic research, as opposed to applied research, but they are a blunt tool for that task. Three critiques of grants underlie this …

Consenting To Counterclaims Under The Icsid Convention, Harshad Pathak

Pepperdine Dispute Resolution Law Journal

Counterclaims in investment treaty arbitration hold immense significance. Counterclaims have the potential to nullify biases and bolster the confidence of States in investment treaty arbitration. That being said, the multitude of jurisdictional hurdles faced by counterclaims under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention) risk dampening the aforementioned potential. It is two of these hurdles emanating from the consensual nature of arbitration that I address herein. Part II of this article commences by analyzing the provisions of the ICSID Convention to derive the prerequisites of a valid counterclaim in investment …